I’ve got a question about the depreciation schedules. I have items listed that haven't been used for years, or they've already been fully written off. I was told they still have to stay on the list regardless. Is that actually true? On my end, the value is zero, but they're still showing up on the registry. Should I just scrub everything from the list that isn't currently in use and only keep the active assets and the ones that are officially written off? The software automatically calculates depreciation every year... but the list is just massive, filled with endless entries and a ton of zeros. Now I’m stuck wondering what on earth I'm supposed to actually report on the new IRS electronic filing form out of all this mess.
If I want to lower my tax bill, I have to pump up my business expenses. But if I'm spending more, there’s less money left over to put toward my quarterly estimated payments. Honestly, I am so incredibly pissed at myself because I’m looking at a 40% tax hit on one portion of my income from 2015. My revenue actually went up, and I even picked up a tax credit for professional development training. But of course... I made more money, so now I just get penalized by having to pay more.😉))) So, shadowdrifter99 is totally right about this. As for me, I’m definitely doing things differently this year. 🙂))))
Can someone please tell me if I should be recording an input ID that doesn't show sales tax because the company isn't registered for it? I have to enter it through the Input Receipts ledger... does it actually matter for that specific book whether there's sales tax included or not? I always assume it does... so I only log those specific receipts there, and for anything without tax, I just write down the check number as the link. I'm not sure if I'm doing this right?!
Jessica Gonzalez30 said:Oh, please forgive me! I got so caught up in my own typing that I realized I was actually thinking about one of my more profitable small business clients instead of the situation at hand. 🤣
For those working with cash-basis accounting, you'd naturally record that under receipts, 😒 and then you'd just file a request to reduce the estimated tax payments 😉
Yeah, you definitely fall more into the profitable category... I noticed that. Anyway, all good... thanks for all the answers and the help.😉
Brenda Chase3 said:I actually already gave you an answer to this specific question back on page 174. If you feel like your quarterly estimates are too high because of those incentives, you can always file a formal request with the IRS along with a revised summary to adjust your prepayments. If you need some proof that this works, here is the official inquiry I sent to the IRS and the formal response they provided:
"To whom it may concern, I am a small business owner who received a hiring incentive in 2015 in the amount of $9.25 for a new employee. I recorded this amount as income, which means my taxable income for 2015 is higher than it would otherwise be, consequently increasing my tax liability. I understand that I will pay this increased 2015 tax by April 15, 2016. My concern lies with the estimated quarterly tax payments for 2016. Since the 2015 tax liability is divided by twelve to determine the 2016 installments, it doesn't seem equitable to pay significantly higher quarterly amounts for 2016 simply because I received a one-time incentive. Can I submit a request alongside my tax return to have my quarterly payments calculated solely based on my standard business income, excluding the 2015 incentive that inflated my tax liability?"
Response to submitted form
Prepared by: Regional Office Response content: Regarding your inquiry, Section 47 of the Internal Revenue Code outlines the method for paying estimated taxes for self-employment income. Paragraph 3 stipulates that the IRS may, upon a taxpayer's request, adjust the required prepayment amount. We suggest you contact your local IRS field office to proceed with this adjustment.
I'm starting to tackle the actual tax filing next week, and I'll handle it that way. I'll write up that request. :clapping::
Jessica Gonzalez30 said: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?
I received that money from the agency back in October, but I only actually used the contributions as an expense for two months—November and December. I get what you're saying, and I know it’ll all balance out eventually... but that specific influx bumped up my 2015 tax liability and my prepayments for 2016. I realize the expense side will lower my 2016 taxes... but until then, who knows what'll happen.😵
People have already mentioned something about this here... I'll dig into it some more.
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?
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.
I’m thinking income tax prepayments don't actually count as business expenses. Am I on the right track here? Is it just the self-employment taxes that go toward my overhead? And for VAT and income tax, am I just supposed to deduct those directly from my checking account?
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?
Brenda Chase3 said:I’ve got some firsthand intel here, straight from two different IRS representatives:
Regarding prepayments, they aren't being submitted manually anymore. Instead, the prepayment amount will be calculated based on the 2015 figures within the new tax form. The IRS will then bill for those prepayments, much like how they handle corporations. They can't give a specific start date because, frankly, things are a total mess over there right now—at least, that's what they told me. Regardless, all taxes and surcharges for 2015 must be settled by February 29, 2016, upon filing the tax return. Further prepayments will kick in once their system is actually up and running and processing data again.
For anyone who received various subsidies that caused their prepayment amounts to spike artificially, you can file a request to reduce those prepayments. You'll just need to provide a written explanation along with an updated summary showing that your actual income doesn't justify such high prepayment amounts. Once processed, the IRS will issue a new determination with adjusted prepayment totals.
Thanks for the heads-up. It would be great if it actually works that way... if we can really settle the prepayment issue just by filing that request. 👏
John Price92 said:Take the total annual taxable amount and divide it by 12 to get your monthly base, then multiply that by your tax rate. Or, just keep it simple: take the total tax you owe and divide it by 12 to figure out what your monthly estimate needs to be.
Thanks, Elly... I figured out the same thing later on. I realized I could just divide the total tax owed by 12, but my brain was totally fried at the time. Seeing that massive tax bill from my annual filing sent me into such a panic that I couldn't think straight.😵😠🙂
Uh... I’m honestly a little bit in shock right now. I’m working on my income tax return, and since last year was my first actual year in business, I was supposed to be exempt from paying taxes. But then, I also received those funds from the Department of Labor—which you mentioned counts toward gross income—and now I'm staring down a massive tax bill. 😢 Honestly, it would have been so much better if I had just been paying quarterly estimated taxes throughout the year... this is just... brutal. 😢 And then there's that extra cash from the Department of Labor... On top of that, all of this is going to hike up my monthly estimated payments for this year. If I'm understanding this correctly, I take that total income from 2015, divide it by 12, and that becomes my monthly estimate? If that's how it works, I am absolutely screwed, because we're talking several thousand dollars a month here. 😢
ruggedlynx63 said:Man, I just realized I posted this in the Sole Proprietors thread... my bad. Given that, just ignore what I said earlier about "booking to the down payment account and then clearing it against account 220"😁 At any rate, they absolutely have to issue you an invoice for that deposit
So here’s my current headache. They sent over a quote, but it shows the total amount for everything, not just the deposit I already paid. I sent the payment on $67 December 16th to the bank account info they emailed me, and I honestly thought I'd get a confirmation once it cleared... but nope. Now I'm looking for something specific... right now... and all I've got is this quote from December 24th showing the full price for the seminar, which doesn't happen until February 20th when I pay the rest and finally get my reimbursement. How on earth am I supposed to book all of this?
My bad. There isn't actually a specific income tax form available through the e-filing portal; instead, those tax withholdings are going to be handled via the quarterly payroll reports. I’m already overthinking things that aren't even an issue... sorry. I guess I just got a little lost in all the technicalities.😢
Thanks, account. So, looking at the contributions, this month is basically a carbon copy of last month. I was under the impression... that you also file your annual self-employment tax return through the e-tax portal... but... I could be wrong. 🙂
I’ve got a few questions popping up: regarding self-employed contributions for December 2015—am I supposed to be filing those right now this month via the tax form, or does that only kick in for the January 2016 contributions due by February 15th? Also, those new numerical codes for contributions based on self-employment... do they apply to the January 2016 payments too?
The State Employment Agency actually paid the contributions for an employee undergoing professional training last year. Should I be recording that as a receipt in my cash book?
Has the new annual tax return through the online IRS portal been released yet, or did I just miss it? I haven't seen the specific tax form for self-employed contributions either... so I’m guessing I don't need to send anything in this month, but... if anyone actually knows...👍🙂
Thanks, graniterider10. I’m going to try and get that down payment sorted out right now. As long as there isn't a massive panic today, it should be fine since I still have some breathing room before the sales tax filing deadline.