Accounting for Sole Proprietors: Tax & Bookkeeping Tips

ruggedlynx63 said: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...

See, these were basically forced collections, and they were issuing proformas to close out payments from individual debtors. Once everything was squared away, they’d finally drop the actual invoice once that last payment cleared, attaching it to the proforma. From what I can tell, the proforma has every single detail a standard invoice has anyway. Honestly, the service should have been billed immediately after it was provided to the client, but—just to play ball with them—those proformas were issued to their debtors who ended up paying off those debts in random chunks over time.
Later on, a formal contract was drawn up with that educational institution regarding how his services would be paid for, just to make sure he wouldn't run into any more trouble.

Hey there,

Quick question regarding the books—how does one go about writing off bad debt for invoices that have passed their statute of limitations, or for accounts where the companies have simply vanished from the business registry?
We never actually filed any lawsuits against these debtors.

thanks,

So, I’m looking at this small travel agency set up as a sole proprietorship. They basically act as a middleman—they take a commission for booking accommodations, and then the rest of the money goes straight to the property owner. I was wondering if anyone could walk me through how to handle this in KPMG? Specifically, what happens when a guest pays the full amount into the agency's bank account, but their actual earnings are only a 15% commission? Since the whole lump sum isn't technically revenue, just that percentage is, how does that look on the books? 🤔

Good morning, everyone. I’ve been chatting with an employee who’s been with us for five years about ending his contract. We were leaning towards a mutual agreement, but he’s really counting on those unemployment benefits from Medicare, which we can't trigger if we just settle things mutually.
Is there any way to classify this as a layoff due to redundancy instead, so we can bypass the notice period and still provide severance pay, since that would actually be a win-win for both sides?

Nancy Jones said:Good morning, everyone. I’ve been chatting with an employee who’s been with us for five years about ending his contract. We were leaning towards a mutual agreement, but he’s really counting on those unemployment benefits from Medicare, which we can't trigger if we just settle things mutually.
Is there any way to classify this as a layoff due to redundancy instead, so we can bypass the notice period and still provide severance pay, since that would actually be a win-win for both sides?

You could draft the termination as a reduction in force, but make sure you specify that the decision was made prior to the notice period, and that he will continue working through his final date. For instance, you issue the notice on October 26th, but his official last day isn't until November 10th.
If the employee chooses to waive his right to severance pay, ensure you get that in writing.
I am only suggesting this assuming you have already discussed this privately and the employee is fully on board with the plan.

Brenda Chase3, thanks so much!

Hey... Are you guys counting sales tax as a business expense for your LLC?

Not even close. Sales tax isn't an expense. Look, if you didn't pull it out of your incoming revenue in the first place, you can just log it as an expense once it’s actually paid, and then everything offsets perfectly. It won't show up as income or an expense, and honestly, if an auditor ever comes knocking, you'll have a super easy time explaining why you booked it that way.

So, I’m wrestling with this sales tax order—specifically the one labeled 68 1708-oib—and the system just flat-out refuses to process it. It keeps rejecting the whole thing. Has anyone else run into this lately, or did they change some random rule behind my back without telling me? Thanks.

amberbadger17 said:So, I’m wrestling with this sales tax order—specifically the one labeled 68 1708-oib—and the system just flat-out refuses to process it. It keeps rejecting the whole thing. Has anyone else run into this lately, or did they change some random rule behind my back without telling me? Thanks.

As far as I know, nothing has changed. It should work.

cosmictinker24 said:Hey there,

Quick question regarding the books—how does one go about writing off bad debt for invoices that have passed their statute of limitations, or for accounts where the companies have simply vanished from the business registry?
We never actually filed any lawsuits against these debtors.

thanks,

Anyone happen to have an answer for this?

cosmictinker24 said:Anyone happen to have an answer for this?

Basically, any write-offs from previous tax periods that were claimed as deductions get added back into your income—unless you've actually sued them, started a collection action, filed them in a debtor's bankruptcy, or settled through restructuring/bankruptcy proceedings (assuming the debtor isn't just some individual or a related party).

There’s also a little exception—you can write off expired debts if they don't exceed $750 per non-individual debtor in any single tax period.

Carol Price4 said:Basically, any write-offs from previous tax periods that were claimed as deductions get added back into your income—unless you've actually sued them, started a collection action, filed them in a debtor's bankruptcy, or settled through restructuring/bankruptcy proceedings (assuming the debtor isn't just some individual or a related party).

There’s also a little exception—you can write off expired debts if they don't exceed $750 per non-individual debtor in any single tax period.

Right, okay... I found that bit online..
But does that only apply to corporate income tax filers? We're dealing with individual income tax here!
How is the official decision supposed to look, and how does one actually record this in the books? I'm looking for actual examples, you know... real-world practice..

Hi there, I have a small business owner who commutes using their personal vehicle, which is registered under the company. They’re currently splitting expenses at a 70:30 ratio and keeping a log of all those short trips for local travel.
Is it actually okay to include the mileage for the daily commute to and from work in that logbook?

cosmictinker24 said:Right, okay... I found that bit online..
But does that only apply to corporate income tax filers? We're dealing with individual income tax here!
How is the official decision supposed to look, and how does one actually record this in the books? I'm looking for actual examples, you know... real-world practice..

Ah, an income earner... well—just close out the accounts, record the payment in kind under receipts, and toss in a note saying the entity was struck from the registry, or whatever else works...

Carol Price4 said:Ah, an income earner... well—just close out the accounts, record the payment in kind under receipts, and toss in a note saying the entity was struck from the registry, or whatever else works...

Aha! Okay, I have a few entries from defunct businesses and some old stuff that's past the statute of limitations..
1. If I have an invoice from 2011, but part of it wasn't settled until 2014, do I show the remaining unpaid balance and the sales tax on that portion?
2. So, basically, I just dump every invoice into Receipts, set the payment type to In-Kind, and add a note that the entity is dissolved or it's expired?
3. Would I be putting all these invoices into Receipts before the end of the year?
4. Is there anything else needed for the final accounting? Do I need to draft a formal resolution or something?

Thanks a ton!

Nancy Jones said:Hi there, I have a small business owner who commutes using their personal vehicle, which is registered under the company. They’re currently splitting expenses at a 70:30 ratio and keeping a log of all those short trips for local travel.
Is it actually okay to include the mileage for the daily commute to and from work in that logbook?

Oops👎
The 70:30 split usually applies when the vehicle is strictly for business and stays at the office overnight. Commuting from home to work isn't business travel. That would just be considered taxable fringe benefits. As for the question: no, that wouldn't be correct.

I feel like this might have been asked before, but...

So, if a Small Business owner uses a business credit card that’s set up as its own separate account, and the credit card company just automatically pulls the payments from the business checking account on whatever date they feel like—how am I supposed to handle the bookkeeping if I buy something on an installment plan?

When and how do I actually record this?

Do I just book it all at once and call it a cash purchase?

Or should I be closing out the account in installments and claiming the sales tax deduction as I go?

Thanks!

Thanks for the help! I have one more quick question for you—if we're heading out to pick up supplies from some 31 miles, and we fill out a travel voucher that doesn't show any extra expenses or per diems, should that still be reported on the IRS filing with a zero amount for payout, or is it better to just leave it off the records entirely?

amberbadger17 said:I feel like this might have been asked before, but...

So, if a Small Business owner uses a business credit card that’s set up as its own separate account, and the credit card company just automatically pulls the payments from the business checking account on whatever date they feel like—how am I supposed to handle the bookkeeping if I buy something on an installment plan?

When and how do I actually record this?

Do I just book it all at once and call it a cash purchase?

Or should I be closing out the account in installments and claiming the sales tax deduction as I go?

Thanks!

Does anyone actually know this? Help me out here, please...🙂