Accounting for Sole Proprietors: Tax & Bookkeeping Tips

ruggedheron13 said:No worries at all. That specific invoice is just going to keep popping up in the software as unpaid. It’ll stay right there on your radar until you properly close out and reopen your books at every opening balance phase... until it's finally settled. Besides, if you're running a small business, you're required to maintain an Accounts Receivable and Payable ledger anyway. You have to track every single outstanding bill and uncollected payment through that system...

Thanks so much!
Can I pick your brain for one more thing? Since we track our Iraq accounts based on when the cash actually hits, is it cool if an invoice dated 12/31/2014—with a due date of 1/15/2015—doesn't even show up in the system until it's actually paid in 2015? Basically, it wouldn't be entered into the Iraq records during 2014 at all.

Olivia Cruz86 said:Thanks so much!
Can I pick your brain for one more thing? Since we track our Iraq accounts based on when the cash actually hits, is it cool if an invoice dated 12/31/2014—with a due date of 1/15/2015—doesn't even show up in the system until it's actually paid in 2015? Basically, it wouldn't be entered into the Iraq records during 2014 at all.

I'm not sure if you're registered for sales tax or not... I'm thinking about that extreme scenario where you aren't in the system yet, but you're right on the edge of the threshold, and this specific invoice would push you over into being required to register. If that's not an issue, then naturally, there's no problem recording it now in 201x. A receipt technically happens when the bill is actually settled. The fact that it wasn't logged last year, but rather this year, shouldn't be a dealbreaker... unless you're facing that specific tax registration situation mentioned before.

I guess I'll just leave this here. Maybe someone will find it useful. says:
I honestly hope this means those of us running our own operations don't need to rush into getting a license. If we actually have to, I guess there might be a deadline for when that needs to be sorted out.

Thanks.

The specifics regarding how, where, and at what cost the license will be issued are subject to a separate federal regulation.🙄
The same applies to the unified account plan; nothing concrete has been decided yet, I guess.
Maybe the rollout will be delayed. I guess. ☕

ruggedheron13 said:I'm not sure if you're registered for sales tax or not... I'm thinking about that extreme scenario where you aren't in the system yet, but you're right on the edge of the threshold, and this specific invoice would push you over into being required to register. If that's not an issue, then naturally, there's no problem recording it now in 201x. A receipt technically happens when the bill is actually settled. The fact that it wasn't logged last year, but rather this year, shouldn't be a dealbreaker... unless you're facing that specific tax registration situation mentioned before.

We are definitely in the sales tax system...
thanks for everything! 🙂

hey, do I need to get that quarterly form in by 10/20/2015 (for months 7 through 9)?

Robin Cook4 said:hey, do I need to get that quarterly form in by 10/20/2015 (for months 7 through 9)?

Yes, you do.

So, I’ve been thinking about this one small business owner I know... He was leasing a commercial space and put a significant amount of money into the build-out and improvements. He was booking those costs as direct improvements, but then life happened—he moved out before he could fully depreciate the investment. Now he's left wondering... what happens to that remaining book value?

ruggedheron13 said:So, I’ve been thinking about this one small business owner I know... He was leasing a commercial space and put a significant amount of money into the build-out and improvements. He was booking those costs as direct improvements, but then life happened—he moved out before he could fully depreciate the investment. Now he's left wondering... what happens to that remaining book value?

Think of it like inventory management. You should complete the depreciation process just as you would with stock you buy, put into your inventory, and then eventually sell. Essentially, the day he vacates the premises serves as the date of disposal; you simply write off the remaining value as of that specific date.

Can I write off 100% of the sales tax and claim the whole thing as a business expense when buying a trailer?
The trailer is meant for both my personal car and the cargo van we rent out occasionally for work. We bought it under the business license, so I’m stuck wondering—do I get to claim 100% of that sales tax?🤔

Thanks.

What kind of books does a small business owner need to keep if they aren't registered for sales tax? I’m running a quick-service food spot—just selling ice cream and handheld pies that I make myself. Does anyone know what the requirements are? Please, I really need some advice here... thanks in advance!

coastalfalcon90 said:What kind of books does a small business owner need to keep if they aren't registered for sales tax? I’m running a quick-service food spot—just selling ice cream and handheld pies that I make myself. Does anyone know what the requirements are? Please, I really need some advice here... thanks in advance!

I'm pretty much a newbie too, but when I checked in with the local Small Business Administration office, they told me that for a sole proprietorship not paying sales tax, you basically need to track
a cash receipts and disbursements journal,
a sales ledger,
an accounts receivable and payable record, and
a fixed asset register.
So, from what I gather, in the receipts and disbursements journal, you log everything you pay out and everything you take in. Like, if I go to a local bakery, buy buns for my burgers with cash, and get a standard receipt, that goes straight into the receipts and disbursements journal. Then, for the receivables and payables record, you’d track any unpaid bills or money owed that goes through your business bank account... which I think means if I bought those same buns but paid via a business check or ACH, I'd list it in the payables record first, and then once the check actually clears, I'd mark it as paid in both that record and the main journal. I'm hoping someone with a bit more mileage under their belt can walk through this with me just so us beginners don't mess it up... is that how it actually works?

hey, I could really use some help here... do interest payments on taxes and payroll contributions count as a business expense? Like, do they actually get factored into the KPI? Thanks

Aaron Young85 said:hey, I could really use some help here... do interest payments on taxes and payroll contributions count as a business expense? Like, do they actually get factored into the KPI? Thanks

Nope. 😉

Quick question about tax refunds—does the IRS not count them as taxable income? I’m trying to double-check my math here, but I'm not 100% certain about how it hits the books... Would anyone mind giving me a quick confirmation? Thanks so much!

Keith Martinez5 said:Quick question about tax refunds—does the IRS not count them as taxable income? I’m trying to double-check my math here, but I'm not 100% certain about how it hits the books... Would anyone mind giving me a quick confirmation? Thanks so much!

I can confirm that. You don't record it as 🙂

Henry Edwards33 said:I can confirm that. You don't record it as 🙂

Thanks!

Henry Edwards33 said:Nope. 😉

thanks, Liti 👍

The association is putting together an off-site workshop, and the members attending are paying a registration fee to participate. I'm trying to figure out which revenue category this should be booked under. Just keep in mind that the fee covers both travel and lodging, since the workshop is set to run through the entire weekend.

Hey everyone!

So, we’re operating under the US VAT system—we're an R2 taxpayer and basically run a service business.
We have this deal with a local school district where we handle debt collection for them against their debtors. Instead of billing the school district directly for our services, we collect straight from the debtors themselves (who are just individual people)...
Here’s the kicker: there are tons of these individuals and the collection rate is honestly pretty lousy. To manage this, my boss used to issue pro forma invoices whenever a payment actually hit our account. He’d book every single incoming payment against those pro formas as they arrived, even if they came in at totally different times. Once the entire service was fully paid off, he’d finally issue the actual invoice. He refused to cut official invoices earlier because so many people never pay the full amount, and he didn't want to end up stuck with a mountain of Unpaid invoices at the end of the fiscal year!
He’s got a backlog of these pro formas dating all the way back from 2006 to 2011 from when he first started working with that district.
First off, I have no clue how "by the book" this whole pro forma thing actually is. The payments are being cleared and booked correctly as they come in, they're just tied to that specific pro forma. Like, one chunk might land in 2009, then the rest doesn't show up until 2011. I haven't dealt with this kind of mess before and I'm not sure what the best way to close these out is to keep the auditors happy... Since I started working here, we stopped using pro formas altogether and just go straight to invoicing, mostly because we don't have nearly as many of these debtors to chase anymore.
Second—when filling out the standard tax reporting forms, are we supposed to list these partially paid pro formas, or what?
From what I can gather, at the end of every fiscal year, any pro formas that haven't been fully settled get lumped into the Unpaid category in the filings... If anyone out there has more experience with this headache, please give me some advice!
Thanks

If you ask me, you’ve been out of compliance this entire time because you were only issuing invoices for services that had already been paid for.
The rule is simple: you HAVE to issue an invoice the moment a service is completed; when the actual cash hits your account is a completely different matter, especially since you aren't hitting those sales tax obligations until the payment is actually collected.
Regarding the OPZ-STAT-1 filing, my take is that you really ought to be reporting all Unpaid prepayments on there, provided you listed them as Unpaid receivables on your DOH forms... and we're talking about those Unpaid amounts going back six years. Anything older than six years doesn't need to be reported...