Bookkeeping FAQs

• It's our goal to have your reports delivered by the end of the month.
•  Ideally, we will have View Only/ Accountant access to all bank accounts to pull statements on your behalf.
• We aim to have questions to you by mid-month to ensure reports can be delivered by the end of the month after receiving your answers. 
• Delayed responses lead to delayed reports. 
• Please do your best to answer questions promptly to ensure you receive your reports on time. This allows you to have the information needed to make business decisions. 
• If you prefer one form of communication over another, just let us know, and we will do our best to honor that.   

Alert us if you:

• Open a new credit card or bank acct
• Change banks
• Begin selling physical products
• Hire any new staff
• Apply for or receive new loans
• Accidentally pay a personal expense through the business
• Accidentally pay a business expense personally

Our rates are based on the time it takes to complete your books, and not your income.

Rates are subject to increase with written notice and upon your acceptance. In the event of an increase you will be notified of the amount and the date it goes effective in advance and with consent. 

Examples of what can cause a rate increase:

• manual processes (example: keying in each transaction versus a bank feed. coding items of income one at a time in a separate platform) 
• increase in volume of transactions that adds time (sometimes an increase in volume doesn't add time)
• granular detail of reporting ( expample: showing you detail by project or division)

It's important to separate business and personal expenses for many reasons. 

Separating expenses makes it easier to track. Reducing the number of questions and room for error. Time saved equals a lower fee and more accuracy. 

Keeping personal and business expenses separate will help you in the event of an audit.

If cash is tight on either side ( personal or business accounts), transfer between accounts. 

If you use PayPal, you should have a separate profile for business and personal. Your business profile should only be linked to business accounts. You can edit this in PayPal under Pay & Get Paid>Bank & Cards>and then delete any accounts that are not business accounts. 

If you accidentally pay a personal expense from your business account.

We will typically code it to Owner's Draw, and it will not count as a business deduction. 

If you accidentally pay a business expense from a personal account.

We have no way of knowing unless you tell us, and you miss the opportunity to deduct what you spent. Just send us an email with the date, amount, and vendor, and we will enter it into your books. You can also reimburse yourself by writing a check; or transferring money out. with a memo telling us it's a reimbursement. If you don't give us this information, it may be coded to Owner's Draw, and you will not get the deduction. 

We kindly ask that you keep this to a minimum, as it creates more work and more possibilities for errors. 

 FYI-estimated taxes and payments on your personal tax return are personal expenses and are not deductible. If you pay them from your business, we will treat them as Owner's Draw. 

Long story short: receipts are a client's responsibility and used to back yourself up should you ever get audited. We don't manage your receipts, and we won't ask you for them.

Keep this simple and upload all receipts into a Dropbox Folder ( or any other document storage platform). Create a folder for each year and date each receipt as follows:

DATE-VENDOR-AMOUNT 

Determining if a new hire is an employee or contractor is not a choice. It's a matter of what the IRS determines them to be.

The IRS has a 20-point test to determine if someone is a contractor or employee. 

1. Level of Instruction: If a company directs when, where, and how work is done, this control indicates an employee-employer relationship. 
2. Amount of Training: Requesting or requiring workers to undergo company-provided training suggests an employment relationship since the company is directing the methods by which a worker performs her duties. 
3. Degree of business integration:  Workers whose services are central to the business operations or significantly affect business outcomes are likely to be considered employees.
4. Extent of personal services: Companies that insist or demand that a particular person perform the work have asserted a high degree of control, which indicates an employment relationship. In contrast, independent contractors are typically free to assign work to anyone.
5. Control of assistants: If a company hires, supervises, and pays a worker's assistants, this control suggests an employment relationship. If the worker gets to control the hiring, supervising, and paying of assistants, they could be defined as an independent contractor.
6. Continuity of relationship: A continuous relationship between a company and a worker indicates an employment relationship. However, an independent contractor arrangement can also be an ongoing relationship that spans multiple, sequential projects.
7. Flexibility of schedule: If a company gets to dictate a worker's days and hours of work, this degree of control suggests an employer-employee relationship.
8. Demands for full-time work: Workers who work full-time hours suggest a company has control over most of their time, which indicates an employment relationship.
9. Need for on-site services: Requiring someone to work on company premises — particularly if the work could be performed elsewhere - suggest an employer-employee relationship.
10. Sequence of work:. If a company requires work to be performed in a specific order or sequence, this type of control suggests an employment relationship.
11. Requirements for reports: If a worker has to regularly provide written or oral reports on project status, they could be viewed as an employee.
12. Method of payment: If a worker is paid hourly, weekly, or monthly, this could suggest an employment relationship, unless the payments are simply a convenient way of distributing a lump-sum fee. It is more characteristic to pay freelancers upon project completion or commission.
13. Repayment of business or travel expenses: Independent contractors are typically responsible for paying for travel or business expenses, and most contractors set their fees high enough to cover these costs. In contrast, reimbursement of travel and other business expenses by a company suggests an employment relationship.
14. Provision of tools and materials: Workers who use company-provided equipment, tools, and materials to perform their work are more likely to be considered employees. Work largely done using independently obtained supplies or tools supports an independent contractor classification.
15. Investment in facilities:. While independent contractors and freelancers usually pay for their own work facilities, most employees rely on their employer to provide work facilities.
16. Realization of profit or loss: If a worker's earnings are predetermined and have little chance to realize significant profit or loss through their work, they are generally considered to be an employee.
17. Work for multiple companies: Workers who provide services for multiple companies concurrently are likely to qualify as independent contractors.
18. Availability to the public: If a worker regularly makes services available to the general public, they could qualify as an independent contractor.
19. Control over discharge: If a company has the unilateral right to discharge a worker, this suggests an employment relationship. In contrast, a company's ability to end an independent contractor relationship generally depends on the terms specified in the contract.
20. Right of termination: Most employees can terminate their work for a company unilaterally without liability. Independent contractors cannot quit their work engagements without liability, except as permitted under their contracts.

If you hire an employee, you will need to register with your state and begin running payroll, if not already. I recommend using ADP or Gusto. If you would like help determining which payroll provider to use, please reach out to me via Email/ Voxer. 

Both have HR packages, should you need help with employment contracts, benefits, and job descriptions.

If your hire is a contractor, it's best practice to obtain a W9 from them upfront. You can do this by sending the form and retaining it for your records.

You should pay them in a way that either prepares the 1099 for you (a payroll system) or allows you to not need to file one.

Payroll systems will handle the 1099 for you and allow you to send payment to your contractor. They have monthly fees. If you're paying yourself a salary as an S Corp owner, and this person will be ongoing, this is a good way to pay.

To avoid having to issue a 1099 at all, pay via a third-party processor. This may happen if your contractor invoices you through a payment processor like Stripe, PayPal, Dubsado, Honeybook, Wave, QBO, or Xero. In this event, you do not need to file a 1099-NEC because the payment processor will issue a 1099-K if requirements and thresholds are met. This is my preferred method, though your worker may get confused. See the next question.

If you have a client who paid you via cash, check, bank transfer, or a personal app (Zelle, Venmo, PayPal friends & family), then your client is right to ask you for a W9. 

However, most of my clients should not receive 1099s from their clients because they accept payment via a third-party processor (Stripe, PayPal, goods and services, Wave, Honeybook, Dubsado, etc. 

For the most part, you can deduct expenses you pay from your business to generate income that are necessary and ordinary in your line of work.

It gets tricky when the expense can double as a personal expense.

If you have a question about deductions, message me and ask. I will likely defer to your tax preparer for the final decision.

If you tell us something is a business expense, we will take your word at faith.

Our engagement does not have us auditing your books - we are simply recording the information and answers you provide to us.

That means if you tell us something is a business expense but it is not, the onus lies with you.

If you take the standard mileage deduction (see Business Mileage below), you cannot also write off gas.

Clothing for photoshoots is not a business expense if it can be worn personally.

Your Amazon purchases can be written off if you are purchasing office supplies or other business expenses, but your personal Amazon charges should be paid with your card.

Apps used for business can be purchased on your business card, but your personal apps should be paid personally.

Meals can be deducted if there was a business purpose, but a family and friends dinner, or your morning coffee, or afternoon Uber Eats cannot.

We have no way of knowing if your Amazon, Apple, Target, Meals, or Travel purchases are truly for business.

Most of the time, we have this conversation upfront and ensure you know that if you are paying for any of the above on your business cards, we are going to treat it as a business expense unless otherwise notified.

If these expenses are not for business, and you get audited, it is your responsibility to have receipts to back up your deductions.

If you have taken non-business expenses as business expenses and therefore underreported your taxes, you may be subject to having to pay the tax you should have paid, plus penalties, interest, and the cost of representation under audit. You should consult with your CPA regarding deductions and also understand your responsibilities and risks. 

There Are Two Ways To Deduct Auto Expenses

The actual method- allows you to deduct the business use percentage of actual auto expenses, including gas, maintenance, insurance, and lease payments or depreciation (a specialized calculation of the cost of your vehicle over time). The business use percentage is found by tracking all miles and dividing business miles by total miles driven.

The standard mileage -allows you to deduct 58.5 cents per business mile driven. This means that for each 2 miles you drive, you can deduct more than $1 worth of income and save money on your taxes. This adds up!

 If you're working with an accountant, it's a good idea to ask them which one is right for you and exactly what you need to do to take the deduction.

Tracking your miles is simple. You just need to note the date of your trip, where you went, the business purpose of the trip, and the miles driven.

The best time to log miles is when they happen, so you don't forget or have to go back and figure it out later. I drop my destination in my GPS and take the calculation from the round trip and drop them in my mileage log and then forget about it until tax time when I can take the information off my log and use it to save money in taxes.

What Counts as Business Miles?

Simple! Anything that you're doing for business!

Examples are:

• business meetings
• networking events
• shopping for office supplies
• trips to the post office

What Doesn't Count as Business Miles? 

Commuting does not count as business miles. Commuting is going from your home to your regular place of work. So if you rent an office or work for one client and make the same trip daily, unfortunately, that is not counted as business miles. Traveling between clients or to different clients does count.

Something to be aware of

If you're choosing the standard mileage method, you don't pay for gas, oil changes, auto tag renewals, or car payments from your business. Those are all included as an estimate in the 58.5 cents per mile that you are allowed to deduct, and claiming both can get you in trouble.

What is NOT included in the standard mileage rate that can be included is parking and tolls, so be sure to pay for those from your business account when traveling for business.

You should save 25% or more of your profit for taxes. We recommend setting this aside in a high-yield savings account so the money is set aside but also earning interest. You can then use this account to make your tax payments both when quarterly estimates are due and at tax time.

You should work with your CPA to determine what your estimated taxes should be and when you should file.

Here are some general tips:

Who needs to file: Sole proprietors who have a profit in their business. Sole proprietors file their business income on Schedule C of their 1040. Sole proprietors are either doing business by themselves with no business registered, as a registered sole proprietorship, with a DBA, or as a single-member LLC.

What estimated tax payments are: An estimate of taxes that allows you to avoid penalties and avoid paying taxes all at the end of the year, when the money may have been spent already.

Ways to look for the minimum estimated payment: Check last year's 1040 and search for 1040-ES vouchers. These are the minimum you need to pay, with rare exceptions.

How to calculate your payment: by providing our reports to your CPA and asking for their support in determining if you should file estimated taxes, and if so, how much. They may also file these for you.

How to file your estimated payment: Either online or by mailing a check and a paper voucher. Your CPA can help with this and should be involved.

How we calculate the 25% of profit that is included in your report: This is calculated on business profit, after the expense for your officer's compensation paid on a W2 is deducted, if there is any. This assumes your withholdings on wages are appropriate, and estimates you owe 25% on the profit after paying yourself wages.