Accounting for Sole Proprietors: Tax & Bookkeeping Tips

Keith Martinez5 said:Thanks, >. One of my colleagues mentioned that this approach might be wrong—she suggested we should strictly stick to the standard labor pool and then log anything beyond that as overtime, or perhaps just "adjust" the hours to match the pool exactly. So, just to be absolutely clear—if I continue tracking hours this way and don't pay out any time exceeding the designated pool as overtime, am I technically staying within the rules?

I have to disagree with your colleague there. The 40-hour workweek is the baseline, but naturally, that means the total number of hours in a monthly pool will fluctuate depending on the calendar. If you worked exactly 40 hours a week, recording 165 hours without any overtime is perfectly accurate. In fact, both of those tables are pulled from professional HR journals that clearly illustrate how the hour pools differ depending on the specific scenario.
"Adjusting" the numbers like she’s suggesting isn't legal; you shouldn't be logging arbitrary hours that don't reflect what was actually worked.

https://www.calculators.com/payroll-calculator/example-link-abcde12345

http://www.irs.gov/employment-resources/overtime-and-hours-worked-guide

Keith Martinez5, I’ve included two links here that provide some context on how this works, though you can certainly find more information via a quick Google search. Essentially, the baseline remains a 40-hour workweek. The total monthly hour pool will naturally fluctuate depending on how many days are in the month according to the calendar, but the weekly threshold is what matters most. Whether an employee works a standard Monday through Friday, 8-hour shift, or follows a schedule of seven hours Monday through Friday plus five hours on Saturday, they are still hitting that exact 40-hour mark. In neither scenario would you be looking at overtime pay. You should feel free to report your actual hours worked, provided you don't cross that 40-hour weekly ceiling. For instance, if someone worked 7 hours on June 1st instead of their usual 5, they would hit 167 hours for the period, which would trigger 2 hours of overtime. However, 165 hours is simply the standard monthly allotment for employees working a six-day week who stay within their 40-hour weekly limit. 😉

Brenda Chase3 said:https://www.calculators.com/payroll-calculator/example-link-abcde12345

http://www.irs.gov/employment-resources/overtime-and-hours-worked-guide

Keith Martinez5, I’ve included two links here that provide some context on how this works, though you can certainly find more information via a quick Google search. Essentially, the baseline remains a 40-hour workweek. The total monthly hour pool will naturally fluctuate depending on how many days are in the month according to the calendar, but the weekly threshold is what matters most. Whether an employee works a standard Monday through Friday, 8-hour shift, or follows a schedule of seven hours Monday through Friday plus five hours on Saturday, they are still hitting that exact 40-hour mark. In neither scenario would you be looking at overtime pay. You should feel free to report your actual hours worked, provided you don't cross that 40-hour weekly ceiling. For instance, if someone worked 7 hours on June 1st instead of their usual 5, they would hit 167 hours for the period, which would trigger 2 hours of overtime. However, 165 hours is simply the standard monthly allotment for employees working a six-day week who stay within their 40-hour weekly limit. 😉

Thank you so much! I'm certainly no "professional" accountant—I just handle my own books—but I really love double-checking everything because the last thing I want to do is make a mistake. Your advice truly means a lot to me... you're wonderful! 🙂 I can't get past the paywall on that first link since I don't have a subscription, but from what I can see, my calculations are spot on... TnX 🙂

Hey everyone, I haven't been around here in a while. Could someone point me in the right direction—is there a specific thread for small businesses that also do Uber driving?
Thanks

Hi there! I haven't been around here in a while, so if someone could point me in the right direction—is there a specific thread for small businesses that also do Uber driving?
Thanks

During our cash drawer reconciliation for August 19th, I spotted a little hiccup regarding how one specific transaction was recorded. Basically, the customer paid via credit card, but the system has it logged as a cash sale—a classic clerical slip-up! What would be the best way to handle this? Should I just let the transaction sit as is and simply attach a formal memo explaining the error to the record?

Hey there,

I am seriously losing my mind trying to figure out how to book this incoming invoice (it’s for a service subscription plus a new iPhone combo) that looks like this:

Net Amount $1104
Sales Tax $276
_______________________
Total Invoice Amount $1379
Device Installment Plan 1/24 $50
Device Credit/Rebate applied -$1200
__________________________________________
TOTAL DUE $229

Can someone please walk me through the right way to run this through QuickBooks? I don't want to screw up the books. Thanks!

Does anyone know the right way to handle a sale to a customer in Canada when it comes to customs paperwork?
Specifically, I’ve got a business entity over in Canada buying goods from my company.
They’ll pay upfront, and based on their tax ID, I'll be issuing an invoice without sales tax.
The buyer is actually coming here to pick up the goods themselves and drive them across the border into Canada.
Am I going to run into any extra costs regarding this, and what specific export documentation do I need to prep for them to get the goods into Canada?

Olivia Cruz86 said:Hey there,

I am seriously losing my mind trying to figure out how to book this incoming invoice (it’s for a service subscription plus a new iPhone combo) that looks like this:

Net Amount $1104
Sales Tax $276
_______________________
Total Invoice Amount $1379
Device Installment Plan 1/24 $50
Device Credit/Rebate applied -$1200
__________________________________________
TOTAL DUE $229

Can someone please walk me through the right way to run this through QuickBooks? I don't want to screw up the books. Thanks!

Seriously, is anyone even home?

Can someone run the numbers for me on gross II for sole proprietors who just pay contributions based on a fixed base? I don't have a traditional salary—just the mandatory contributions—so I need to figure out what my gross II looks like relative to that base. Thanks.

Does anyone happen to know how to pull a tax withholding card through the employer portal for a new hire?
I can't seem to make heads or tails of this IRS site... it's a bit of a mess, I guess.

Thanks

cosmictinker24 said:Does anyone happen to know how to pull a tax withholding card through the employer portal for a new hire?
I can't seem to make heads or tails of this IRS site... it's a bit of a mess, I guess.

Thanks

Did the employee's registration with the CDC go through?

It'll just show up in your IRS digital inbox as a withholding certificate. Easy as pie.

Jack Young said:Did the employee's registration with the CDC go through?

It'll just show up in your IRS digital inbox as a withholding certificate. Easy as pie.

Look, the filing went through, but my inbox is still empty.
It’s her first job, so she doesn't have a tax history yet... I guess that might be why.

cosmictinker24 said:Look, the filing went through, but my inbox is still empty.
It’s her first job, so she doesn't have a tax history yet... I guess that might be why.

It might be prudent for her to request the opening of an account through the IRS website.

urbanwalker72 said:It might be prudent for her to request the opening of an account through the IRS website.

I’d love to, really, but I have no clue how to actually do it.
Can anyone walk me through this?

From what I’ve been able to gather through the IRS portal, an employer can’t just request a new W-2 for someone who doesn't have one on file, simply because the employer isn't considered an authorized signatory for that individual's tax records.
I noticed that while you can tweak certain details on an existing W-2, I’m still not entirely convinced there's a way to actually trigger the creation of a brand-new one for an employee—at least, I haven't stumbled upon a method to do it myself.
If it were that easy, anyone could just start generating tax documents for people who don't even realize their paperwork is a mess. That said, please double-check my logic; don't take my word as gospel. I’m just recounting my own experience where I tried to find a workaround and hit a dead end. Usually, we just advise our staff to handle their own filings through the official channels, which seems standard to me. As employers, we just wait for the documents to show up in our digital inbox via the IRS system.

Brenda Chase3 said:From what I’ve been able to gather through the IRS portal, an employer can’t just request a new W-2 for someone who doesn't have one on file, simply because the employer isn't considered an authorized signatory for that individual's tax records.
I noticed that while you can tweak certain details on an existing W-2, I’m still not entirely convinced there's a way to actually trigger the creation of a brand-new one for an employee—at least, I haven't stumbled upon a method to do it myself.
If it were that easy, anyone could just start generating tax documents for people who don't even realize their paperwork is a mess. That said, please double-check my logic; don't take my word as gospel. I’m just recounting my own experience where I tried to find a workaround and hit a dead end. Usually, we just advise our staff to handle their own filings through the official channels, which seems standard to me. As employers, we just wait for the documents to show up in our digital inbox via the IRS system.

I actually managed to get through... I finally saw the employee's Social Security number today, and when I entered it, the system said there was no tax record on file. So, I submitted the request and the consent form, and now I'm just sitting here waiting...

Brenda Chase3 said:From what I’ve been able to gather through the IRS portal, an employer can’t just request a new W-2 for someone who doesn't have one on file, simply because the employer isn't considered an authorized signatory for that individual's tax records.
I noticed that while you can tweak certain details on an existing W-2, I’m still not entirely convinced there's a way to actually trigger the creation of a brand-new one for an employee—at least, I haven't stumbled upon a method to do it myself.
If it were that easy, anyone could just start generating tax documents for people who don't even realize their paperwork is a mess. That said, please double-check my logic; don't take my word as gospel. I’m just recounting my own experience where I tried to find a workaround and hit a dead end. Usually, we just advise our staff to handle their own filings through the official channels, which seems standard to me. As employers, we just wait for the documents to show up in our digital inbox via the IRS system.

The employee is actually the daughter of a small business owner, and he's been claiming her as a dependent until now...
Will she just be removed from the deduction for these last two months when the annual tax return is filed?
Or does he need to submit a request to amend his own business tax records?

cosmictinker24 said:The employee is actually the daughter of a small business owner, and he's been claiming her as a dependent until now...
Will she just be removed from the deduction for these last two months when the annual tax return is filed?
Or does he need to submit a request to amend his own business tax records?

🤔 If this individual is simply a sole proprietor filing taxes under standard income rules without drawing a regular W-2 salary, then he wouldn't even utilize an IRS withholding certificate, let alone claim a dependent through one.

An IRS withholding certificate exists solely to facilitate the application of standard deductions during payroll or pension calculations; it serves no other administrative function.

However, if she was previously listed as a dependent, a withholding certificate cannot be issued for her until that status officially ends, so everything seems to be in order.

One would just need to verify whether the business owner even requires such documentation if he isn't receiving a formal salary or pension. If he does, then it is fine.

urbanwalker72 said:🤔 If this individual is simply a sole proprietor filing taxes under standard income rules without drawing a regular W-2 salary, then he wouldn't even utilize an IRS withholding certificate, let alone claim a dependent through one.

An IRS withholding certificate exists solely to facilitate the application of standard deductions during payroll or pension calculations; it serves no other administrative function.

However, if she was previously listed as a dependent, a withholding certificate cannot be issued for her until that status officially ends, so everything seems to be in order.

One would just need to verify whether the business owner even requires such documentation if he isn't receiving a formal salary or pension. If he does, then it is fine.

Of course a small business owner can claim child tax credits and maintain their own tax withholding profile with their children listed. I personally know people with at least five kids where all those credits are applied because their business income is treated as their "pay," and for the sake of these credits, a business owner is treated just like any other employee on their tax filings. That’s why when you file your annual return, there’s a specific section to list dependents and credits. Small business owners have their own withholding profiles under their names, just like any standard employee.