Accounting for Sole Proprietors: Tax & Bookkeeping Tips

We’re spinning up a new transport business, and I’ve got some questions about the billing side of things. Say someone pays us $167 to cover moving costs—do we need to deal with sales tax registration and formal receipts, or how exactly do we book that income?

darkmarlin5 said:We’re spinning up a new transport business, and I’ve got some questions about the billing side of things. Say someone pays us $167 to cover moving costs—do we need to deal with sales tax registration and formal receipts, or how exactly do we book that income?

If you're taking cash payments, you'll definitely need a POS system or a receipt printer for tax compliance.
The process is pretty straightforward: you issue an invoice, and if it's a cash transaction, you run it through your receipt system. Once the bill is settled, you close it out, and at that moment, it gets logged as revenue. If it's cash, it goes into your cash receipts; if it's via check or bank transfer, it hits your accounts receivable through your business checking account.

So, I’m looking at this parking ticket, right? And from what I can tell, it doesn't get included in the JOPPD filing for travel expenses. Does that mean it stays out of the actual travel reimbursement report too, or how does that even work?

Hey everyone, I was wondering—can I count business taxes and those Chamber of Commerce membership fees as deductible expenses on my KPI? Also, should I be booking bank interest as income?

Thanks!

I make sure to write off my corporate taxes and membership fees as business expenses—they definitely count toward my KPI. However, I don't book the interest I earn from my savings accounts on a quarterly basis as standard income (so they don't hit my KPI right away). Instead, at the end of the year, I put together a comprehensive list of non-business receipts. That’s where I report those interest payments, any sick leave covered by Medicare for sole proprietors, transfers between different personal accounts, foreign currency trades, and things like that.

Hi everyone, my mom is heading toward retirement, so we’re looking at transferring her small business over to me. I was wondering if anyone here has experience with this kind of transition? I'd love some guidance on what to look out for and what specific steps I need to take.

I feel like I have a decent handle on things, but there are still a few gray areas. I keep getting conflicting answers from different people, which is honestly pretty confusing.
So far, I've already filed the paperwork for her retirement, and I also submitted a request to the Department of Commerce to transfer the business to a direct family member due to her retiring. Her retirement date is set for December 31st, which means the official decision for me to take over should kick in on January 1st.

The folks at the IRS told me I should register the business effective December 31st so I can stay in the VAT system (since the business is currently registered for sales tax). They suggested filing a final return for the current owner and then starting mine. Anyway... I think I grasp those parts, but I'm completely lost regarding the employees. The law says all contracts are transferred, but does that mean I just write a memo stating that the existing terms still apply to the staff? Or am I supposed to keep them on but draft entirely new contracts with my own signature and stamp? Also, do I need to "terminate" them on December 31st and re-hire them on January 1st because the Tax ID changes? That seems like a massive headache. It feels more logical to just update the ownership info with the Social Security Administration since the business registration number stays the same.
I'm also wondering if I'll need to get entirely new point-of-sale and tax certification software/permits, since everything is tied to the Tax ID. There is just so much to manage here. If anyone knows the exact, step-by-step procedure—or if you could point me toward an expert who does—I would be incredibly grateful.
I'm really nervous about messing something up. 😢

Hey there!
I’m totally stuck on how to handle depreciation for some equipment.
The invoice is dated November 2013, but we didn't actually start using it until January 1st, 2014—so I guess that's when the clock officially starts ticking on the depreciation, right? The purchase price was $1438, the useful life is 2 years, and the annual depreciation rate is 50%. Can anyone help me run the numbers for the initial value, the accumulated depreciation, and what the remaining book value looks like at the end of the year?
Thanks a million!

So, if I’m working a regular job but decide to start my own small business on the side, do I have to pay social security taxes through both my employer and my own LLC, or just one?

Hello, I am looking for some assistance here.

A small business owner hasn't been paying himself a monthly transit pass, nor has he been claiming mileage reimbursements for his vehicle. Now, I find myself wondering if he is legally permitted to pay for an annual public transit pass based on a provider's receipt, and subsequently record that expense through the standard payroll tax filings?

Thomas Diaz8 said:Hello, I am looking for some assistance here.

A small business owner hasn't been paying himself a monthly transit pass, nor has he been claiming mileage reimbursements for his vehicle. Now, I find myself wondering if he is legally permitted to pay for an annual public transit pass based on a provider's receipt, and subsequently record that expense through the standard payroll tax filings?

I'm guessing they’d want to settle up for the whole year at once—if that were me, it definitely wouldn't fly... the end goal is way too obvious, and if the IRS ever came knocking, they'd totally challenge the validity of it.

Robin Cook4 said:So, if I’m working a regular job but decide to start my own small business on the side, do I have to pay social security taxes through both my employer and my own LLC, or just one?

Actually, if you're already employed, you aren't paying monthly taxes on the business side—instead, you'll settle everything based on your annual income once the IRS calculates your total earnings for the year.

I am reaching out because I could use some guidance here.
An accounting error has just come to my attention, and it’s one of those things that really sticks in your craw once you notice it. Basically, an invoice was issued for $758, but the actual payment received was $2,270.00. However, it was recorded in our KPI as if the full amount had been settled—meaning we over-recorded the payment by five dollars. To make matters more complicated, that extra five dollars was already included in our sales tax filing. I suppose I’m wondering how on earth to rectify this. Is it possible to simply adjust the payment entry within the KPI to reflect the correct $2,270.00, and if so, what should be done regarding the discrepancy in the sales tax? I hope my explanation is sufficiently clear. Thank you in advance.

Thomas Diaz8 said:I am reaching out because I could use some guidance here.
An accounting error has just come to my attention, and it’s one of those things that really sticks in your craw once you notice it. Basically, an invoice was issued for $758, but the actual payment received was $2,270.00. However, it was recorded in our KPI as if the full amount had been settled—meaning we over-recorded the payment by five dollars. To make matters more complicated, that extra five dollars was already included in our sales tax filing. I suppose I’m wondering how on earth to rectify this. Is it possible to simply adjust the payment entry within the KPI to reflect the correct $2,270.00, and if so, what should be done regarding the discrepancy in the sales tax? I hope my explanation is sufficiently clear. Thank you in advance.

Just fix it in the KPI—the sales tax return will pick up the difference automatically.

Carol Price4 said:Just fix it in the KPI—the sales tax return will pick up the difference automatically.

Thanks for the response.
I have another question brewing here. This year, our service revenue fell below $76667, which means we’ll be dropping out of the sales tax registration system altogether. I suppose my concern is whether we still have to report and pay sales tax on every single invoice we issued before the transition. We have quite a few outstanding invoices that we haven't been able to collect yet. Some of them even went into pre-bankruptcy settlements, but we still haven't seen a dime. So, my actual question is: does exiting the sales tax system imply that we are liable for the tax on all invoices issued, rather than just those that were actually paid? Thanks in advance!

Hey, quick question—can I (small business owner) write off a generator as an immediate expense $5.00 right away, or does it have to be depreciated over time?

Robin Cook4 said:Hey, quick question—can I (small business owner) write off a generator as an immediate expense $5.00 right away, or does it have to be depreciated over time?

Generally speaking, long-term tangible and intangible assets are defined as items where the individual purchase cost exceeds $1.25 and the useful life extends beyond one year.
In this case, you'll need to capitalize it.

Can someone walk me through how this is calculated? Like, does the IRS factor it in, and if so, how exactly?

Robin Cook4 said:Can someone walk me through how this is calculated? Like, does the IRS factor it in, and if so, how exactly?

Basically, they take your annual tax from the previous year's filing, divide it by the number of months you were actually in business, and that becomes your monthly estimated payment for the current year.—pretty straightforward!

Carol Price4 said:Basically, they take your annual tax from the previous year's filing, divide it by the number of months you were actually in business, and that becomes your monthly estimated payment for the current year.—pretty straightforward!

aha, so I don't wait for an official notice from the IRS, I just start paying the first installment in March? 😁

Do they issue R-2 invoices?