Category: Tax Planning

What You Need to File Your Business Taxes

What could be difficult about filing this year’s business income tax return?Plenty. Not to worry though, Donohoo Accounting Services is here to help! Every business has unique ways to best prepare taxes and you’ll need an accountant to help find all your deductions, but here are some tips about the three kinds of records your accountant will definitely need.

Income/Earnings Records

Because most businesses use electronic means to capture every transaction of the sale of goods or services, income records should be easy – though perhaps voluminous – to collect. Be sure to review your business’s income records, however, to look for any obvious errors such as missing information. Complete income records should include:

• The gross amount of each individual sale,
• Any returns or discounts credited against your business’s income,
• Interest earned from business bank accounts (from your year-end bank statement or Form 1099-INT) and,
• Any other income from non-sales sources.

Documentation of Expenses

Perhaps the most documentation required for your businesses tax filing falls into the category of expenses. You must account for more than a dozen different kinds of expenses on your tax form. These include all employee wages, rent or lease payments (including vehicle leases), insurance, travel, office supplies,and advertising and communications (such as telephone, fax and Internet). Additionally, within these expense categories there are sub-categories. Be sure to consult with a tax professional for a complete list of expense categories to be sure you don’t overlook any potential deductions.

Inventory Details

If your business maintains a physical inventory of goods, you will need to have documentation of your inventory totals at the beginning and end of the year along with its dollar value. As well, be sure you also have records of any inventory purchased over the course of the year. Remember to account for any inventory items that were used for business or personal needs, and the value of any supplies or materials on-hand that were purchased to operate the business. For businesses that track inventory electronically, these records should be easy to access. But again, remember to check – and correct – any errors or irregularities between your inventory records and your actual physical inventory.

The professionals at Donohoo Accounting Services have been helping small businesses file annual tax returns for more than 20 years. For a free consultation, call Donohoo Accounting today at 513-528-3982. Check us out on Facebook, Twitter and LinkedIn for our latest updates and tips!

Get Your Money in Order for the New Year

This year is quickly coming to a close. Get ahead of the game and get your money in order for the new year. Don’t know where to begin? No worries! Here are some helpful tips.

Get Organized

Organize Concept Metal Letterpress Word in Drawer

You can file taxes after the new year, so now’s a good time to get all your ducks in a row. In January and early February, you’ll be receiving important documents in the mail including your W2, mortgage interest statement (1098), or student loan interest statement (1098-E.)Most companies, by law, have until January 31 to mail statements, so keep an eye out.

Designate a single location where you’ll keep these documents so they are easily accessible when you’re ready to file taxes. You can use a folder, drawer, box or other container. Put a large “taxes” label on it and use the container for tax-related documents only, not other mail or bills. But you may want to keepit near where you sort mail, so you can immediately put the documents in their home.

Then start gathering other items you’ll need for filing taxes, including charitable contributionand expense receipts. Qualified expenses depend on your situation, but could include expenses related to childcare, medical, job (mileage, supplies, relocation) and education. Donohoo Accounting Services can help you navigate the complicated tax structure. In addition to income tax preparation, we handle payroll tax prep, tax levies and liens, back taxes, end tax penalties, estate tax return preparationand more.

Make Year-End Charitable Contributions

Many charities do a final fundraising push at the end of the year, so you’ll probably receive solicitations asking for support. If you want to help non-profit organizations while also possibly reducing your taxable income, make your donations by December 31. Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of the yearwill count in that year – even if the credit card bill isn’t paid until later. You’ll want to make sure the charity is eligible. Many times, the charity will note its “501c3” status, which is IRS speak for tax-exempt. You can also use the IRS Tax Exempt Organization Search.

Take an Assessment of Where You Stand Financially

Magnifying glass showing assessment word on grey background

Now’s a good time to take a hard look at your income, debt, expenses, retirement funds, college and emergency savings. Are you on track to meet financial goals? If yes – great! If no – why are you falling short? To properly move forward into the next year, you need a realistic picture of where you are now. Put pen to paper and write down all the numbers. It helps to see everything in black and white.

Make a Financial New Year’s Resolution (Or Better Yet – Create APlan You’ll Stick With All Year)

Once you know where you stand currently, you can create a plan for the upcoming year. Perhaps you want an emergency savings fund. You never know when the furnace is going to go out, someone in your family has a medical issue or there’s a company layoff. Experts say you should have enough emergency savings to cover three to sixth months of expenses. Maybe you have all your financial bases covered but want to take an exotic vacation? Set the goal, create a plan and start saving for that overseas beach trip. Although it’s a busy holiday season, set aside time to get your money in order for the new year. Once you’re ready to file taxes, turn to Donohoo Accounting Services, locally owned and operated by Cincinnati native, Duane Donohoo.

What Qualifies As A Donation On Your Taxes

The IRS defines a charitable contribution as “a donation or gift to, or for the use of, a qualified organization.” You must abide by certain rules to claim charitable donations on your taxes legitimately. Do you know the tips for handling donations on your taxes?

 

You must abide by certain rules to claim charitable donations on your taxes legitimately.
You must abide by certain rules to claim charitable donations on your taxes legitimately.

 

Charitable Contributions what Are They?

Donations include property such as vehicles, household items, clothing, land and cash contributions.  You can only deduct the fair market value (FMV) of any property you donate.

How Do You Determine The Fair Market Value?

Fair market value includes donations of noncash property of items like clothes, household items, land and cars additionally stocks may qualify. The FMV comes down to the price the item you are donating and how much it would sell for on the open market.

Do Your Expenses Qualify as a Charitable Tax Deductions?

You can claim a tax deduction for expenses you acquire:

  • To cover a live-in student who is sponsored by a qualified organization.
  • Out of pocket while serving as a volunteer for a qualified organization.

For questions of what counts as a deductible charitable contribution, consult Donohoo Accounting Services.

 

For questions of what counts as a deductible charitable contribution, consult Donohoo Accounting Services.
For questions of what counts as a deductible charitable contribution, consult Donohoo Accounting Services.

 

Which Organizations Qualify to Receive Charitable Contributions?

The government allows the following types of establishments qualified to take tax-deductible donations:

  • Religious (such as churches, mosques, synagogues and temples)
  • Literary
  • Educational (such as nonprofit schools)
  • Charitable (such as American Red Cross, Boys and Girls Club of America, Goodwill, Salvation Army and United Way)
  • Those working to prevent cruelty to children or animals
  • Scientific
  • Federal, state and local governments (for contributions intended for public purposes)

These Charitable Contributions Are Not Tax Deductible?

As a general rule, donations to individuals, political organizations and candidates for public office are not tax deductible. The same goes for gifts of money or property given to:

  • Homeowners associations
  • Sports clubs
  • Chambers of commerce
  • Civic leagues
  • Social clubs
  • Labor unions
  • Civic leagues

How Can I Be Sure I’m Donating to a Tax-Exempt Organization?

The easiest way to confirm that you are donating to a tax-exempt organization is to ask the organization directly for proof of their tax-exempt status. You also can search for charities using the Exempt Organizations Select Check tool or confirm tax-exempt status by calling the IRS at (877) 829-5500.

Cash Donations Receipts To Keep

If you donate by check, cash or some other monetary gift, you must provide written communication such as a bank record, payroll deduction records or written acknowledgement from the tax-exempt organization with your tax return. This written proof must include:

  • The name of the organization.
  • The date you made the contribution.
  • The amount of your contribution.

 

The amount of your contribution.
The amount of your contribution.

 

If you still have questions about what is a taxable donation or what constitutes a taxable donation please contact Donohoo Accounting at 513 528 3982.  We specialize in helping small businesses with all you taxable needs.

What Are The Basics Of Accounting Methods

What are accounting methods? Accounting methods help businesses keep their cash records and assist in preparing money reports by utilizing two fundamental methods of record-keeping for cash.  These two methods are cash-basis and accrual basis accounting.  These methods both have their own distinctive advantages of keeping corporate record keeping which help keep track of money coming an and out of the business. Donohoo Accounting knows what are the two types of accounting methods and how to utilize the for your business.

 

Accounting methods help businesses keep their cash records and assist in preparing money reports by utilizing two fundamental methods of record-keeping for cash.
Accounting methods help businesses keep their cash records and assist in preparing money reports by utilizing two fundamental methods of record-keeping for cash.

 

CASH-BASIS ACCOUNTING

What is cash-basis accounting? Corporations recording expenses in financial accounts when the cash is laid out, and they book revenue when they actually hold the cash in their hot little hands or, more likely, in a bank account. For example, if a plumber completed a project on December 30, 2018, but doesn’t get paid for it until the owner inspects it on January 10, 2019, the plumber reports those cash earnings on her 2018 tax report. In cash-basis accounting, cash earnings include checks, credit-card receipts, or any other form of revenue from customers.

 

Corporations recording expenses in financial accounts when the cash is laid out, and they book revenue when they actually hold the cash in their hot little hands or, more likely, in a bank account.
Corporations recording expenses in financial accounts when the cash is laid out, and they book revenue when they actually hold the cash in their hot little hands or, more likely, in a bank account.

 

ACCRUAL ACCOUNTING

Does your company use accrual accounting? This method is when you record revenue when the actual business is completed ex. (is when the completed amount of work that was stated in a contract agreement between the company and its client), not when it obtains the cash. The company records income when it produces it, even if the customer hasn’t paid yet. For example, a plumbing contractor who uses accrual accounting records the revenue earned when the job is completed, even if the client hasn’t paid the final invoice yet. Expenditures are handled in the same way.

 

The company records income when it produces it, even if the customer hasn’t paid yet.
The company records income when it produces it, even if the customer hasn’t paid yet.

 

BASIC ACCOUNTING TERMS

  • Equity: The net worth of your company. Also called owner’s equity or capital. Equity comes from investment in the business by the owners, plus accumulated net profits of the business that have not been paid out to the owners. It essentially represents amounts owed to the owners. Equity accounts are balance sheet accounts.

 

  • Assets: Things of value held by your business. Assets are balance sheet accounts. Examples of assets are cash, accounts receivable and furniture and fixtures.

 

  • Liabilities: What your business owes creditors. Liabilities are balance sheet accounts. Examples are accounts payable, payroll taxes payable and loans payable.

 

  • Debits: At least one component of every accounting transaction is a debit amount. Debits increase assets and decrease liabilities and equity.

 

 

While all these terms may seem a foreign language or a little overwhelming they can keep your business finances in order and make tax time a lot easier when it comes time to file.  Making the everyday accounting run smoothly can be done with Donohoo Accounting Services. Call us today for your free evaluation and let us take the stress out of your day-to-day money functions.