Category: Personal Finance

The Five Most Important Pieces of Advice from Your Accountant

Follow These Five Accounting Tips That Could Save Your Business Time, Money, and Aggravation

Financial advice persists everywhere we turn: On the Internet, the radio, TV, and in your email and snail mail boxes. But what is often overlooked is some basic accounting advice that not only could save you or your company from difficulties associated with being audited but also save you time, money, and aggravation in the long run. Whether your business already has an accountant or you’re looking to hire one, follow these five important pieces of accounting advice.

 

  1. Be (or Get) Organized

The simplest and perhaps most important advice an accountant can give you is to stay organized. You’ve heard that there are “pilers and filers” when it comes to being organized. That may be true, but whatever your method, know where your documents are when you need them or if they are called for by the IRS. The better organized your papers and electronic files are, the less likely you’ll have trouble in your financial matters whether they be tax-oriented or not.

 

The simplest and perhaps most important advice an accountant can give you is to stay organized.
The simplest and perhaps most important advice an accountant can give you is to stay organized.

 

  1. Keep Business Expenses Separate

An important part of being organized is to properly categorize your expenses as business or personal. Be sure to keep business expenses separate – don’t tell yourself it’s OK to blur the line or to “fudge” it. If or when you have an audit – internal or external – questions will assuredly arise about any questionable business expenses that may in fact be personal. Keeping business and personal expenses separate, too, will ensure that you don’t accidentally pay for a business expense out of your personal funds without reimbursement. Some accountants like to say, “If you want to reduce your business expenses, reduce your personal expenses.” That’s an indirect way of saying keep them separate.

 

An important part of being organized is to properly categorize your expenses as business or personal.
An important part of being organized is to properly categorize your expenses as business or personal.

 

  1. Document Business Expenses

While you’re keeping your business expenses separate from those that are personal, be sure to create – and maintain – a paper trail on your business expenses. Of course, many of those expense records may also be in electronic form, but you get the idea. The more documentation you keep on your business expenses, the better. Simply stated, for each expense, document and be able to answer these questions:

  • Who incurred the expense?
  • What was purchased?
  • Where was the purchase made?
  • When did the transaction take place?
  • Why was the item or service needed? and
  • How much did it cost?

 

  1. Do an Internal Audit

When your documents are in order, you’ve successfully separated your personal and business expenses, and you have your expenses documented, you’ll have little to worry about when you’re audited. And the best way to get ready for an IRS audit is to perform an internal audit. When your accountant conducts an internal audit, you may feel like your business is being turned inside out. It is, and that’s OK. Better to turn your business inside out and make corrections to your financial records on an internal audit than to have to answer to Uncle Sam in the form of a penalty.

 

  1. File and Pay Taxes

Above all, perhaps the best piece of advice a wise accountant will give you is to file and pay your taxes on time. Just at the federal level, there are at least five forms of tax that apply to businesses. They are: Income tax, estimated tax, self-employment tax, employment taxes (Social Security, Medicare, federal income tax withholding, and federal unemployment tax), and excise tax. These are in addition to any state and local taxes, which vary according to the location of your business. Financial penalties for failure to file, failure to pay, failure to pay estimated tax, and dishonored check/payment (“bounce”) have the potential to cause a significant financial setback to your business or even cause it to close. Having an excellent accountant on staff – or contracting with an accounting firm – to meet your tax filing and payment deadlines is even better than doing it yourself.

 

Above all, perhaps the best piece of advice a wise accountant will give you is to file and pay your taxes on time.
Above all, perhaps the best piece of advice a wise accountant will give you is to file and pay your taxes on time.

 

Donohoo Accounting Services is a professional accounting services provider, dedicated to helping our clients overcome the challenges and burdens that small businesses face. To learn more about how Donohoo Accounting can help your business prosper, call us today at 513-528-3982 for a free consultation.

Need Help Managing Your Money? Try These Top 10 Budgeting Apps

It’s said that no one likes making a budget, they only like having a budget. If that’s true, then there are at least 10 apps to help make it much easier for you to not only have a budget but also to follow it. Although each of these 10 budgeting apps features slightly different characteristics, all of them have two important goals:  1) To help you understand where your money goes and 2) To keep you from spending more than you have. With these goals in mind, let’s take a closer look at each of these top 10 budgeting apps that just may help you stretch your dollars.

 

  1. Mint – Nearly all reviews of budgeting apps include Mint on their lists for one primary reason: It tracks everything when it comes to your money. Bill alerts, account balances, investments, loans, bank fees, credit cards, even cash transactions are all accounted for in Mint. Based on these and other factors, Mint configures your budget and instantly calculates your net worth.

 

Need Help Managing Your Money? Try These Top 10 Budgeting Apps
Nearly all reviews of budgeting apps include Mint on their lists for one primary reason: It tracks everything when it comes to your money.

 

  1. YNAB – “You Need a Budget,” thus the acronym. Rule #1 in YNAB is to “give every dollar a job.” Assigning your income dollars to expenses shows how much you have left for discretionary spending, saving, or getting out of debt.

 

  1. Wally – Wally is more than a budgeting tool. It’s a personal finance app. Wally performs all the budgeting functions while also helping you keep track of – and stay abreast of – your progress toward your financial goals.

 

Need Help Managing Your Money? Try These Top 10 Budgeting Apps
Wally is more than a budgeting tool. It’s a personal finance app.

 

  1. Simple – Just as its name implies, easy-to-use Simple tracks expenses through your bank accounts. You can set and track savings goals as well as instantly check your “safe-to-spend” amount, which keeps you from overspending. Note: Just so you don’t confuse other apps for this one, Simple is called “Simple – Better Banking” in your favorite app store.

 

  1. Pocketguard – Instantly providing you with the “big picture” of your finances, Pocketguard also uses a pie chart to help you keep aware of spending against your budget while reminding you of your “in my pocket” balance – the amount you have to spend minus your bills. Pocketguard helps you set and track savings goals, as well.

 

Need Help Managing Your Money? Try These Top 10 Budgeting Apps
Pocketguard helps you set and track savings goals, as well.

 

  1. GoodBudget – Remember when budgeting meant labeling envelopes and filling them with cash to pay your bills? GoodBudget uses the same idea but in a virtual budget program. You can track your “envelope” balances on your way to reaching your most important financial goals.

 

  1. Mvelopes – Using the same concept as GoodBudget regarding virtual envelopes, Mvelopes adds additional levels of service (for a fee) up to and including having the help of a personal finance trainer. Choose from three levels of subscription budgeting service: Basic, Plus, or Complete.

 

  1. Albert – The Albert personal finance app – and Albert Genius, an additional service – carry out similar savings, spending, and tracking functions as other budgeting apps but with the added twist of offering a team of financial experts whom you can text with specific questions about your personal finances and spending.

 

  1. Trim – If your focus is mostly looking for ways to save money, then Trim is the app for you. Connect your accounts, and Trim will analyze your spending to find money-saving opportunities for you. Additionally, Trim offers automated tips to lower your monthly expenses based on your transactions.

 

Need Help Managing Your Money? Try These Top 10 Budgeting Apps
Trim offers automated tips to lower your monthly expenses based on your transactions.

 

  1. Everydollar – By simplifying the budgeting process, Everydollar can develop your personalized budget in 10 minutes or less, based on your account and expense input. Charitable giving and emergency fund savings are included as part of your overall plan.

 

Because handling money – and money matters – go beyond having a budget, Donohoo Accounting can help you. We are a professional accounting services provider, dedicated to helping our clients overcome the challenges and burdens that individuals and small businesses face. Call us today at 513-528-3982 for a free consultation.

 

4 Actionable Tips for Using Your Tax Refund This Year

Even though getting your tax refund can feel like hitting a mini lottery, it’s important to remember that this payment is your money. As a result, the last thing you want is to let it flow out of your bank account just as quickly as it arrives. If you’ve had that experience in the past, the good news is you can do things differently this year. To help you make the most of every dollar that you receive, here are 4 actionable tips for using your tax refund this year.

  1. Make Payments Towards Debt

People from all walks of life struggle with managing debt. What often starts off as a small amount can spiral into a snowball that just keeps rolling in the wrong direction. What makes debt so problematic is that you’re not just dealing with the initial amount. Instead, interest is what really gets people in bad situations.

Because debt can choke someone’s personal finances, using your tax refund to pay off some or all of your debt is an amazing choice. If you’re trying to decide the specific debt to pay towards, the one with the highest interest rate is almost always the best choice.

  1. Prepare for An Emergency

Whether you have been able to stay out of debt or used previous tax refunds to pay it off, anyone who doesn’t have this burden can intelligently use their refund in a number of ways. A great option is to build up your personal or family emergency fund. Having a meaningful amount of money that’s easily accessible but off limits except for an emergency can give you a lot of peace of mind.

  1. Improve Your Home

Let’s say you’re already debt-free and have a comfortable emergency fund built up. One option to consider for your refund is improving your home. As long as you do your research and choose a project with a strong ROI, you’ll be adding to the long-term value of what is likely your largest asset.

  1. Other Investments

The other really good option that’s available for leveraging your tax refund is investing the money. Just keep in mind that even though highly speculative investments like cryptocurrency can seem enticing, they come with an incredible amount of downside risk. Investing your money in a more conservative option and letting it grow for the foreseeable future will likely yield the best return.

If you want to get your tax return filed so that you can get your refund and put it to good use, Donohoo Accounting Services can take of this process for you. All you need to do is call us at (513) 528-3982 to set up an appointment.

How to Save for College

College is an important topic of conversation for many families. While there are lots of exciting things to talk about related to college, there are also some very stressful ones. Money is probably the most stressful. Given how common significant student loan debt has become, paying for an education can seem like a very big obstacle.

 

For many years, getting a college degree seemed like a reliable way to land a great job and get ahead in life. But because plenty of parents are still trying to pay off their own student loan debt, the path no longer seems as clear. Due to this disillusionment, plenty of families get overwhelmed and have no idea where to start as far as saving goes. That’s why only about one-third of low-income and middle-income families are saving at all for college.

 

If you agree that this topic is stressful but want to figure out how to save for your child’s college education, we want to cover the three best options to make that happen this year:

 

  1. 529 College Plan

 

The state of Ohio offers a 529 college savings plan. This plan can also be referred to as a Qualified Tuition Program (QTP). The way a 529 plan works is you invest after-tax money into it. Then when your child reaches college, money can be withdrawn tax-free for qualified expenses like books or tuition. The tax-free status includes gains made by the plan. One of the great things about this plan is you can contribute quite a bit to it each year.

 

  1. Roth IRA

 

When most people think of a Roth IRA, they think of it as a retirement account with a favorable tax status. What isn’t as well known is that this account can be used for college as well. As long as funds have been in the account for at least five years, they can be withdrawn for qualified college expenses without triggering any tax penalties. The biggest appeal of this account is the flexibility to pay for both college and retirement expenses.

 

  1. Coverdell Education Savings Account

 

This option has a lot of similarities to a 529 plan. That includes being viewed as your asset, so it won’t hurt your child’s odds of receiving financial aid. But as you probably guessed, there are some important differences as well.

 

The biggest difference this option provides is it’s not limited to college expenses. Instead, it can be used for any educational expenses ranging from kindergarten through 12th grade and beyond. A common example is private school tuition. The main limitation is how much you can contribute each year.

 

If you’re interested in speaking with a tax planning professional about the best ways to start saving for your child’s college education, get a free consultation by calling Donohoo Accounting at 513-528-3982.