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Posts by cosmictinker24

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Accounting for Sole Proprietors: Tax & Bookkeeping Tips in Business, Accounting & Taxes · Jan 13, 2016

Carol Price4 said:But who are you supposed to sue if you didn't even know the company had already folded? Honestly, if it's bothering you, I'd just move it to receipts and call it a day—because if you ever decide to clear out all the old unpaid stuff during closing, it's going into receipts anyway.🍿

Or just roll with it and put it in the OPZ-STAT, 🙂

Yeah, I get it...
But honestly, dragging yourself through a lawsuit just to rack up legal fees when you'll likely never see a dime? It seems pretty pointless to me.
We all know how it goes these days—most of these businesses are barely keeping their heads above water, struggling just to cover payroll, let alone anything else...

Accounting for Sole Proprietors: Tax & Bookkeeping Tips in Business, Accounting & Taxes · Jan 12, 2016

amberbadger17 said:Seriously though, do unpaid invoices actually count as receipts? And am I supposed to be paying sales tax on them? Since 2012, I’ve been sitting on a claim for about $150 from this small business that shut down back in 2013. We never filed a lawsuit or anything; it’s just this lingering debt hanging over my head. I really want to clear this off the books. If I don't even have to list it under receipts—well, that would be amazing. But I really need to be sure.

So, I went to see my consultant, and they told me that regardless of the statute of limitations or whether those companies were wiped from the corporate registry during bankruptcy or liquidation, we still have to track these as unpaid receivables. Apparently, they have to show up on this new reporting form because we never took legal action (basically all unpaid invoices from the last six years)... It's total absurdity, honestly...
I even had a woman confirm this at a seminar yesterday...
The only real headache is if the business itself closes down; then we might be on the hook for the sales tax, even though we never actually collected a dime from the client. So, I guess the move is to not include them as receipts and just leave things as they are!

Accounting for Sole Proprietors: Tax & Bookkeeping Tips in Business, Accounting & Taxes · Jan 12, 2016

Keith Martinez5 said:Wait, does that imply I still have to pay sales tax on those specific invoices? Since they’re being recorded as receipts, I'm wondering if I'm on the hook for the tax even though I never actually collected any cash—or did I totally miss the mark on how this works?

From what little I can gather—if a company is bankrupt, undergoing liquidation, or just wiped from the Secretary of State records and won't pay up, it isn't treated as income for the KPI!
I'm not sure if that applies to the statute of limitations on individual clients versus corporate ones, though I highly doubt anyone is actually going to settle an invoice from 2010.
And honestly, why would anyone even book those invoices as income and pay sales tax on money we're never going to see?

Accounting for Sole Proprietors: Tax & Bookkeeping Tips in Business, Accounting & Taxes · Jan 11, 2016

Keith Martinez5 said:Wait, does that imply I still have to pay sales tax on those specific invoices? Since they’re being recorded as receipts, I'm wondering if I'm on the hook for the tax even though I never actually collected any cash—or did I totally miss the mark on how this works?

Honestly, I'm wondering the exact same thing.
The instructions are incredibly vague, and I've been trying to get an advisor at the LAPD to call me back for days now, but nothing. Total radio silence.
If you figure anything out, please let me know! 😵

Accounting for Sole Proprietors: Tax & Bookkeeping Tips in Business, Accounting & Taxes · Dec 23, 2015

stormybadger8 said:Hold up. Does this mean from now on, all those payroll taxes (Social Security, Medicare, CDC fees, etc.) for independent contractors are being calculated based on their net income? 😵
If so, then the info below isn't right. 😕

Income is just what's left after you subtract expenses from revenue. Why on earth are we now calculating payroll taxes on top of that income? 😕

Yeah, I guess I agree with you there.

Accounting for Sole Proprietors: Tax & Bookkeeping Tips in Business, Accounting & Taxes · Dec 22, 2015

Hey everyone,

I’m still digging through the weeds regarding bad debt write-offs for freelancers... specifically when it comes to those under the R2 tax bracket. The guidance on how to actually record this in the business ledgers is pretty thin to say the least.😢
Is it handled as an in-kind receipt—you know, things like statute of limitations expiring or companies being struck from the registry?
And if we're talking about bankruptcy or liquidation, does that mean it doesn't count as a KPI receipt? If not, how do we handle those cases?
Do I need to draft a formal decision to authorize the write-off?
If anyone out there has actually dealt with this, I could really use some advice. Thanks.

Accounting for Sole Proprietors: Tax & Bookkeeping Tips in Business, Accounting & Taxes · Dec 16, 2015

amberbadger17 said:Look, cosmictinker24, for real though, where can I actually find a specific example for sole proprietors? I need to see what I'm supposed to be typing in here. Is it basically the same deal as filing payroll tax and health insurance contributions for an employee, just adding in those estimated tax prepayments from my income?

There isn't one. I'm just scavenging through random sites online... I have no idea if anything official has even been posted yet..
Maybe the IRS will eventually cough up some examples..

Accounting for Sole Proprietors: Tax & Bookkeeping Tips in Business, Accounting & Taxes · Dec 16, 2015

cosmictinker24 said:If you're talking about the tax and surcharge prepayments, starting now, monthly prepayments will be calculated and paid based on the figures from the 2015 annual tax return... which basically means the old IRS notices are being phased out...
Yeah, as of January 1st, 2016, reporting those owner contributions on the JOPPD form is officially required. It’s just that instead of waiting for a notice from the IRS, you'll have to calculate the contributions yourself. The tax code actually specifies the exact codes to use for each category of person when filling out the JOPPD...

And, for what it's worth, taxes and surcharges don't count as business expenses...

Accounting for Sole Proprietors: Tax & Bookkeeping Tips in Business, Accounting & Taxes · Dec 16, 2015

Aaron Young85 said:So, all those mandatory insurance premiums an independent contractor has to cover for themselves (based on whatever P&G decides) count as business expenses, right? But I was wondering about the actual taxes and surcharges paid by the contractor...
Does anyone know if we're actually required to file a Form 941 now just to account for those specific contributions?

Thanks

If you're talking about the tax and surcharge prepayments, starting now, monthly prepayments will be calculated and paid based on the figures from the 2015 annual tax return... which basically means the old IRS notices are being phased out...
Yeah, as of January 1st, 2016, reporting those owner contributions on the JOPPD form is officially required. It’s just that instead of waiting for a notice from the IRS, you'll have to calculate the contributions yourself. The tax code actually specifies the exact codes to use for each category of person when filling out the JOPPD...

Accounting for Sole Proprietors: Tax & Bookkeeping Tips in Business, Accounting & Taxes · Dec 1, 2015

cosmictinker24 said:Aha! Okay, I have a few entries from defunct businesses and some old stuff that's past the statute of limitations..
1. If I have an invoice from 2011, but part of it wasn't settled until 2014, do I show the remaining unpaid balance and the sales tax on that portion?
2. So, basically, I just dump every invoice into Receipts, set the payment type to In-Kind, and add a note that the entity is dissolved or it's expired?
3. Would I be putting all these invoices into Receipts before the end of the year?
4. Is there anything else needed for the final accounting? Do I need to draft a formal resolution or something?

Thanks a ton!

????

Accounting for Sole Proprietors: Tax & Bookkeeping Tips in Business, Accounting & Taxes · Dec 1, 2015

casualorca5 said:Oops👎
The 70:30 split usually applies when the vehicle is strictly for business and stays at the office overnight. Commuting from home to work isn't business travel. That would just be considered taxable fringe benefits. As for the question: no, that wouldn't be correct.

????

Accounting for Sole Proprietors: Tax & Bookkeeping Tips in Business, Accounting & Taxes · Nov 16, 2015

Carol Price4 said:Ah, an income earner... well—just close out the accounts, record the payment in kind under receipts, and toss in a note saying the entity was struck from the registry, or whatever else works...

Aha! Okay, I have a few entries from defunct businesses and some old stuff that's past the statute of limitations..
1. If I have an invoice from 2011, but part of it wasn't settled until 2014, do I show the remaining unpaid balance and the sales tax on that portion?
2. So, basically, I just dump every invoice into Receipts, set the payment type to In-Kind, and add a note that the entity is dissolved or it's expired?
3. Would I be putting all these invoices into Receipts before the end of the year?
4. Is there anything else needed for the final accounting? Do I need to draft a formal resolution or something?

Thanks a ton!

Accounting for Sole Proprietors: Tax & Bookkeeping Tips in Business, Accounting & Taxes · Nov 13, 2015

Carol Price4 said:Basically, any write-offs from previous tax periods that were claimed as deductions get added back into your income—unless you've actually sued them, started a collection action, filed them in a debtor's bankruptcy, or settled through restructuring/bankruptcy proceedings (assuming the debtor isn't just some individual or a related party).

There’s also a little exception—you can write off expired debts if they don't exceed $750 per non-individual debtor in any single tax period.

Right, okay... I found that bit online..
But does that only apply to corporate income tax filers? We're dealing with individual income tax here!
How is the official decision supposed to look, and how does one actually record this in the books? I'm looking for actual examples, you know... real-world practice..

Accounting for Sole Proprietors: Tax & Bookkeeping Tips in Business, Accounting & Taxes · Nov 12, 2015

cosmictinker24 said:Hey there,

Quick question regarding the books—how does one go about writing off bad debt for invoices that have passed their statute of limitations, or for accounts where the companies have simply vanished from the business registry?
We never actually filed any lawsuits against these debtors.

thanks,

Anyone happen to have an answer for this?

Accounting for Sole Proprietors: Tax & Bookkeeping Tips in Business, Accounting & Taxes · Oct 29, 2015

Hey there,

Quick question regarding the books—how does one go about writing off bad debt for invoices that have passed their statute of limitations, or for accounts where the companies have simply vanished from the business registry?
We never actually filed any lawsuits against these debtors.

thanks,

Accounting for Sole Proprietors: Tax & Bookkeeping Tips in Business, Accounting & Taxes · Sep 16, 2015

S&P 500;55518906 said:
cosmictinker24 said:Interest collected from customers goes only in the KPI; no explanation to the IRS is required, as they are shown as Revenue./👍

No, those are just interest earned on our own expenses... they belong to us..
Fair enough, I guess that means we just toss them into the Additions section and call it a day..
They show up in the KPI, they don't touch the Sales Tax filings, and there's no need to write some long explanation for the Police Department..
Thanks!
No, those are just interest earned on our own expenses... they belong to us..
Fair enough, I guess that means we just toss them into the Additions section and call it a day..
They show up in the KPI, they don't touch the Sales Tax filings, and there's no need to write some long explanation for the Police Department..
Thanks!
Thanks a million, S&P 500!
I'm pretty much flying solo here, so I guess any bit of help is a godsend. 🙂

Accounting for Sole Proprietors: Tax & Bookkeeping Tips in Business, Accounting & Taxes · Sep 16, 2015

Carol Price4;55513127 said:
casualorca5 said:I will attempt to summarize, and please correct me if I am wrong:
Income:
late fees collected from customers, recorded in KPMG, excluding sales tax
interest on checking/savings accounts paid by the bank, not in KPMG, noted in explanations
taxed at year-end

Expenses:
late fees paid to the FBI, not in KPMG
late fees paid to vendors, recorded in KPMG, no sales tax deduction
business loan interest, recorded in KPMG,
🤔

Interest collected from customers goes only in the KPI; no explanation to the IRS is required, as they are shown as Revenue./👍
Interest collected from customers goes only in the KPI; no explanation to the IRS is required, as they are shown as Revenue./👍
No, those are just interest earned on our own expenses... they belong to us..
Fair enough, I guess that means we just toss them into the Additions section and call it a day..
They show up in the KPI, they don't touch the Sales Tax filings, and there's no need to write some long explanation for the Police Department..
Thanks!

Accounting for Sole Proprietors: Tax & Bookkeeping Tips in Business, Accounting & Taxes · Sep 15, 2015

casualorca5;55496240 said:
cosmictinker24 said:So, I get it.
I'm not recording this interest anywhere, so I suppose it needs to be part of the explanation... I mean, there has to be some kind of paper trail, right?
The person in this role before me... she didn't record the interest, and she didn't bother explaining those deposits to the FBI either. It seems a bit sketchy to me, honestly, because at the end of the day, the bank activity has to reconcile with the actual receipts.

Thanks, casualorca5..
But I'm really struggling with the interest part—specifically, what we collect from customers.
So, I book the invoice normally in the IRA, but I put the interest under Inflows, without sales tax, using the type "extraordinary income"... the interest amount shows up in KPMG, but I don't include it in the sales tax forms. So, it doesn't go into the sales tax summary either..
What I'm wondering about is the end of the year—when looking at the annual Recapitulation of inflows and outflows, those interest payments show up in the Inflows section via the bank statements..
Should those interest amounts be specified somewhere else so the IRS knows they're actually interest?? Like, do I need to write an explanation stating that the discrepancy in the bank statement inflows refers to interest, or how does that work??..
Usually, we receive payments on behalf of clients, and we specify those separately for the FBI (listing which clients they are and when the disbursement happened) to show those aren't our income since we're just passing them back to the clients...
Now I've just got this whole dilemma regarding these collected interest amounts to solve..
Thanks!

Accounting for Sole Proprietors: Tax & Bookkeeping Tips in Business, Accounting & Taxes · Sep 14, 2015

Ryan Rogers4;55494731 said:
cosmictinker24 said:When you're explaining things to the IRS, you're basically throwing everything at them that isn't showing up in the KPMG records just to prove why the bank statements don't match the incoming revenue—you know, why certain deposits aren't reflected in the KPMG files.

So, I get it.
I'm not recording this interest anywhere, so I suppose it needs to be part of the explanation... I mean, there has to be some kind of paper trail, right?
The person in this role before me... she didn't record the interest, and she didn't bother explaining those deposits to the FBI either. It seems a bit sketchy to me, honestly, because at the end of the day, the bank activity has to reconcile with the actual receipts.

Accounting for Sole Proprietors: Tax & Bookkeeping Tips in Business, Accounting & Taxes · Sep 14, 2015

Ryan Rogers4;55494295 said:I don't even bother bookkeeping those things; I just attach them to my income tax return along with an explanation clarifying why the deposits hitting my bank account don't match the revenue reported by KPMG, noting it was just a refund for an erroneous payment.

Okay, thanks... speaking of that explanation when filing—can I include interest payments received into my bank account there?
I'm talking about late fees (basically forced debt collection)...
See, since we run a law firm handling collections for clients, whenever we recover those costs, we end up receiving interest on top of the principal amount.