Accounting for Sole Proprietors: Tax & Bookkeeping Tips

Nicole Lee6 said:If I may interject for a moment;
would this mean that I first take the invoice for my training (specifically code 95—periodic driver retraining) and, say, a subscription to a professional journal, and record them as business expenses in my tax filings based on the cash accounting method at the moment I pay them? And then, am I allowed to use 80% of those base amounts (since we fall under the micro-enterprise category) a second time as a deduction through an HHS filing?

The main thing is making sure the training is directly tied to the business you're actually running.
If that checkmark is hit, you can reduce the tax base by 60%, plus that extra 20% bump. 😉

At the end of the day, neither the jobs nor the interest rates are going to be the real issue... has anyone actually tried sending a direct inquiry yet?

I have this overwhelming urge to just smash things. I'm honestly over it.

ruggedlynx63 said:They aren't coming, they just aren't... ugh...😵
Does anyone actually have a solid conclusion regarding passive interest for 2015? Like, does it even count as income back then or what? I’m honestly just completely lost at this point 😢
It’s like they wrote the laws just to make us suffer... 🙂

I listed them as income. Those $10-$6.75 won't make much of a difference anyway. The IRS implies they count, though standard accounting practices don't explicitly list them as non-reportable income. ☕ For me, the matter is closed; I am not revisiting this.😁

hey, can we still drop everything off in person at the IRS like we used to, or is everything strictly digital through the e-file system now...??

amberbadger17 said:At the end of the day, neither the jobs nor the interest rates are going to be the real issue... has anyone actually tried sending a direct inquiry yet?

I have this overwhelming urge to just smash things. I'm honestly over it.

Not quite—I'm holding out until they clear up all these discrepancies first.🤣

ruggedlynx63 said:Right into the trash pile...

Thanks—and I think you're spot on. It’s not exactly a life-changing fortune, so honestly, it's probably better to just keep your own peace of mind...

Hey,
I handle the books for a Small Family Farm and I’m a bit stuck on how to settle this one:

Our farm sent an invoice to a company, but they paid us a reduced amount. Basically, they just subtracted what we owed them from our total. How should I record this in some simple bookkeeping? I also have to account for the fact that they didn't actually send the payment until early 2015, even though the bill was from back in 2014—so that debt has been sitting on our books for a year now.

Any help would be great.

ruggedlynx63 said:Look, if you want those training costs to be tax-free, you have to check all these specific boxes first:
- The payment absolutely has to be for the benefit of the company's own staff.
- The training needs to be directly relevant to what the business actually does.
- The money should be paid directly to the educational institution, not handed to the employee.
If the employer decides to foot the bill for an employee's continuing education, that expense ends up being doubly tax-advantaged... because the company can use it to lower its taxable income base via standard federal tax incentives when filing their annual return.

Thanks so much. This really helped me out.👍

John Doe got the IRS portal up and running... no more blocked fields...

Well, now, look at you lot... all jumping on the bandwagon to go after John Doe...

I have a quick question for those who have been sending John Doe's for "years" now...
Can I send the payment to John Doe first, and then handle the contributions later...

Thinking about sending it over to John Doe around 1 AM... if everything clears by 8 in the morning, I'll sign it and get it sent out. Only then will I open up the contributions...

I’d probably go that route... I run into issues with signing and sending things all the time.
I wouldn't want to end up in a spot where I've already sent in my contributions, only to find out I can't submit the actual form...

So, is it possible to file the form first and then handle the payments... all within that same 24-hour window?

Thanks...

Brandon Jackson4 said:John Doe got the IRS portal up and running... no more blocked fields...

Well, now, look at you lot... all jumping on the bandwagon to go after John Doe...

I have a quick question for those who have been sending John Doe's for "years" now...
Can I send the payment to John Doe first, and then handle the contributions later...

Thinking about sending it over to John Doe around 1 AM... if everything clears by 8 in the morning, I'll sign it and get it sent out. Only then will I open up the contributions...

I’d probably go that route... I run into issues with signing and sending things all the time.
I wouldn't want to end up in a spot where I've already sent in my contributions, only to find out I can't submit the actual form...

So, is it possible to file the form first and then handle the payments... all within that same 24-hour window?

Thanks...

Yeah, you can send the form first, just make sure the payment clears on the same day.

Hey everyone. Sorry if I’m double-posting this on two different threads, just trying to get some eyes on it.
Since I can't find a single decent example online for how to fill out the Joppd forms for small business owners, I’m hoping
some kind soul out there can walk me through this... :-)
Up until now, I've only been filing Joppd for non-taxable receipts, but does that go along with the Joppd for contributions
or am I supposed to send them separately? It’s for a solo proprietor with zero employees, so the Joppd should be
identical every month, but I really need someone to show me what this first one is actually supposed to look like and which boxes to check. There are plenty of guides out there
for everything else except this specific thing :-(
Thanks in advance!

rowdybison3 said:Hey,
I handle the books for a Small Family Farm and I’m a bit stuck on how to settle this one:

Our farm sent an invoice to a company, but they paid us a reduced amount. Basically, they just subtracted what we owed them from our total. How should I record this in some simple bookkeeping? I also have to account for the fact that they didn't actually send the payment until early 2015, even though the bill was from back in 2014—so that debt has been sitting on our books for a year now.

Any help would be great.

You can basically treat this as a barter or offset transaction between the company and the Family Farm. You'd record the settlement of the debt by offsetting the amounts, and then you just close out the remaining balance as paid.
I think that makes sense—though, if I'm being honest, I might be slightly underselling the technical side of how you actually close that second part out.

rowdybison3 said:Hey,
I handle the books for a Small Family Farm and I’m a bit stuck on how to settle this one:

Our farm sent an invoice to a company, but they paid us a reduced amount. Basically, they just subtracted what we owed them from our total. How should I record this in some simple bookkeeping? I also have to account for the fact that they didn't actually send the payment until early 2015, even though the bill was from back in 2014—so that debt has been sitting on our books for a year now.

Any help would be great.

If you treat it as an in-kind receipt, you can perform a set-off payment between the company and the Family Farm by referencing a Compensation Statement. Then, you just close out the other side as already paid.
I think that makes sense, though I'm slightly fuzzy on exactly which part needs to be closed out manually...

Jessica Gonzalez30 said:Wait, why would that show up as a discrepancy when you have the corresponding outflow for the payroll taxes that basically offsets those receipts? Unless you aren't recording either one, or maybe you're referring to a surplus that hasn't been applied toward covering future tax obligations yet?

I received that money from the agency back in October, but I only actually used the contributions as an expense for two months—November and December. I get what you're saying, and I know it’ll all balance out eventually... but that specific influx bumped up my 2015 tax liability and my prepayments for 2016. I realize the expense side will lower my 2016 taxes... but until then, who knows what'll happen.😵

People have already mentioned something about this here... I'll dig into it some more.

graniterider10 said:I received that money from the agency back in October, but I only actually used the contributions as an expense for two months—November and December. I get what you're saying, and I know it’ll all balance out eventually... but that specific influx bumped up my 2015 tax liability and my prepayments for 2016. I realize the expense side will lower my 2016 taxes... but until then, who knows what'll happen.😵

People have already mentioned something about this here... I'll dig into it some more.

Look, any amount you book as a paid expense for those contributions absolutely has to be recorded as income first. That’s how I handle things when I'm working with companies—anything that hasn't been utilized yet, I just list under deferred revenue. You could probably do the same thing via a formal letter to the IRS; you just have to make sure that for the 2015 tax year, you only recognize enough income to match what you actually spent, and everything should stay perfectly fine.👍

graniterider10 said:I received that money from the agency back in October, but I only actually used the contributions as an expense for two months—November and December. I get what you're saying, and I know it’ll all balance out eventually... but that specific influx bumped up my 2015 tax liability and my prepayments for 2016. I realize the expense side will lower my 2016 taxes... but until then, who knows what'll happen.😵

People have already mentioned something about this here... I'll dig into it some more.

I actually already gave you an answer to this specific question back on page 174. If you feel like your quarterly estimates are too high because of those incentives, you can always file a formal request with the IRS along with a revised summary to adjust your prepayments. If you need some proof that this works, here is the official inquiry I sent to the IRS and the formal response they provided:

"To whom it may concern, I am a small business owner who received a hiring incentive in 2015 in the amount of $9.25 for a new employee. I recorded this amount as income, which means my taxable income for 2015 is higher than it would otherwise be, consequently increasing my tax liability. I understand that I will pay this increased 2015 tax by April 15, 2016. My concern lies with the estimated quarterly tax payments for 2016. Since the 2015 tax liability is divided by twelve to determine the 2016 installments, it doesn't seem equitable to pay significantly higher quarterly amounts for 2016 simply because I received a one-time incentive. Can I submit a request alongside my tax return to have my quarterly payments calculated solely based on my standard business income, excluding the 2015 incentive that inflated my tax liability?"

Response to submitted form

Prepared by: Regional Office
Response content: Regarding your inquiry, Section 47 of the Internal Revenue Code outlines the method for paying estimated taxes for self-employment income. Paragraph 3 stipulates that the IRS may, upon a taxpayer's request, adjust the required prepayment amount. We suggest you contact your local IRS field office to proceed with this adjustment.

I’m feeling a little bit uncertain about this one, so I was hoping someone could jump in and confirm something for me—if I have a child who is a college student (currently 20 years old), do they count as a dependent on my tax return? Also, should I go ahead and attach an official enrollment verification from their university just to be safe? Thanks so much!

1. So, regarding the income tax filing—do we skip the KPI stuff entirely now and just submit the new P-PPI form?
2. Has anyone here used Synesis to calculate self-employment contributions with a February 15th effective date and then tried running a Joppd? I’ve entered everything, but every time I try to save the Joppd, it just throws an error at me...
Tnx

Paul Carter40 said:1. So, regarding the income tax filing—do we skip the KPI stuff entirely now and just submit the new P-PPI form?
2. Has anyone here used Synesis to calculate self-employment contributions with a February 15th effective date and then tried running a Joppd? I’ve entered everything, but every time I try to save the Joppd, it just throws an error at me...
Tnx

1. To be honest, you never actually submitted the entire KPI unless an auditor specifically asked for it later; it was always just a summary of receipts and expenses. Think of this new P-PPI as essentially being that same kind of summary.
2. I actually handled my own payments and successfully sent off my Jopp today. HOWEVER—do yourself a favor and download today's updated version of Synapse. They had a few bugs in there; for instance, in my previous version, the employment contribution wasn't pulling into the XML format correctly, even though the screen showed it was entered and it appeared on the form itself. Once I pulled the latest update today, everything worked perfectly.

Jessica Gonzalez30 said:Look, any amount you book as a paid expense for those contributions absolutely has to be recorded as income first. That’s how I handle things when I'm working with companies—anything that hasn't been utilized yet, I just list under deferred revenue. You could probably do the same thing via a formal letter to the IRS; you just have to make sure that for the 2015 tax year, you only recognize enough income to match what you actually spent, and everything should stay perfectly fine.👍

Oh, please forgive me! I got so caught up in my own typing that I realized I was actually thinking about one of my more profitable small business clients instead of the situation at hand. 🤣

For those working with cash-basis accounting, you'd naturally record that under receipts, 😒
and then you'd just file a request to reduce the estimated tax payments 😉