I can’t believe how many people start businesses and don’t keep good records.  That is the one way to have the IRS eat you for breakfast, lunch, AND dinner.

Without the records, the IRS wins when it asserts that this deduction is not valid, that this expense can’t be claimed. In today’s day and age there is ZERO excuse to not have a bookkeeping system.  There are plenty of programs that will suck the data from your bank account and your credit cards, so all you need to do is spend a little bit of time making sure the coding is correct.  (You could, of course, hire us for about $ 60 a month [assuming you have 50 transactions or so], that would make things much easier- including the accounting program.)  The real reason to keep accurate records is the IRS has the right to challenge the premise of your business, should you not.

Which brings up another problem many new businesses encounter.  (Encounter?  Not the right verb, when it’s self-inflicted.)  PAY YOUR TAXES!!!!  I’m not saying you overpay them…As a matter of act, one of our mottoes is “retain our services, so that you may pay the lowest amount of taxes required by law.”

If you are a solopreneur, you know that you must not only cover your income taxes- but (and this is where most solopreneurs miss the mark) you also need to ensure that you pay your employer taxes.  Yes- employer taxes.  You see, you are not only the proprietor of your business-  you are also the employee.  So, if you make $ 50K from you business, and you have two kids, you probably don’t owe any income taxes.  But, you do owe $ 7800 in employer taxes.   And, that means each and every quarter, you need to be depositing $ 1950 via a 1040ES or the IRS will penalize you.

If you are conventional firm, with employees, you need to file quarterly 941s (the reconciliation of federal withholdings and employer taxes), plus the equivalent form for your state (and for the state’s unemployment bureau).  Some states may make you file the withholding tax forms monthly and the feds may require you to make deposits far more often than once a month.  It’s a question of your total liability.

Now would be a great time to remind you that given the change in the tax laws (effective this year, 2018), it would behoove you to reconsider your corporate structure.  If you are a solopreneur and aren’t clearing more than $ 60K, then there is no reason to consider changing your structure.  (OK.  Wait.  You should form an LLC- but with only one stockholder [you]- you will be considered a disregarded entity.  That means you are personally protected if someone wants to sue you, but you don’t file any income tax forms that are different from if you didn’t create a business entity.)

If you are an LLC operating as a partnership, you probably want to reclassify as an S entity.  Unless, of course, your personal income will put your firmly in the middle class ($ 157,500 adjusted gross income for singles; $ 315,000 for joint filers).  Because you will begin to lose your 20% pass-through (unless you have sufficient payroll or capital expenses- and are not one of the chosen [as if “we don’t like your”] professions like legal, accounting, health).  You should consider a C corporation, which now has a very low tax rate (21%) or a combination of business entities.  (Again, this is our specialty.  We are ready to help you find the right business structure.)

Given the new tax law, buying your big ticket items is really a no-brainer.  Because for most of the small- and mid-sized enterprises, these costs will simply be able to decrease one’s taxable income.  Because there is bonus depreciation (which really means one gets to completely write off the purchase price) until 2022, we have this opportunity.

But, we’ve also lost some deductions.   Like business meals-  not only for your and your staff, but even those meals where we take out our clients.  (There is some discussion that the IRS may find a creative way to interpret the signed law and let this slide, but don’t count on it.)  But no matter what, entertainment has zero deduction capability- which means no golf outings, no ball park tickets, no theater, nada.

Remember, we’re already six months into this tax year.  Time to get your books in order- and to ensure your tax deposits have been made.

So, that next year at this time, you will still be around!

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