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taxes

Episode 90: Questions To Ask Your CPA & Tracking Expenses for Tax Time

It’s that time of year again. Something we all have to do, but none of us like it. That’s right, it’s TAX TIME. And that’s why today we are welcoming Jake Randall, the CEO of Taxbot. Taxbot is a mobile app that focuses on automating your expense and mileage tracking and staying IRS compliant. This is something we all need to know since we all deal with taxes. There is an easier way to keep track of your business and new laws you need to know about. Listen in for all the details! 

taxes

Biggest Takeaways You Don’t Want To Miss:

  • How has the structure of the tax system changed for small business and solo-preneurs? A lot of the news on corporate tax doesn’t apply to us, we’re mostly just small businesses. The biggest change for us is a new bonus deduction. You get to take your income and multiply by 20% and you get that back. For example, if you make $50,000 in a year you can multiply that by 20% which gives you $10,000 as a deduction. Plus, all rates have mostly gone down, which is great for all small businesses.
  • Have there been any changes that aren’t so good for small business owners? Overall the new tax laws are great, but the entertainment deduction isn’t the best for us. You can’t deduct certain entertainment events. You can still deduct meals, but if you’re taking your clients out for just entertainment activities they may not qualify.
  • What are the chances of being audited? They are actually pretty low in any given year. But what you don’t realize that it can compound. You have a chance every year. Mathematically, if you’re in business for about 20 years then you have a 1 in 3 chance of being audited. This increases as you grow, if you make about mid-six figures then you’re more likely going to be a target for auditing.
  • How can Taxbot help you with keeping track of mileage and receipts? The app can automatically track your trip. It knows when you start driving and you can then easily track your work miles. Plus, it will match up your bank transactions with business expenses. It will prompt you about certain transactions, ask you details about them (for example, with whom were you meeting and what was the topic?) then you can confirm them in your Taxbot. It makes all the headache of keeping track of these minor details so much easier.

Show Highlights:

  • Don’t miss out on the new 20% bonus deduction for small businesses [2:30]
  • The difference between expenses and deductions [8:00]
  • What you need to know about the possibility of being audited [9:20]
  • How did Taxbot get started? [14:30]
  • What you can do to learn more about taxes and how to drive your own tax conversation with knowledge [22:00]

Tweetables:

Links:

Learn more about the benefits of Taxbot and connect with Jake Randall at Taxbot.com

Also, don’t miss some great educational information and video’s on the Taxbot Mileage and Expense Tracker on Facebook!

Downloadable Offer:

Jake is offering a 14 day trial for Taxbot. You can watch the magic happen for yourself and get the most out of your taxes.  Simply go to taxbot.com/bella to get start your trial today. Also, get a risk free 50% off of Taxbot’s educational tax course when you sign up. Plus you can bundle them for even more 

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Best Practices To Prepare Your Business For Tax Season

If you don’t prepare your business for tax season, it will usually end up stressful at the last minute.  I know many pet business owners moaning and groaning wishing they hired that bookkeeper or kept better records. Personally, for quite a few years it was opening a bottle of wine, printing out every bank statement, and recording a year’s worth of expenses in about 5 hours of time.

Ok, so it might have been more than one bottle of wine… 🙂

In the process, I am sure I missed a lot, classified in the wrong categories, and “forgot” a lot of other items. Doing an entire year in one session is never recommended.

So how do we not fall into this trap and how can we prevent this from happening ever again? Here are some

Prepare Your Pet Business For Tax Season
Best Practices To Prepare Your Business For Tax Season

Start Early

By “starting early” I mean doing it as the year goes on. Every single month, as soon as that bank account statement is ready, reconcile it with your Quickbooks or Freshbooks account. Keep on top of it while the expense page is fresh in your mind. Was the Amazon delivery for groceries or new business card holders? Doing this will eliminate another step of having to go research it in Amazon. It will help you prepare your business for tax season little by little.

Get The Right Categories Set Up

Each business will differ, with no two the exact same but getting the typical categories set up early will help you prepare your business for tax season. Examples: Meals and Entertainment can be broken down into: personal, staff meetings, interviews. Or taxes: FICA, SUTA, etc  Having the right categories will help you do projections for your business and potentially let you know where you might be bleeding money. Was all that money you spent with one company on advertising really profitable?

Consider Getting A Bookkeeper

If you don’t have a background in accounting, my best piece of advice would be to contact a local bookkeeper that you can trust to keep things checked and balanced. If you are a cash and check business this is HUGELY important because sometimes payments fall through the cracks. You are so busy running your business, you don’t realize that you missed collecting a $60 check from Mrs. Green. A bookkeeper can help you project, predict, and strategize your cash flow. When tax time comes he/she will already have a lot of your books taken care of so there will be no scramble as you prepare your business for tax season!

Find An Accountant You Can Trust

Most people only see their CPA once a year. Sometimes they just work virtually. As a small business, it is important to see your CPA a few times a year, especially for tax planning purposes. When your business grows, there are different types of corporations that you can file as that would help keep your tax bill lower than if you didn’t. A good CPA will give you options, if there are any, and be able to strategize with you. I would recommend asking your local networking groups and other small business owners who you trust who they use to get a recommendation.

 

Wrap Up

So to sum it all up, you can wipe away the crazy tax prep planning in March and replace it with a steady plan that works for your business throughout the year. Doing so, you will have less stress, ease of planning, and potentially less of a tax bill to pay because you have accounted for all your expenses and collected all your accounts receivable! Do just a little every month and you can always be preparing your business for tax season!

 

 

Mastermind

Bookkeeper Answers Pet Sitter’s Most Important Questions:

bookkeeper

I have the most incredible bookkeeper. you have probably heard me talk about her a bunch of times, already.  many of you have even asked questions and she has agreed to answer them all. Below, you will see the answers in no particular order:

 

When doing payroll, what are things that are constantly changing that you need to be aware of?

To ensure that your company is in compliance and good-standing, it is critical to stay up to date on changing laws, tax rates, and payment/filing deadlines.

 

My expenses are phone, payroll company, Google Apps, software, maybe computer equipment, wages when I have that and mileage. So why do I need a Bookkeeper?

Not only does hiring a bookkeeper ensure that you have easy access to accurate up to date financial reports, but it also frees up your time so that you are able to use your strengths and skill-set to build and grow your business rather than having to worry about day to day accounting tasks.

 

What is the one best practice you would advise pet sitters business owners?

Proper accounting should be a priority from the start, it is much easier to do things right the first time versus correcting mistakes down the road.

 

Travel expenses: Can the owner of the business use the business account to by air tickets to travel if it’s business?

Yes, according to the IRS, “travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job.” However, for these expenses to be deductible, you must be away from your tax home (the town where your business is located) for a period longer than one day’s work, and you must be away overnight. Be sure to document everything associated with your business travel expenses. Keep receipts and maintain a centralized spreadsheet of all your trips, individual line items, dates and the reason for your travel.

 

Sue asks: How to find a good book keeper? I’m serious. I have no clue what questions to ask to see if they know what they are doing.

Most bookkeepers will have the following basic skill set:

– Add vendors and customers to your books
– Be proficient in QuickBooks
– Reconcile bank statements and credit card statements
– Manage accounts payable and receivable
– Familiarity with financial reports

In choosing the right person to work with you’ll want to go beyond this basic list and look for someone who can provide the following:

– Extreme attention to detail
– An analytic mind aimed at handling bookkeeping discrepancies
– A keen understanding of financial accounting systems and related procedures
– Good communication skills
– Experience

Use your business network for recommendations on who they use.
(Bella note: That is how I found Darcy!)

 

Shelly asks: When interviewing a bookkeeper what questions we should be asking to know whether the person we’re speaking to is right for a petsitting business. Also, what exactly does a bookkeeper do?

A good bookkeeper will ask questions so that they are familiar with your industry and your individual business, they do not necessarily need to have previous experience in your industry.

A bookkeeper’s responsibility will vary from company to company depending on the need and demand. Typically they are responsible for some or all of an organization’s accounts, known as the general ledger. They record all transactions, post debits and credits, reconcile accounts and check for discrepancies. They also produce financial statements and other reports to help keep the owners and management team up to date on the company’s financial health.

For more on what bookkeeper’s do you can see here

 

Jan asks:  What exactly does it mean when they do our “monthly reconcile”?

In accounting, reconcile means to compare two sets of records to make sure they are in agreement.   In other words, it is the process of comparing each transaction in your financial statement with the same transaction in your accounting records.

 

Damiane asks: How do I not get audited?

To help your small business avoid an audit and to ensure a smooth process if you do receive an audit, the following strategies are recommended:

 

  • Keep detailed records, the NFIB advises keeping records and receipts for at least seven years.
  • Always meet deadlines, don’t give the IRS any reason to look twice, always file complete forms on-time and always make sure they are signed
  • Report all income
  • Accurately assess independent contractors vs employees
  • Proper deductions – The IRS is strict about not mixing the personal and the professional when it comes to write-offs.
  • Out of Proportion Deductions – Large deductions that reduce the amount of your taxable income may raise a flag if they are out of proportion with your income. If these deductions do occur, be sure to have detailed records to back them up.
  • Excessive entertainment deductions – Tax returns including higher-than-average entertainment expenses will increase the chances of an audit. If you’re going to deduct these types of expenses, you must keep records for each write-off that includes when and where it occurred, who was in attendance, the purpose as it relates to your business, and a record of what was talked about.

 

Kelly asks: Should I have a monthly or quarterly bookkeeper help me? I am not very good at it & it takes me forever!

Hiring a bookkeeper frees up your time so that you are able to focus on your business. If day to day accounting is not something you are comfortable with and it is taking up too much of your time I would recommend hiring a bookkeeper to assist on a monthly basis.

 

Jennifer asks: what are the most common errors business owners make?

  • Mixing business and personal transactions – not having separate bank accounts for personal and business activities
  • Failure to file and pay sales tax – Oversight in collection and correct reporting of sales taxes can result in significant fines and penalties.
  • Improperly categorizing expenses – Accurately tracking income and expenses will allow you to maximize your tax savings
  • Not classifying employees correctly – misclassification of employees and independent contractors can result in overpayment of taxes
  • Not using their time wisely – many business owners do not put enough value on their own time. A bookkeeper will be able to perform your daily accounting tasks faster and more efficiently, freeing up your time to focus on the business.

 

Those are great questions above, huh? Even better is having a bookkeeper that wants to HELP us! Imagine that? I had a bookkeeper and she had to resign due to family medical issues. Then, I went searching for another. I was terrified!  I would wonder:
Who would I choose?
Would they understand my business?
Would they know what to do?
Would they do a good job?
Would they pay attention to the details and keep ME on my toes? 

I put it out to my personal network and got a lot of  responses. I contacted a lot of people and then, I didn’t even know it, but Darcy said she had a background in that. Darcy was actually a client of my pet sitting company before she moved out of town, and we found out we had a friend in common as well. She was someone I knew in my network and that I trusted. When we interviewed on the phone I was impressed. She asked intelligent questions that made me feel like she understood what I needed and most importantly was on time and very professional with her proposal and follow up. Since then, Darcy and I have had a super relationship and I HIGHLY recommend her!

If you want a connection, let me know. You know me, I love connecting and helping people! What other questions do you have for a book keeper? Maybe we could do a PART TWO blog?