Accounting for Sole Proprietors: Tax & Bookkeeping Tips

can someone walk me through this? apparently there’s an IRS rule from back in the day where if a small business hits over $60k in revenue within their first six months, $0.00 you basically average that out over the months they were active and pretend that's their monthly baseline... so like, if I pull in $60k in 4 months, does that mean $60k/4 = $15k per month, which equals $180k annually???? please, if anyone actually knows where this is written, let me know

Hey there. Quick question regarding shipping costs when invoicing a client overseas—do I need to charge sales tax on the postage itself, or is that exempt?
thanks for the help!

cosmictinker24 said:Hey there. Quick question regarding shipping costs when invoicing a client overseas—do I need to charge sales tax on the postage itself, or is that exempt?
thanks for the help!

I guess it’s a yes; actually, that was the rule before we joined the USA, and it probably hasn't changed.
The shipping cost could be bundled into the total service fee, like an attorney's fees for
a specific case, where the invoice shows one line item with a flat 8% sales tax on everything.
Or you could list the shipping separately, which would also carry that 8% sales tax.
Maybe it's better to just keep things simple.

amberbadger17 said:I've run into a bit of a snag.

I accidentally paid the exact same invoice twice—it’s crystal clear on my bank statements since the invoice number is identical for both. I gave the vendor a call, and after checking their books, they assured me they would issue a refund directly to my account for the overpayment.

But here’s the thing...
When I check my bank activity, I don't see a "refund" entry at all; instead, it just shows up listed as another "payment."

What am I supposed to do with this? Do I need to explain the discrepancy to the IRS by filing some sort of amended report or something?

I'm honestly at a loss here. It isn't even a huge amount of money, but I still have to make sure everything balances out perfectly when I reconcile my accounts and justify these random transactions.

Thanks in advance for any help!!!!

When you go to file your taxes, just pull the bank statements showing the double payment alongside the statement showing the reversal. Just include a brief note explaining that the transaction was a refund for the duplicate payment. That should clear everything right up with the IRS.😉

I don't even know how many times I've said this, but thanks, Brenda Chase3!!!!

Honestly, I fully expected that if I actually did this, someone would just burst through my door and start screaming about tax evasion and all that legal nonsense.

But nope, no drama. Total relief! <3

amberbadger17 said:I don't even know how many times I've said this, but thanks, Brenda Chase3!!!!

Honestly, I fully expected that if I actually did this, someone would just burst through my door and start screaming about tax evasion and all that legal nonsense.

But nope, no drama. Total relief! <3

Look, those IRS agents aren't exactly out here playing cowboy. Most of the time, they don't even have a clue what they're doing themselves; you just have to lay everything out clearly enough so their math adds up, and then they leave you alone. 🙂

I guess I have to ask... do you actually book interest payments for taxes and contributions as expenses?

cosmictinker24 said:I guess I have to ask... do you actually book interest payments for taxes and contributions as expenses?

No, they can't. Any interest payments being funneled into the federal treasury aren't recognized as deductible expenses.

Nicole Lee6 said:No, they can't. Any interest payments being funneled into the federal treasury aren't recognized as deductible expenses.

Thanks, Nicole Lee6!

Hi everyone, I could really use some advice here! At the electrical supply store where we work, we end up using up things like light bulbs and various cables just to set up our displays and spruce up the shop floor. How should we be handling that on the books so our inventory counts don't end up showing a deficit during an audit?
Thanks so much!

Hey there.

I'm trying to figure out how a foreign entity can invoice us for an amount we already covered on their behalf. We paid a local notary $48 for some services, but it’s a bit of a mess—some of the service is subject to a 25% sales tax, while the stamps used were tax-exempt. I guess I'll just be booking the notary's receipt as a business expense.
Thanks.

cosmictinker24 said:Hey there.

I'm trying to figure out how a foreign entity can invoice us for an amount we already covered on their behalf. We paid a local notary $48 for some services, but it’s a bit of a mess—some of the service is subject to a 25% sales tax, while the stamps used were tax-exempt. I guess I'll just be booking the notary's receipt as a business expense.
Thanks.

Just take a look at this sample invoice and follow the breakdown. You just need to address it to whichever client you're targeting—assuming I actually understood what you were asking...🙂

David Green642 said:Just take a look at this sample invoice and follow the breakdown. You just need to address it to whichever client you're targeting—assuming I actually understood what you were asking...🙂

I’m stuck on this one... The price for the RN is sitting at 142.50, and from there... $38 It’s just... well, you have to factor in the sales tax. That's an extra 25% on top of the $90 base price. I guess that brings the total up quite a bit. Maybe? It certainly feels like more than I expected. $10 It’s an exempt fee, so there's no sales tax involved. Now I’m sitting here wondering how I'm even supposed to invoice this... whether I just mirror exactly what's on the receipt or if there's some other way to handle it. I guess we'll see. $30 First you've got the whole signature verification headache... and then there's the VAT. It’s just one thing after another, I guess. Maybe it'll settle down, but probably not. $10 Should I list these separately since they’re just fees without any sales tax applied? I suppose I'll just book them as expenses for now, but I definitely need to invoice the client properly if we want to get that money back...

cosmictinker24 said:I’m stuck on this one... The price for the RN is sitting at 142.50, and from there... $38 It’s just... well, you have to factor in the sales tax. That's an extra 25% on top of the $90 base price. I guess that brings the total up quite a bit. Maybe? It certainly feels like more than I expected. $10 It’s an exempt fee, so there's no sales tax involved. Now I’m sitting here wondering how I'm even supposed to invoice this... whether I just mirror exactly what's on the receipt or if there's some other way to handle it. I guess we'll see. $30 First you've got the whole signature verification headache... and then there's the VAT. It’s just one thing after another, I guess. Maybe it'll settle down, but probably not. $10 Should I list these separately since they’re just fees without any sales tax applied? I suppose I'll just book them as expenses for now, but I definitely need to invoice the client properly if we want to get that money back...

Just invoice it exactly how it appears on the original receipt. My advice? Add a note in the description stating that these are passed-through expenses, and make sure to include the original receipt number—you know, that reference number from the notary's ledger—so there’s a clear paper trail.

cosmictinker24 said:I’m stuck on this one... The price for the RN is sitting at 142.50, and from there... $38 It’s just... well, you have to factor in the sales tax. That's an extra 25% on top of the $90 base price. I guess that brings the total up quite a bit. Maybe? It certainly feels like more than I expected. $10 It’s an exempt fee, so there's no sales tax involved. Now I’m sitting here wondering how I'm even supposed to invoice this... whether I just mirror exactly what's on the receipt or if there's some other way to handle it. I guess we'll see. $30 First you've got the whole signature verification headache... and then there's the VAT. It’s just one thing after another, I guess. Maybe it'll settle down, but probably not. $10 Should I list these separately since they’re just fees without any sales tax applied? I suppose I'll just book them as expenses for now, but I definitely need to invoice the client properly if we want to get that money back...

Yeah, you can—and honestly, you should—just do exactly what was on the receiving report. Everything stays the same.

Hey there, fellow forum junkies!

So, look—I’m pretty much a rookie at this whole thing, so I’m coming to you guys because I desperately need some guidance!
Basically, we went through a notary to file an enforcement order for an outstanding export invoice, and we finally managed to collect the full amount plus late fees through a payment processor. Now, I need to log this entire mess into the IRS system, but I’m stuck: do I include those interest charges in the same entry, and if so, where exactly does that go?? I’m running Synesis software, and when I’m punching in the numbers, the fields I see are: Invoice Amount, transitory clause, VAT exemption, Exemption Base, and EU delivery type. I haven’t dealt with interest payments before, so I have zero clue how to handle this... where am I supposed to record that extra cash and which tax forms does it actually hit??
Thanks a million in advance for the help!

In the business module—once those receipts hit, they roll straight into your KPI 😉

Henry Edwards33 said:In the business module—once those receipts hit, they roll straight into your KPI 😉

So, if I've got this right, I just book the RN normally under the IRA,
then I list the late interest fees under "Other Income" tied to that specific account, and that should show up in the KPI. Which means the interest amount won't mess with the sales tax form. Do I need to flag anything else regarding interest—like in the year-end statements—or am I good to go??

thanks Henry

Olivia Cruz86 said:So, if I've got this right, I just book the RN normally under the IRA,
then I list the late interest fees under "Other Income" tied to that specific account, and that should show up in the KPI. Which means the interest amount won't mess with the sales tax form. Do I need to flag anything else regarding interest—like in the year-end statements—or am I good to go??

thanks Henry

If you issued the invoice this year, just go into the sales module, enter the payment date and the amount: it automatically pulls everything through to the IRA and the KPI.

For interest, you enter it in the business receipts module; it isn't subject to sales tax, nor does it affect the tax calculations.
/ similar to how people record bank interest /

That's basically it. Data from the IRA flows directly into the tax return.
If the IRS asks for clarification regarding interest or perhaps a loan, you'd just provide them with an Excel spreadsheet. That should suffice.

I’ve got a question about the special healthcare contribution for people working abroad in
the States. Let's say a small business owner is running their business overseas and stays there for more than 30 days—say, six months—but they pop back home to the US for a few days here and there. Is this person actually required to pay? If they are, since they're abroad for more than 30 days, does the rate jump to 20%, or does it stay at 10%? And if it's the 10% rate, what's the base calculation? Employees calculate based on their salary, but a business owner doesn't have a "salary" in the traditional sense. For the 20% rate, I assume the base is already set.
I need an answer ASAP. This is urgent.🙏

Thanks. 🙂