Posts by Jessica Gonzalez30

Nathan Peterson10 said:I'm not quite sure which section this belongs in.🤔
An employer running a small business wants to pay for additional training for an existing employee. Not a student, just a current staff member.
What kind of tax breaks are available, and what exactly can be filed as a deductible expense? Can they write off the full amount of the training costs? If so, how much? Also, how does this get recorded on the payroll forms, and what's the proper way to report it to the IRS?
Thanks for any help.

Just wanted to jump in and follow up on what ruggedlynx63 mentioned earlier.

Basically, you can claim up to 60% for general education and training expenses, or 25% if it falls under specialized training. This covers things like tuition at accredited institutions, seminar fees, professional literature, and—this is a good one—even travel and lodging costs if the training happens away from where the employee lives.

Regarding the paperwork, you'd enter those additional deductions into columns 4.2.1 and 4.2.5. 😉

It might be worth taking a closer look at the Higher Education Act for the specifics.

ruggedlynx63 said:They aren't coming, they just aren't... ugh...😵
Does anyone actually have a solid conclusion regarding passive interest for 2015? Like, does it even count as income back then or what? I’m honestly just completely lost at this point 😢
It’s like they wrote the laws just to make us suffer... 🙂

If you sit there and read Article 20, Section 6, and then Article 21, Section 5—give or take the exact numbers—a few times🤣, and then try to jump over to Article 30, Section 15... then circle back to those first two articles again, you should eventually realize that yes, it really does go under business receipts🤣

I finally realized that when I'm digging through the IRS code, I have to actually write things out and formulate entirely new sentences as I go—just trying to bridge the gap between all these different sections and subsections. It's honestly the only way I can stitch everything together into something that actually makes sense 🙂

casualorca5 said:My mistake, I haven't actually read the new law yet. I suppose I should go look at it.
👎

Haha, yeah, I can tell you didn't...
Honestly, this forum is great for all the stuff I don't have time to actually read 🤣🤣
I basically just pretend I've kept up with everything 🎉🤣

amberbadger17 said:So, which K.

The PDMO form—you know, the one for voluntary pension data.

Can I just be old-school and carry this around on paper, or am I seriously expected to master some xmllmx nonsense?

Second thing—what am I supposed to put in the work description field for W-2 employees regarding hours worked and insurance basis...?

Of course you can.
I honestly couldn't wrap my head around xmllmx at all—it was just too much for me. 🤣

For the work area, you just list the business headquarters; at least that’s how I’ve always done it, since everyone works right where their office is located.🤣

And don't bother putting in actual working hours—just use the number of calendar days. So, 31 for January, 29 for February, and so on.

6.1 0041
6.2 5801 if you're dealing with sole proprietors under the Internal Revenue Code.😉

Brandon Jackson4 said:Jessica Gonzalez30 and Carol Price4,

I'm looking into interest paid into my account during 2015.

I noticed the Income Tax Act went into effect on January 1st, 2016.

How did you all handle things back in 2015... did you include those amounts in your MIT or not?

Thanks

The section we're quoting here refers to the law that has actually been in effect since January 1st, 2015.

Brandon Jackson4 said:So, interest earned on the checking account goes straight into the MIT... it counts as receipts, and on the P-PPI form, we list them under "receipts via bank account":

Basically, they bump up our total income, which means we end up paying more under the Income Tax Act.

Just one more thing: I have a client who paid late, so they included some interest for the delay.

I didn't record those interest charges in my Sales Journal—I just logged the actual invoice itself.
Should those late fees be recorded as a receipt in the MIT?

Thanks,

Well, look at you...
You'd actually make a profit there instead of just handing it all over to the IRS.
Come on now, 🤣

Carol Price4 said:I’d honestly go looking for an official ruling on this one. Look, Section 20 says business receipts come from the types of income listed in Section 30, but then Section 30 itself says that credit interest on a checking account isn't actually "interest"... and it's never been treated as a business receipt before.

I don't mean to be difficult here—it's not a huge deal—but the wording just feels super blurry to me. Plus, why even mention receipts in a section that focuses on expenses? It's not even explicitly stated in Section 20...

If I were you, I’d start by waiting for them to actually write the laws properly according to the Fall Law.
Because, man, God help any country where you have to interpret one single sentence of a law by cross-referencing five other different sections. As if adding a bunch of extra IRS regulations wouldn't make things just a little more "fun" for us.

Since it isn't specifically laid out in Section 20, paragraph 6...
Honestly, for just a few bucks, I wouldn't even bother stressing over it.
Besides, why wait for their official stance when we can usually figure out the answer ourselves during a debate right here? It would take us days to get a response from them anyway. 👏👏 That’s why I love reading the quotes on this forum—you end up learning so much just by following the discussions. 👏

And keep an eye on Section 30. You really need to look at it strictly from the perspective of capital gains taxation.

Carol Price4 said:Article 20 of the Income Tax Act

(6) Business income also includes interest received under Article 30 if it comes from financial transactions that fall under the taxpayer's core business operations.

Article 30

(15) Regarding the interest mentioned in paragraphs 1 and 3, the following are not considered:

3. Interest earned on positive balances in checking, current, or foreign currency accounts provided by banks, savings institutions, or other financial entities—but only up to the maximum amount paid for liquid savings. This exemption applies if the interest on liquid savings is lower than the minimum rate for fixed-term deposits—basically, if it doesn't exceed 0.5% annually.

Well, Section 30 covers income from capital and how that gets taxed when it's paid out.

Section 20, paragraph 5—if you look closely—clarifies that interest collected on funds or placements used for business operations counts as business receipts, unless those amounts are already subject to withholding tax under Section 30. So, basically, any interest up to 0.50% isn't classified as capital income and isn't hit with withholding, but it *is* still a business receipt.

Anything over 0.5% is subject to withholding, but it wouldn't count as business income because we wouldn't want it getting taxed twice, right? 😉

graniterider10 said:Before, when dealing with interest or down payments on earned income, I used to put together a separate breakdown for any wire transfers that didn't end up being logged in the main Cash Receipts and Disbursements Ledger. Does this mean I’m supposed to do all of that *only* on this new form now... and still skip entering them in the main ledger? Okay... I guess I totally misunderstood how this works. So, the form has Section II RECEIPTS, specifically item 2. RECEIPTS VIA WIRE TRANSFER... is that where I log those interest payments? And then under Section V SUPPLEMENT TO THE CASH RECEIPTS AND DISBURSEMENTS SUMMARY, item 2. DIFFERENCE BETWEEN BANK STATEMENT TURNOVER AND REPORTED RECEIPTS... do I list those interest amounts there? Also, that discrepancy from the State Employment Agency payment is going to pop up too—should I just mark that as part of that difference?

Wait, why would that show up as a discrepancy when you have the corresponding outflow for the payroll taxes that basically offsets those receipts? Unless you aren't recording either one, or maybe you're referring to a surplus that hasn't been applied toward covering future tax obligations yet?

Brandon Jackson4 said:Lada,
I read somewhere you mentioned that interest on checking accounts counts as receipts, which means they’d need to be logged in the MIT.

For years now, following the IRS guidelines, we haven't been logging bank interest as income or receipts for business owners.
We always just listed them as the difference between total bank activity and actual receipts.

Could you let me know if there’s been a change in the rules? I'd love to know where I can find the updated documentation...
Thanks,

It’s Article 21, Section 5 of the Income Tax Act.

On top of that, the R&D department released a note that I'll quote here:
"Please note that interest earned on deposits (both demand and term deposits) in checking or foreign currency accounts, paid out by the bank where the business holds its account, is considered part of business receipts."

As of January 1, 2015, the provision in Article 9, Section 1, Item 1 of the Act was removed—it used to say:

(1) The following are not considered income:
1. Interest received from USD or foreign currency savings, or on deposits (demand or term) held in checking, current, or foreign currency accounts earned from banks, savings institutions, or credit unions.

So, there you have it.😉

graniterider10 said:One more thing I need to double-check. When interest gets credited to my checking account, does that count as a receipt? It’s nothing major—just about $2.00—but do I really need to log that in my income and expense ledger? Since it's an incoming transfer to my bank account, I assume I have to list it as a receipt on the PPP form.

That’s correct, you’ll list it under income.😉

graniterider10 said:So, you trigger the requirement to register for sales tax once you cross $77 in total receipts? I'm talking gross revenue, not actual profit—just the raw intake from the business, right?
Also, is it true that if we opt in voluntarily, we're basically stuck in the system for five years without being able to opt out?

Actually, no—for sales tax registration, it’s not about your total cash coming in, but rather the value of your taxable sales. You really have to be careful about what qualifies as a taxable sale and what doesn't. And as for the commitment part, under the current rules, if you choose to register voluntarily, you're looking at a 3-year period.

David Mitchell4 said:Could someone please explain what happens when you blow past the flat-tax threshold and transition to being a standard taxpayer? What are the most significant shifts?
Can a standard taxpayer draw a salary and use that to justify business expenses?
Roughly how much higher is the tax burden compared to the flat-tax model if one maximizes their deductible expenses?
What are the specific thresholds for hitting profit margins or triggering sales tax requirements?
Is it possible for a standard taxpayer to hire employees to account for additional revenue?
What are the most common, easy, or efficient ways to handle expense reporting?

If anyone feels inclined to answer even a fraction of this... I'm weighing whether to shut things down entirely or stick with being a standard taxpayer, though it's starting to look like a losing game.

A small business owner isn't technically an employee—you don't get a W-2 salary; instead, you take draws from your income, which aren't treated as business expenses.

If you max out your deductions, you’ll minimize your taxable income and, by extension, your tax bill. It's hard to give a precise answer to that without knowing the specifics of your industry or what kind of business you're running. Unlike the flat-tax system, you'll be dealing with progressive tax brackets based on your net profit.

As for Sales Tax, you hit those requirements once you cross $76667.

Employee wages count toward your business expenses and reduce your taxable income, but only once they've actually been paid.

Beyond your standard overhead, you can sometimes issue tax-free bonuses up to $2,500 which counts as an expense—plus there's mileage if you're using your own car for work trips rather than a company vehicle, and so on.

I honestly don't get why people are so terrified of moving away from the flat-tax model. Usually, hitting that limit is a sign that your business is actually growing, not a reason to shut down. Everyone wants more cash in their pocket without spending a dime of their own, even when the math actually works in their favor.
🕺

stormybadger8 said:Under the new rules, interest on those assets counts as income all at once, so they have to show up in the S&P 500 as such...
at least that's what I heard from the LAPD...

That’s actually why I mentioned it earlier 😉
They're rolling out a new form now, and interest isn't listed separately because it's all categorized under general receipts 😉

urbangull65 said:When I actually sat down to write that, I realized—I think I was thinking one thing and typing another—so you’re totally right there. I meant she uses the kids as a way to lower her tax burden; they aren't listed under her husband since he's currently employed.
One more thing, if you happen to know: in the new income tax filing, section 4.2.5 covers "Reduction of Income under 1. Salaries of newly hired employees." Now, she has an employee who is flagged in the NASA Apollo 11 system as a "new hire" per the employment incentive laws. Am I supposed to enter this worker's salary here? Like, do I take the net pay and multiply it by 12 months, or... does this not even fall under this category at all??

To be able to claim that reduction for new hires, you have to meet specific criteria—basically, the position has to be permanent, and the person needs to have been registered with the IRS for at least a month prior to being hired. So, it's essentially the definition of a new employee, plus people entering the workforce for the very first time.

Take a look at Article 56 of the Internal Revenue Code.😉

Olivia Cruz86 said:So, I’m staring down this N/A form right now and I’ve got some questions:
III. EXPENSES - what's the deal with in-kind expenses versus write-off expenses? Does AM go under write-offs? Because my software keeps dumping AM into the in-kind category!
Also, regarding V. SUMMARY OF INCOME AND EXPENSES
point 2—what is the actual difference between the turnover per the ledger and the reported income???
2.1. cash deposits??
Here’s my situation: I have incoming funds hitting the account, but they're actually being paid out to third parties (it's just a pass-through item for us). At the end of the year, I put together a full list and handed everything that hit the account over to the FBI to show it isn't considered actual income... so where am I supposed to plug that in now???

Those transit items should probably be accounted for in the discrepancy between the General Ledger turnover and the reported receipts. Up until now, we've just included those in the attachment used to explain any differences—things like interest earned, loan repayments, and stuff like that. 😉

Thomas Diaz8 said:Thanks for the input.
Under the Sarbanes-Oxley Act regarding pre-packaged bankruptcy, Article 85 states:
(4) Value adjustments based on impairment of receivables are determined as tax-deductible expenses in the amount of the write-offs approved under a settlement pursuant to this Act.

Does this imply that I should book the remaining balance of the invoice as an expense? Specifically, if I book the amount actually paid as revenue, but then simultaneously book that 30% portion as an expense on the same date—since I handle sales tax based on actual payments received—would that be the correct approach?

What you pointed out makes total sense for corporations or profitable small businesses—they already recognized the full revenue and paid taxes on it at the moment they issued the invoice.
So, in those cases, that 30% really does act as a tax-deductible expense once the value adjustment happens.

But for a sole proprietor using a cash-basis accounting method, that money was never actually recorded as income in the first place; it only shows up when the payment is finally received. So, to my mind, it doesn't quite track that they would get to claim that 30% as a deductible expense if it wasn't even considered income to begin with.
😉

Thomas Diaz8 said:I am looking for some guidance here if anyone happens to have experience with this.
During the last fiscal year, certain bills were settled by a creditor as part of a pre-bankruptcy settlement I was pursuing. A notice was issued writing off 30% of the balance, while the remaining 70% was paid in full. I recorded the paid amount in the general ledger, which leaves that outstanding 30% sitting there as an unfulfilled balance. Consequently, when we closed out the year, those accounts rolled over into the current year as open items. What is the proper procedure to write off that 30%? I need them to stop appearing in this year's books since they were officially written off under the settlement terms. I hope I’ve explained the situation clearly enough. Thanks in advance for any help.

From what I understand, when a debtor goes through bankruptcy or liquidation, you don't record income under Section 8 of the Corporate Income Tax Regulations for uncollectible claims. To be honest, I'm not entirely certain about how it works specifically for pre-bankruptcy settlements, though my gut feeling is that the same logic should apply.

Now, obviously, you can't just void the original invoice. You might consider recording it as an in-kind receipt and marking it as unrecognized so it doesn't impact the S&P 500. Just make sure to attach all the supporting documentation to the entry.

Brenda Chase3 said:Here’s the catch: imagine a Small Business Owner gets an incentive for hiring someone, and that money hits their account in November. That grant is intended to cover the new employee for the following year. You can't exactly burn through all that cash in two months when the credit is meant to span a full twelve-month cycle—especially since you have to submit proof of payroll and tax contributions every quarter. But the reality is, the entire lump sum of $9.25 lands in the bank account all at once. The moment it arrives, it artificially inflates the owner's income for the current year, even though they haven't actually incurred any of the expenses yet to offset it.

You've got a point there.
I was actually thinking about self-employment incentives.
I've been dealing with them so much lately that my brain is basically just a revolving door of incentive programs at this point.😵

Arthur Bishop6 said:Does a Small Business Owner on income-based tax still need a liquidator to verify their paperwork
before handing it over for bookkeeping under the accounting laws?

The folks at my local bank told me that starting January 1st, even a Small Business Owner has to comply, but I want to hear what you all think.

I have to disagree there. Liquidations are governed by the SEC, and we all know exactly which entities are actually required to follow that specific Act.

But then again, since things can get pretty chaotic and nobody ever seems to be quite sure who’s in charge or who’s footing the bill, anything could happen. 🥱