Do you run a successful business but you are doing your own books?

Are you doing your own books because you are a solo entrepreneur?

Is Your CPA also your bookkeeper? I would think twice about that.

The terms “bookkeeper,” “accountant,” and “CPA” are often used interchangeably. But they are definitely not the same. These three professionals are very different in their scope of work, their licensing and professional status, and their standing with the Internal Revenue Service. But, many business owners try to lump them together and fine someone who can handle all three.

I think that is a mistake.

I set out to get some answers from Parker Stevenson. I have known Parker for a while now. Parker is a managing partner and the Chief Business Officer at Evolved Finance… a bookkeeping firm in California specializing in helping online entrepreneurs build a more profitable and stable online business.

Check out this interview in its entirety as we discuss how to handle bookkeeping as a small business owner.

Cheers!

Colin Exelby, CFP®

The post How Using a Bookkeeper Can Help Grow Your Business appeared first on See The Forest Through The Trees.

The United States income tax system is a pay-as-you-go tax system, which means that you must pay income tax as you earn or receive your income during the year.  That is pretty easy for employees, as taxes are automatically withheld from your paycheck. However, what if you own a business? The IRS requires business owners to pay estimated taxes on a quarterly basis throughout the calendar year. However, many business owners forget.

If you own a business, or you are an employee who also has a side hustle its important to remember your quarterly deadlines. Often we get busy running our business and may forget to pay…consider this a friendly reminder. September 16th is less than two weeks away. Taxpayers who are required to pay the IRS every quarter will need to make their third payment for this year by the 16th.

For the 2019 tax year, the quarterly deadlines are April 15, June 17, Sept. 16 and Jan. 15, 2020.

To avoid a penalty from the IRS, you must pay at least 90% of the income taxes you think you will owe for a given year, or 100% of the tax liability from the prior year, to avoid an underpayment penalty on your tax return. If your previous year’s return exceeded $150,000 of adjusted gross income you must pay 110% of your previous year’s taxes.

The estimated tax penalty is basically an interest charge for not paying taxes throughout the year and holding onto your money. The IRS sets this rate each quarter. According to Bookkeeping site Intuit, the interest rate for underpayments by individual taxpayers was 6 percent for the first half of the 2019 tax year. However, it recently dropped to 5% for the third quarter. The rate for noncorporate taxpayers is based on the federal short-term rate plus 3 percentage points. So, if the Federal Reserve continues to lower interest rates, that penalty could head lower in coming quarters.

If your business income is inconsistent or “lumpy” as I like to call it it can be difficult to project what you will earn for this calendar year. Run projections with your accountant or your bookkeeper to see if you are on track and do it to the best of your ability. It will probably not be 100% accurate but close is good enough in this case.

According to the IRS Website, The law allows the IRS to waive the penalty if:

1. You didn’t make a required payment because of a casualty event, disaster, or other unusual circumstance and it would be inequitable to impose the penalty, or
2. You retired (after reaching age 62) or became disabled during the tax year or in the preceding tax year for which you should have made estimated payments, and the underpayment was due to reasonable cause and not willful neglect, or
3. The underpayment was due to an inability to accurately calculate your estimated income tax payment due to the breadth of changes enacted by the tax reform.

Last year the IRS gave taxpayers a break because the new tax law took effect. That generous break is no longer there so the penalty for underpayment is back to the standard rates. A key to keeping more of what you make is managing your tax liability, so plan accordingly. Of all the expenses a business must pay, taxes are the one that hurts the most.

It’s for that reason we compiled this eBook, 5 Tax Mistakes Business Owners Make. If you own a business, you can download it for free here.

Cheers!

The post Business Owners…A Key Tax Deadline is Right Around the Corner appeared first on See The Forest Through The Trees.