Accounting for Sole Proprietors: Tax & Bookkeeping Tips

So, has anyone here actually signed up for the "payroll service" yet?
From what I can gather, they’ve gone ahead and posted some specific examples over there on how to fill out everything—daily logs, weekly stuff, even annual leave...

Hi everyone,

I’m looking into setting up a sole proprietorship—still getting my head around the details—and I’m a bit fuzzy on how business travel per diems work. My estimate is that I’d be traveling out of the country for about 14 days every month. So, when calculating net income, does paying out those per diems based on a travel voucher count as an expense? Naturally, I'd keep the per diems within the standard IRS limits so they remain tax-free.

I currently lease some commercial space for my business. I was wondering if I could write off improvements made to that property—for instance, installing new ceramic tile flooring—as a business expense? Since I am actually running my operations out of this specific location, I assume the investment should count toward my business costs, though I suppose I should be certain about how the IRS views this.

Not many of you are hanging out on the forum in this heat, but I’m hoping someone might pop in and offer some advice. Namely, I got a call today from an agent at the local Police Department, and she told me that according to my 2014 receipts and expenses summary (Synesis), my cash turnover doesn't match their sales tax law reports for that year—there's a discrepancy of about $10. My immediate gut reaction was that it's simply impossible because everything is processed through the register properly and there's zero manipulation involved, but I guess I'll have to double-check everything. Since I run a small business and pay sales tax based on collected invoices—where card payments go straight into my business checking account—I've always closed out those transactions on the date the funds actually hit my account, marking them as bank transfers rather than cash, since, well, they aren't physical cash. Of course, I made sure everything balanced, because if you add up the card transactions, you arrive at the exact same total the Police Department has. However, my contact at the Police Department insists I should be recording those as cash turnover, while my advisor at the IRS says that under the sales tax law, a card payment counts as cash turnover, even if it isn't "cash" in the sense of actual banknotes. Currently, I don't close out card payments the day they happen, but rather when the money is settled; otherwise, if a client pays by card at the end of the month, it would count toward my sales tax for that month, but the actual payment wouldn't land until the next—which just feels wrong from an accounting standpoint. Anyway, has anyone else dealt with this kind of headache, or am I just flying solo on this one?

So, I’ve been digging into this whole mess since they rolled out the new sales tax laws, but honestly? We haven't found a way to make sense of it all yet. 😍

According to Article 193d of the VAT regulations, if someone swipes a credit card, the payment is officially considered "received" the second it hits the bank account.
Then you look at Article 8, Section 9 of the income tax regulation, and it says the same thing—if you're using a card, the receipt is triggered when the money lands in your checking account.
But here’s the kicker—per Article 1, Section 5 of the sales tax law, paying with a card is treated just like a cash transaction.

The real headache starts when you realize that not every card out there is actually a credit card 😍

As of right now, nobody from the IRS has come knocking on our door.
Let's just pray it stays that way. 😍

Thomas Diaz8 said:I currently lease some commercial space for my business. I was wondering if I could write off improvements made to that property—for instance, installing new ceramic tile flooring—as a business expense? Since I am actually running my operations out of this specific location, I assume the investment should count toward my business costs, though I suppose I should be certain about how the IRS views this.

You are certainly allowed to depreciate investments made to someone else's fixed assets according to the standard rates. However, there is a specific complication regarding the income tax regulation 🙂 Namely, the IRS maintains the position that once your lease concludes, regardless of whether you invested in those tiles and depreciated them, those improvements remain the property of the landlord. Consequently, you effectively owe the owner the value of those improvements at fair market value when you vacate, since you cannot simply "take the tiles home" with you. It is a bit of an unfair situation; you are essentially allowed to expand the windows or install premium flooring to make your office more functional, but in the end, the landlord receives a space with increased value due to your investment, and you are required to invoice them for that value and pay the applicable sales tax if you are registered for it.

Keith Martinez5 said:Not many of you are hanging out on the forum in this heat, but I’m hoping someone might pop in and offer some advice. Namely, I got a call today from an agent at the local Police Department, and she told me that according to my 2014 receipts and expenses summary (Synesis), my cash turnover doesn't match their sales tax law reports for that year—there's a discrepancy of about $10. My immediate gut reaction was that it's simply impossible because everything is processed through the register properly and there's zero manipulation involved, but I guess I'll have to double-check everything. Since I run a small business and pay sales tax based on collected invoices—where card payments go straight into my business checking account—I've always closed out those transactions on the date the funds actually hit my account, marking them as bank transfers rather than cash, since, well, they aren't physical cash. Of course, I made sure everything balanced, because if you add up the card transactions, you arrive at the exact same total the Police Department has. However, my contact at the Police Department insists I should be recording those as cash turnover, while my advisor at the IRS says that under the sales tax law, a card payment counts as cash turnover, even if it isn't "cash" in the sense of actual banknotes. Currently, I don't close out card payments the day they happen, but rather when the money is settled; otherwise, if a client pays by card at the end of the month, it would count toward my sales tax for that month, but the actual payment wouldn't land until the next—which just feels wrong from an accounting standpoint. Anyway, has anyone else dealt with this kind of headache, or am I just flying solo on this one?

I’m with the IRS advisor on this one—just head back down to the Police Department and tell her to get her supervisor on the line. Ask them nicely how exactly I’m supposed to report a bank deposit as "cash," and demand they cite the specific law and article in writing.

Total nonsense—you can't just mix up sales tax law with basic accounting principles for small businesses... honestly, it's laughable...

But hey, they're doing all sorts of things these days... anyone who had daily turnover lower than $167 at any point in the last month—and has a hospitality license, regardless of whether they actually work in food service—can expect a call from the Police Department for an explanation and a sales tax audit questionnaire. 😉

Carol Price4 said:I’m with the IRS advisor on this one—just head back down to the Police Department and tell her to get her supervisor on the line. Ask them nicely how exactly I’m supposed to report a bank deposit as "cash," and demand they cite the specific law and article in writing.

Total nonsense—you can't just mix up sales tax law with basic accounting principles for small businesses... honestly, it's laughable...

But hey, they're doing all sorts of things these days... anyone who had daily turnover lower than $167 at any point in the last month—and has a hospitality license, regardless of whether they actually work in food service—can expect a call from the Police Department for an explanation and a sales tax audit questionnaire. 😉

We aren't even registered for hospitality or retail; we strictly handle service work—specifically repair and transport—yet we still got hauled in for an official explanation. They demanded a written statement justifying why, between July 1st and July 31st, there were certain days where our cash turnover fell below $167

It seems like they're gearing up to slap us with penalties if we don't hit a daily fiscalization minimum of at least $167. It's obvious what's happening: the government is broke and looking for ways to fill the budget gap...

So, they’ve expanded it to all service industries now—it started out just being checks on restaurants and retailers, but now they're moving even further, 🙂

Obviously, they're just short on cash...

Nicole Lee6 said:We aren't even registered for hospitality or retail; we strictly handle service work—specifically repair and transport—yet we still got hauled in for an official explanation. They demanded a written statement justifying why, between July 1st and July 31st, there were certain days where our cash turnover fell below $167

It seems like they're gearing up to slap us with penalties if we don't hit a daily fiscalization minimum of at least $167. It's obvious what's happening: the government is broke and looking for ways to fill the budget gap...

I went through this exact same thing with my 🙂 Auto repair shop and retail setup. I tried explaining—quite politely, mind you—that I'm not running a convenience store where people stop by for bread and milk every single day. My turnover isn't constant, and honestly, most of our business happens via bank transfers anyway. I genuinely thought they had sent those notices specifically to me!
Regarding my contact over at the local Police Department, I actually brought her all my paperwork—every single receipt I re-organized just to prove everything was perfectly accounted for. She just looked at me with zero interest and told me she didn't care and that the statement was enough. Every attempt I make to walk her through the logic is a complete dead end. Since we live in such a small town, I feel like if I push too hard, I'll just end up making life difficult for myself. It’s truly disheartening; instead of acting as advisors or offering any kind of guidance, I get the distinct impression that the folks at the Police Department view us small business owners as nothing more than crooks and scammers just waiting to be caught...

Hey guys, I’ve got a quick question—anybody here an expert who can help me out?

So, here's the deal: I got hit with this bill that was totally the fault of the company that sent it. We didn't owe them a single cent. I went ahead and filed a formal dispute, and they actually came back and said, "Yeah, our bad," and approved it. Now I'm just sitting here wondering—since we haven't paid anything yet, do I actually need to do anything with the original bill or that approval letter? Or can I just toss them both in the trash?
thanks

Olivia Cruz86 said:Hey guys, I’ve got a quick question—anybody here an expert who can help me out?

So, here's the deal: I got hit with this bill that was totally the fault of the company that sent it. We didn't owe them a single cent. I went ahead and filed a formal dispute, and they actually came back and said, "Yeah, our bad," and approved it. Now I'm just sitting here wondering—since we haven't paid anything yet, do I actually need to do anything with the original bill or that approval letter? Or can I just toss them both in the trash?
thanks

You just Enter the original invoice as a positive amount, then enter the credit memo as a negative amount, and your balance will hit zero. Just make sure you run both those entries through your books.

Brenda Chase3 said:You just Enter the original invoice as a positive amount, then enter the credit memo as a negative amount, and your balance will hit zero. Just make sure you run both those entries through your books.

Look, I'm entering them one by one into the accounting software right now—one as a credit, the approval as a debit—only thing is, I'm leaving the payment column totally blank since, well, nothing's actually been paid yet...
The invoice date is June 30th, 2015, but we didn't even get our hands on it until late July 2015, so now I'm freaking out wondering if that's gonna be an issue (since June is already closed out, or does it even matter as long as the balance ends up at zero?)... the approval date is July 31st, 2015.

Olivia Cruz86 said:Look, I'm entering them one by one into the accounting software right now—one as a credit, the approval as a debit—only thing is, I'm leaving the payment column totally blank since, well, nothing's actually been paid yet...
The invoice date is June 30th, 2015, but we didn't even get our hands on it until late July 2015, so now I'm freaking out wondering if that's gonna be an issue (since June is already closed out, or does it even matter as long as the balance ends up at zero?)... the approval date is July 31st, 2015.

Think of it this way: if you didn't record the credit back in June, just record it now in July alongside the sales tax entry, and you're all set. Just make a note on the invoice stating when you actually received it, and there shouldn't be any hiccups. That way, the sales tax balance for those two specific invoices will net out to zero. Essentially, you just handle each invoice individually within the July period—one entry as a credit, one as a debit.

Brenda Chase3 said:Think of it this way: if you didn't record the credit back in June, just record it now in July alongside the sales tax entry, and you're all set. Just make a note on the invoice stating when you actually received it, and there shouldn't be any hiccups. That way, the sales tax balance for those two specific invoices will net out to zero. Essentially, you just handle each invoice individually within the July period—one entry as a credit, one as a debit.

Thanks a million!

Olivia Cruz86 said:Thanks a million!

The invoice goes straight to $6.75 and since it's tax-exempt, it won't even touch the sales tax filings—it just hits the IRS records...

Has anyone actually dug into that new Bureau of Labor Statistics report regarding adult unpaid bills?
It looks like they’ve pushed everything back to 2016, and apparently, the first batch won't even be released until February 20th, 2016.
I'm just trying to figure out what timeframe this first form is actually going to cover... I mean, does it start with bills from December 31st, 2015, and go from there, or what?

cosmictinker24 said:Has anyone actually dug into that new Bureau of Labor Statistics report regarding adult unpaid bills?
It looks like they’ve pushed everything back to 2016, and apparently, the first batch won't even be released until February 20th, 2016.
I'm just trying to figure out what timeframe this first form is actually going to cover... I mean, does it start with bills from December 31st, 2015, and go from there, or what?

No.
Everything you need should be laid out clearly right here:

A small business owner is projected to hit $72 in total receipts by the end of the year, which keeps them just under the threshold for mandatory sales tax registration. They’re also expecting to receive a refund from the IRS $6.75.
My question is whether receiving that $6.75 refund from the Department of Labor would push their total income over the limit, forcing them into the sales tax system? Or does the limit only apply to gross business revenue deposited directly into their business accounts?

Brenda Chase3 said:A small business owner is projected to hit $72 in total receipts by the end of the year, which keeps them just under the threshold for mandatory sales tax registration. They’re also expecting to receive a refund from the IRS $6.75.
My question is whether receiving that $6.75 refund from the Department of Labor would push their total income over the limit, forcing them into the sales tax system? Or does the limit only apply to gross business revenue deposited directly into their business accounts?

Let me jump in here to answer this for anyone else wondering about the same thing. According to sales tax consultants, things like refunds, donations, or similar credits don't count toward the sales tax threshold because they aren't considered a sale of goods or services. Essentially, you record it as income for income tax purposes, but it doesn't trigger the requirement to register for sales tax. All you really need to do is keep a copy of that bank statement and include it with your tax filing to show that the money was a refund rather than standard business revenue.