Posts by rowdyhawk25

Brenda Chase3 said:That is exactly right. Anything that didn't pass through the business checking account prior to the closing date should be recorded as non-cash items. I actually dealt with this exact scenario for a client back in 2013, and we handled it that way for the final filings—everything was processed perfectly fine by the IRS.

Thanks for the reply. You guys are awesome.

I could really use some help here if anyone knows the ropes. When I'm closing down my small business, should I only be reporting the bank account transactions up until the official deregistration date? Does everything after that point just get categorized as non-monetary income and expenses, or am I totally off base?

Brenda Chase3 said:Thanks, rowdyhawk25. I’m a little fuzzy on the closing part, though. If I close them out in the IRS books, wouldn't they automatically be recorded as expenses (in my view, as kind of an in-kind gain)? Is that the correct way to handle it? And what happens to the sales tax on those invoices?
If I'm understanding this correctly, if they aren't tax-deductible, they would be booked as in-kind income? And since they are expired and the invoices are less than $1667, then they get booked as an in-kind expense?
I've been trying to hunt down some articles online that explain this in more detail, but I haven't had much luck so far.

Hmm, I'm not entirely sure. Usually, writing off bad debt from customers counts as in-kind income and you have to account for sales tax regardless of how old the debt is—unless the person is going through bankruptcy or liquidation and it becomes impossible to collect. But regarding this specific situation, I can't say for certain. 🤷 I think I might be mixing up the rules for an LLC and a sole proprietorship.

Brenda Chase3 said:A small business client of mine currently has several outstanding invoices owed to a supplier totaling roughly $2.00 (we're looking at about ten different invoices here). These bills date all the way back to 2006 and 2009, and they've just sat there untouched—no one ever chased them down or initiated any legal action. Based on my understanding of the statute of limitations, these should have expired after three years. I'm trying to figure out the proper accounting procedure to write off this stale debt: specifically, how do we actually clear these from the books and which accounts should they be posted to? Also, do we need to obtain some kind of formal documentation from the supplier to justify closing these out due to the expiration of the claim?

You really need to draft a formal debt forgiveness decision regarding those suppliers due to the statute of limitations, and you have to list every single invoice individually. Since these fall well under $1667, they are tax-deductible. There isn't a specific place to book this on the small business owner's side. Those invoices are likely still sitting there as unpaid in the IRS records. My advice would be to use that debt forgiveness decision to clear them out in the IRS books and attach the decision itself so there's a clear paper trail of why the action was taken.

Brenda Chase3 said:To recognize a Sales Tax liability, you generally need an invoice that explicitly breaks out that tax amount. From what I understand, these types of federal disbursements aren't subject to taxation themselves. This means a small business owner would still owe Sales Tax on the invoices they issue, but they wouldn't be able to claim a credit against those funds received from the government.

Look, in this specific scenario, it doesn't matter if the payment is being issued by the federal government. The key thing is that the outgoing invoice isn't addressed to them—it's addressed to the client. Even if someone like Pero Perić stepped in and made the payment on the client's behalf, the logic remains the same. You handle that outgoing invoice exactly how any other sole proprietor would handle their standard billing.

Terry Miller17 said:I find myself facing a bit of a dilemma regarding a sole proprietor who also happens to be an attorney.

I am not entirely certain if this falls within the scope of our discussion, but perhaps someone could point me in the right direction, as I am struggling to identify which specific section of the tax code would govern this situation.

To provide some context: the attorney represented a client in a lawsuit against the government and was successful. A lien agreement has been established, stipulating that instead of the government paying the client directly, the funds will be paid to the sole proprietor, who will then settle the debt owed to their client.

My primary concern involves how to properly report this to the IRS. Since sole proprietors typically recognize their tax obligations based on when payments are actually received, I am quite puzzled by how to handle funds disbursed from the federal treasury. Should I record this payment as a taxable event for sales tax purposes, or should the payment simply be treated as the underlying base amount? I hope my explanation hasn't been too convoluted.

I WOULD GREATLY APPRECIATE ANY INSIGHTS YOU MIGHT HAVE.

It's pretty straightforward: he issues a standard outgoing invoice to his client. Once that payment hits his business account, the subrogation settles the receivable, and the Sales Tax liability gets recorded in the books. Honestly, though, looking at the setup, this feels less like subrogation and more like an assignment of funds.

Anthony Cruz13 said:Thanks for getting back to me. So, I actually just finished chatting with my accountant, and she’s telling me that those specific costs won't be carried over if I set up an owner's loan—or whatever the official term is for injecting my own cash into the business. Basically, as the owner, I'd just transfer some funds into the company account. I have to get my payroll taxes and contributions sorted by the 15th, so I'm really curious what you all think. Is it smarter to just deposit some revenue into the account and pay from there, or should I go the route of the owner's loan? Or does it honestly not even matter in the long run?

To be honest, what your accountant is suggesting doesn't actually align with what you were saying in your previous posts. It seems like you might not be laying out all the facts, or perhaps there's a misunderstanding of how this works, which makes it impossible to get truly accurate advice here. Based on what she told you, it sounds like she's just reacting to your current cash flow situation. If your business account is looking pretty empty right now, she's giving you a solution based on your recent history rather than the bigger picture. You have to remember that the actual balance in your business checking account isn't the same thing as your official income and expense ledger.

Anthony Cruz13 said:Okay, I get that part, but what I'm really trying to figure out is if "carrying them over" means I'm actually going to have to pay those amounts in future tax periods or not?

Since you've already paid them, the answer is no.

Anthony Cruz13 said:Well, my accountant actually told me the opposite—that since my expenses are currently higher than my total revenue, I can only write off enough costs to match that revenue level. Anything beyond that, she said, basically carries over into the next period. It’s all those business expenses I’ve already paid out of pocket, but my current sales just aren't high enough to cover them yet.

I think there's been a bit of a misunderstanding between you and your accountant,🙂. When people say those costs "carry over," it’s just a way of explaining how the math works out. In reality, you'll just see a seesaw effect—one month you might have high revenue and low expenses, and another month, like right now, you're facing higher expenses and lower revenue. At the end of the day, the IRS looks at everything on an annual basis. It all boils down to the total numbers for the entire year: if your total income exceeds your total expenses by December 31st, you've made a profit; if your expenses outpace your income, you've taken a loss. Everything balances out over the full fiscal year.

wearycrane55 said:Could someone help me run some rough numbers on potential revenue here?

I'm looking at charging $40 $0.00 per month for the service, and I'll have three employees who need to receive their net pay $1000. This is for a cleaning business based out of St. Louis. My only other overhead would be bookkeeping and supplies, totaling about $333. After I settle all the bills, how much cash will actually be left in my pocket? Also, am I eligible for any kind of tax refund, and if so, what might that annual amount look like? Let's assume I'm not part of the tax system during my first year, but I'll officially enter it in the second.

What kind of tax refund are you talking about? You're more likely to be paying it, and quite a bit too. If you're serious about turning this into a real business, go find a professional accountant like people have been telling you to do. It used to be $8333 a month, and now it's already $13333 ???

silentgull14 said:🤣

I ended up switching over to Internet Explorer and did it exactly how MDamir suggested. It worked. Took a bit, though...😁

I had the exact same experience following MDamir's advice. That was definitely the root of the problem. Thanks so much, MDamir,
🙂

The IRS portal is still blocking me from signing off and getting this processed. Is it just a glitch on their end, or am I doing something wrong here? Does anyone know if I can just physically drop off this Podcasting paperwork in person regardless of my status with the IRS, or am I strictly tied to using their online system? I’ve been trying to get a hold of someone, but all I get is that endless loop of "your call is important to us..." grrrrr

Charles Stewart69 said:So, about this whole cash vs. checking account thing...

Since big banks like Chase or Bank of America keep hiking those annoying fees for basically anything involving physical cash—you know, like hitting the teller window to deposit or withdraw stuff—I've been brainstorming ways to dodge those ridiculous service charges. I was thinking maybe I could just deposit my contractor payments directly into my personal checking account, and then also wire any down payments I get from clients from my business account over to my personal one. Since there aren't usually those pesky transaction fees for digital transfers or using an ATM with your debit card, I figured I could save maybe $50 a month, which adds up to something like $600 a year, I guess.$1333

Are there any legal hurdles if I just move my contractor pay through my personal checking? Like, what if I put the money in my personal account and then use online banking to send it straight to my business account, keeping everything totally clean?

Also, can I just transfer a client's down payment to my personal account and then just go grab the cash from an ATM?😍

Is there even a chance one of these moves works without getting flagged by the IRS?

None of them work. Here’s the breakdown of what gets deposited directly into your checking account versus what you can actually pull out in cash:

The latest updates to the Internal Revenue Code, which were recently published in the Federal Register, have brought about a whole series of significant changes. For anyone managing day-to-day business operations, there are a few key shifts you really need to have on your radar right now. I’ve put together a quick rundown of the most essential updates below to help you stay ahead of the curve, but if you want to dive deep into the full technical breakdown of every single amendment, you should definitely check out the FBI 7/13 report for the complete details.
Since July 5, 2013, we've seen a total shift in how payouts are handled—whether you're looking at direct deposits into checking accounts or receiving cash upfront.
Checking account vs. savings account: which one should you actually be using?
When you look at the breakdown of what counts as taxable income under the Internal Revenue Code, there are several key categories to keep in mind. We’re talking about standard wages, entrepreneurial income, and any compensation received by seconded employees. You also have to account for the stipends or fees paid to members of representative or executive boards for their service on those bodies—basically, any income derived from non-independent employment as outlined in Section 14.
Dividends and profit shares—this includes any tax-exempt amounts as well. $4.00 When you're looking at your annual returns, you really have to pay close attention to interest—specifically those capital gains under the Internal Revenue Code.
When you're looking at life insurance or voluntary pension plans, you have to keep a close eye on how those payouts are treated under the Internal Revenue Code. Specifically, when you start receiving benefits from these types of policies, they fall under certain sections regarding taxable income that you really need to account for.
Income derived from the alienation of financial assets.
The compensation for buying back secondary raw materials and scrap metal that qualifies as personal property is strictly capped. $0.53 Monthly breakdown by individual payer.
When you're working through student associations or campus organizations while pursuing your degree, that income is generally treated as part of your standard earnings. Basically, any money you pull in from those types of roles is considered taxable income under the Internal Revenue Code.
Financial aid and scholarships for students pursuing regular education—covering everything from high school through vocational training and four-year universities—are available up to... $0.53 Monthly.
We’re talking about those specific types of scholarships designed to actually cover the real-world costs of getting an education—I mean the heavy hitters like tuition, commuting, housing, groceries, textbooks, and even health insurance.
When we talk about athletic scholarships, people often overlook just how massive the opportunities are here in the States. We aren't just talking about a little help with tuition; we’re talking about life-changing financial coverage that can carry you all the way through a degree at a major university. Whether you're looking at a powerhouse program in the SEC or a solid Division II school, those athletic stipends can cover everything from full tuition and room and board to books and even a monthly living allowance. It’s one of the few ways high-level athletes can essentially graduate debt-free while playing the sport they love. If you have the talent, the door is wide open, but you have to be aggressive about pursuing those recruitment paths early on. $0.53 Monthly.
When it comes to those big awards for athletic excellence—you know, the ones celebrating major sporting achievements—we really need to talk about the limits on prize money. There’s always that debate about how much is too much when we're honoring the best of the best in American sports. $6.75 Annual.
When it comes to amateur athletes, there’s a lot of confusion surrounding how much compensation they can actually receive without running into trouble with the IRS. It’s a fine line, but if you play your cards right, you can accept certain stipends and reimbursements for expenses without them being flagged as taxable income. Essentially, as long as those payments are strictly covering things like travel, equipment, or training costs—rather than acting as a "salary" for playing—you're generally on solid ground. However, once those amounts start looking like a paycheck for services rendered, the Internal Revenue Code steps in, and that's when you have to start reporting it. It really comes down to whether the money is a reimbursement for an out-of-pocket cost or a reward for performance. If you aren't careful about documenting everything, you could end up with a headache during tax season. $0.53 Every single month.

2. Holding Cash (Bills and Coins):
Let’s talk about retirement. It’s one of those topics that everyone avoids until they suddenly realize they aren't getting any younger, and then it becomes the only thing on their mind. Honestly, when you look at how things are shifting, it feels like we need to have a much more serious conversation about what our golden years are actually going to look like. I feel strongly that we can't just rely on the old ways of thinking. We need to be proactive. You can't just sit around hoping the system stays exactly as it is today and somehow works perfectly for you thirty years from now. That's not a plan; that's a prayer. We need real, concrete strategies to ensure that when we finally decide to hang it up, we aren't just scraping by. It’s about dignity, it's about freedom, and frankly, it's about being smart enough to prepare for the reality of inflation and changing economic landscapes right here in the States.
You know, there’s a specific category of tax-free compensation that often gets overlooked in these discussions—things like pay received during periods of temporary unemployment or when someone is legally prevented from working. It also covers stipends for those serving in civil defense roles or receiving pay during military training exercises. Under the current rules, these aren't treated as taxable income.
If you’re a non-resident picking up prizes from sports, arts, or any other type of competition held here in the States, and the winner isn't clearly defined or specified in advance, you need to be mindful of how that plays out with the Internal Revenue Code. It can get a bit complicated when the prize structure is open-ended like that.
When it comes to income earned by kids from seasonal gigs—you know, those summer jobs or holiday rushes—it’s important to stay on top of how that plays into your tax situation.
When you look at what the IRS actually considers non-taxable income, there’s quite a bit of relief available if you know where to look. We're talking about things like social welfare benefits, child allowances, and those specific cash grants meant to help with newborn supplies. It also covers disaster relief payments following major natural disasters, interest earned on certain types of domestic savings accounts, survivor benefits, and various government awards. Basically, under Section 9, these are all receipts that aren't classified as taxable income.
Rewarding students during their internships is such a crucial part of the process, but we need to talk about how we actually handle those incentives. It shouldn’t just be a "thanks for the coffee" kind of deal; if you want to truly motivate them and build a pipeline for future talent, the compensation and recognition need to feel substantial. We should be looking at structured performance bonuses or even small stipends that reflect the actual value they bring to the table. When an intern feels like their work is being properly acknowledged, they engage on a much deeper level. It turns a simple learning experience into a serious professional stepping stone. $0.53 When you look at what’s exempt from taxes under the Internal Revenue Code—specifically those items that don't count toward your taxable income—there are a few key categories to keep in mind. We're talking about monthly stipends, awards given to students for winning competitions, and even compensation paid out for damages resulting from workplace accidents. These are all types of receipts that, according to the law, simply aren't subject to income tax.
Let’s break down what we can actually write off when it comes to business travel, commuting, and those gifts for your kids. It’s easy to get tripped up on where the line is drawn between a legitimate deduction and something the IRS is going to flag immediately. First off, business travel is a major one. If you’re heading out of town for work—meaning you’re away from your "tax home" overnight—you can generally deduct your airfare, hotel stays, and even a portion of your meal costs. Just remember, this isn't about upgrading to first class just because you can; it’s about the reasonable costs of getting the job done. If you're driving your own car instead of flying, you can either track every single receipt for gas and maintenance or, much more simply, take the standard mileage rate. Most people find the mileage rate way easier to manage. Now, be very careful with commuting. This is the biggest trap people fall into. Generally speaking, the cost of getting from your house to your regular office is considered a personal expense, not a business deduction. The IRS is pretty strict here: commuting is just part of life. However, if you're traveling from your primary office to a client site or a different branch, that counts as business travel, not commuting. There is a distinction, and knowing it can save you a massive headache during audit season. Lastly, let's talk about gifts for your kids. I know we all want to spoil them, but from a tax perspective, you have to be realistic. You can't just write off a new PlayStation or a trip to Disneyland as a business expense. Business gifts are usually limited to a specific dollar amount per person per year under the current tax laws. If you're trying to claim a gift to your child as a business deduction, you're likely headed for trouble unless there is a very specific, documented business reason that holds water. Stick to the rules here so you don't end up paying more in penalties than the gift was worth in the first place. $200 Annual bonuses and holiday perks can go up to... $833 When you look at the breakdown of employee benefits, you have to account for everything from annual bonuses—like Christmas bonuses or those year-end performance incentives—to tax-exempt severance packages and service anniversary awards. Then there’s the specialized stuff, like field pay or maritime allowances, and even compensation for remote assignments or living away from home. All of these non-taxable reimbursements, subsidies, and worker rewards fall under the specific guidelines outlined in Article 13 of the Internal Revenue Code.
When it comes to those tax-free reimbursements for work-related expenses—specifically when you're looking at things like equipment or remote office setups—it really all boils down to how you navigate the Internal Revenue Code. It’s one of those areas where people often get tripped up because they think the rules are more flexible than they actually are. If you want to make sure these payments don't trigger an unexpected headache from the IRS, you have to be incredibly diligent about documentation. You can't just throw around cash for "office supplies" and call it a day; there needs to be a clear, legitimate business connection for every single cent. I’ve seen so many people try to blur the lines between personal perks and actual job requirements, and let me tell you, that is a recipe for disaster if you ever get audited. The key is to stay organized. If your employer is providing these allowances, they need to be structured properly under current tax laws to ensure they remain non-taxable. It’s not just about having the money; it’s about having the paper trail to prove that this wasn't just a hidden way to give someone a tax-free bonus. Stick to the rules, keep your receipts, and always make sure what you're claiming is a bona fide necessity for your role. It might feel like extra homework, but it is absolutely worth the peace of mind. $0.53 Once the election results are officially certified, things are going to start moving fast.
When you're looking at how to handle payments for buying back scrap metal or recycled materials that qualify as personal property, you have to be really careful about how you categorize those payouts for tax purposes. If you're running a business, you can't just treat these buybacks like any other transaction; there are specific rules regarding how this income is reported and how the value is assessed to ensure everything stays square with the IRS. It’s all about making sure the distinction between commercial inventory and individual personal assets is crystal clear so you don't run into any unnecessary headaches during an audit. $0.53 monthly per individual payer,
• the agreed-upon daily wage for seasonal agricultural workers.

3. Checking Account:
• personal transfers received as gifts for medical expenses,
• miscellaneous other income,
• income from self-employment.

I can either grab the cash on the spot or just have it wired straight to my checking account.

Keith Martinez5 said:Question:
Does a small business owner have the right to claim per diem expenses when traveling for business, and what’s the actual process for paying those out? Also—should this be recorded through the standard payroll system? Thanks!

They absolutely have that right, and yes, you definitely need to report it through payroll.

Brenda Chase3 said:Is the IRS website down again?

It’s down, it’s definitely down! Actually, both are down—the IRS site and my computer, haha.😍

Nicole Lee6 said:Aha, okay. In that case, I think I'll follow your lead and start logging them through the UR.

So, if I'm following this logic correctly, my "expenses" category would be reserved for stuff like employee payroll summaries, self-employment tax contributions, interest on business loans, bank service fees from incoming transfers, exchange rate fluctuations, and so on, right?

You don't actually have to enter non-sales tax invoices into the UR book (according to an article from the AICPA back on January 29, 2013), but personally, I log most of them just to keep my overview and payments organized. Also, if I remember correctly from somewhere, for small business owners, if you aren't maintaining a UR or IRA book, you're technically required to keep a detailed ledger of all assets and liabilities. If I'm off base here, please set me straight!

Carol Price4 said:I finished processing all the sales tax for January today—but my balances aren't lining up with what I'm seeing on the ETA system. Specifically, the debit/credit amounts are totally off from the actual balance... anyone else running into this? Hehehe... clearly something is wonky over there.

I went through the exact same thing with my year-end balance from December 31st, 2013. The ledger showed one amount, but the account card showed something completely different. They finally got it sorted out earlier this week.

Robert Young4 said:I suspect they'll need it for January too—it just seems like they pushed back the deadline since there's such a lag with the official notices coming out.

Yeah, that's definitely a possibility,🙂

Brenda Chase3 said:The IRS has officially started assessing employment levies for small business owners and independent contractors. Since the first effective date was March 14, 2014, we won't be hit with a double payment for January and February. Instead, they’ve jumped straight into the February assessment, which is due this March.

The notice number is 8770, and the total amount due is $29.

That's great news! I was actually logging into the IRS portal the other day looking for that 8770 payment, but nothing showed up, so I was genuinely confused about where they had tucked it away. It looks like one less payment to worry about if they didn't require us to catch up on that first month.