Tag: documentation

Are Your Business Receipts Audit Ready?

Do you often ignore or say too quickly “No” when asked whether you want a receipt?  Not small-business owners. Knowledgeable business owners just know how to keep receipts. If they don’t, their tax return could be at risk. The question is: Are your business receipts audit ready?

  1. TAKE NOTICE

The first mindset to get into (especially if you’re trying to prepare your receipts for taxes) is creating a tiny note of the business purpose on the receipt. Whether or not you inscribe directly or put aside time at the top of the day, week, or once a large amount of buying has been completed (say at the end of a business trip for example), you’ll need the purchases to be recent enough in your mind that you will remember to label them properly.

Be sure that you create the note because this one thing which will permit you to classify the expense later. Merely writing “lunch” might not be enough to jog your memory if you’re audited a year or two later.

  1. CLASSIFY

Now that you’ve taken note of all these numbers, the next step is following and organizing it, so you can put the receipts into specific classifications. This will make tax time a breeze and permit you to refer back to any receipts without having to look through tons of files.

Here are some samples of common classifications for tax-deductible purchases:

  • Advertising: includes things such as business cards, mailing lists/mailing list software, brochures, outside marketing company, website design, development, and maintenance.

 

Advertising: includes things such as business cards, mailing lists/mailing list software, brochures, outside marketing company, website design, development, and maintenance
Advertising: includes things such as business cards, mailing lists/mailing list software, brochures, outside marketing company, website design, development, and maintenance.

 

  • Travel: there are certain criteria to meet for travel expenses to be deductible, but items that may be included are lodging, meals, airfare, baggage & shipping, rentals, taxis, dry cleaning and mileage, and parking expenses.

 

there are certain criteria to meet for travel expenses to be deductible, but items that may be included are lodging, meals, airfare, baggage & shipping, rentals, taxis, dry cleaning and mileage, and parking expenses
there are certain criteria to meet for travel expenses to be deductible, but items that may be included are lodging, meals, airfare, baggage & shipping, rentals, taxis, dry cleaning and mileage, and parking expenses.

 

  • Entertainment and Meals: These items may be examined thoroughly by the IRS so be sure these items get listed correctly such as from a business trip.

 

  • Legal and Professional Fees: attorney’s fees, accountant’s fees, other professional consultants’ fees directly related to your business.

 

  • Indemnification: may include business liability insurance premiums, property insurance premiums, disability premiums, workers’ compensation premiums for employees.

 

  • Professional Dues and Licenses: may include franchise fees, professional license fees, business licenses.

 

  • In-Kind: Gifts given to business contacts are deductible but are limited to $25 per person, per year.

 

In-Kind: Gifts given to business contacts are deductible but are limited to $25 per person, per year.
In-Kind: Gifts given to business contacts are deductible but are limited to $25 per person, per year.

 

  1. BE THOROUGH

A crucial step is organizing your receipts and being thorough with your method. Attempt to keep expenses separated by paying with a “business only” designated credit card or bank account when possible and avoid paying in hard cash.

Over time you may find better and newer apps to help manage your receipts but remember to keep using the same classifying process.  By keeping your method, you will be consistent in your receipts collecting and keeping all the overall information easily acceptable to you and your accountant

Duane Donohoo being self-employed himself understands the challenges of owning a small business. He understands the burden the IRS can be to a small business or individual. It was this experience that relates to his self-employment clients and individual clients. Call today (513-528-3982) for a free consultation to find out how Donohoo Accounting Services, Inc. can serve you.

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.

 

What To Bring To Your Accountant When You File Taxes

Although it’s technically possible to file your own tax return by using software, this can leave you exposed to a wide range of issues. If you want to ensure that everything with your tax return is handled by an experienced professional, working with a reputable accountant is an investment that should always pay off by unlocking extra savings and helping you avoid mistakes.

If you’re planning on enlisting an accountant’s help this year and are wondering what to expect during your appointment, here are some helpful tips on what to bring to your accountant when you file taxes:

Social Security Cards

The accountant you work with will want to verify your identity prior to submitting your filing. And if you are claiming any dependents, it’s a good idea to bring their card along as well. Although social security numbers seem like an easy enough thing to manage, SSN mistakes result in 100,000s of tax returns being sent back by the IRS every year. Since that’s guaranteed to increase how long it takes to get your refund, bring along your cards so your accountant will be able to double check the accuracy of these numbers.

Last Year’s Tax Return

Even if your financial situation has changed quite a bit over the last year, it’s still helpful for an accountant to have your previous year’s return as a reference point. This will allow the professional you work with to identify which deductions and credits you previously claimed, then quickly see if you’re eligible for them again.

W-2 and Any Other Income Forms

If you work as a traditional employee at a company, your employer should have already provided you with a W-2 form this year. This document has a lot of important information your accountant will need, so be sure to bring it along. For freelancers, the most common form to receive is a 1099-Misc. And if you have any investments or other activities that produced income, you’ll want to bring all of those forms along for the accountant to review.

Expense Documentation

Did you make some charitable donations over the course of last year? Maybe you do some selling online and drove around a lot to source inventory. Regardless of the specific donation or expense, an accountant is going to want to see documentation before claiming it for you. While it may take some time for you to get organized prior to your appointment, it will be well worth the effort.

If you’re ready to file your tax return and want to work with a great Cincinnati accountant, Donohoo Accounting Services is here to help. Call us today at (513) 528-3982 to schedule an appointment.