Accounting for Sole Proprietors: Tax & Bookkeeping Tips

Brenda Chase3 said: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 starting to tackle the actual tax filing next week, and I'll handle it that way. I'll write up that request.
:clapping::

Jessica Gonzalez30 said: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 😉

Yeah, you definitely fall more into the profitable category... I noticed that. Anyway, all good... thanks for all the answers and the help.😉

Quick question,
so, I'm thinking about heading out of state—maybe over to Germany—to buy a car with cash (which I'd pull from my business account) and then putting it under the company's name.
Is there actually a cap on how large a cash transaction can be before it becomes an issue for accounting or justifying the expense to the IRS? Just wondering if there's anything I should watch out for before I pull the trigger.
Thanks!

Brenda Chase3 said: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.

Kota, thanks, I'll give it a shot today. 🙂
Got a new question for you. 🙂
I'm thinking about buying a car abroad (over in Germany) using cash—which I'd pull from the business account—and then putting the car under the company name.
Is there a specific limit or cap on how large a cash receipt can be for it to be valid—you know, for business expense justification—or is there anything else I should probably know before I go through with this?
Thanks!

Paul Carter40 said:Kota, thanks, I'll give it a shot today. 🙂
Got a new question for you. 🙂
I'm thinking about buying a car abroad (over in Germany) using cash—which I'd pull from the business account—and then putting the car under the company name.
Is there a specific limit or cap on how large a cash receipt can be for it to be valid—you know, for business expense justification—or is there anything else I should probably know before I go through with this?
Thanks!

Man, I really hope someone weighs in here. About a year ago, I was practically knocking on every door asking if there was a limit on cash transactions within the EU, and nobody could give me a straight answer. Some people insisted the rules applied one way $1667 ,while others claimed they didn't apply at all. By the time the dust settled, my client had backed out of the deal anyway, so I dropped it. It would be great if someone who has actually dealt with this firsthand could provide some clarity.

As far as I can tell,$1667 we're hitting limits again now that the new tax reporting rules are in full swing.

Here’s what’s actually bugging me: do I need to attach extra documentation or proof when filing the PPI for section V.2.5? I’ve got some old deposit records dating all the way back to 2014, and I'm sitting here wondering if I really need to dig up those bank statements and send them in.

Brenda Chase3 said:Man, I really hope someone weighs in here. About a year ago, I was practically knocking on every door asking if there was a limit on cash transactions within the EU, and nobody could give me a straight answer. Some people insisted the rules applied one way $1667 ,while others claimed they didn't apply at all. By the time the dust settled, my client had backed out of the deal anyway, so I dropped it. It would be great if someone who has actually dealt with this firsthand could provide some clarity.

Thanks, 🙂
Does it matter if I'm buying from an individual or a corporation overseas?
Where can I even find the actual laws regarding these limits—is it even safe $1667, gosh..
Who am I even supposed to ask..

Brenda Chase3 said: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.

Got mine working! Just wondering what you guys put under the contractor working hours—and does that cover the other months too?
Thanks

Paul Carter40 said:Thanks, 🙂
Does it matter if I'm buying from an individual or a corporation overseas?
Where can I even find the actual laws regarding these limits—is it even safe $1667, gosh..
Who am I even supposed to ask..

The limit of $1667 is actually set by the cash transaction taxation laws, and it really only applies to businesses required to track sales. I think I read somewhere that the $15,000 threshold stays the same regardless of whether you're dealing in dollars or another currency, but I might be overthinking it.

Paul Carter40 said:Got mine working! Just wondering what you guys put under the contractor working hours—and does that cover the other months too?
Thanks

Well, freelancers don't really have "set" working hours... at least, that's what I put down, and I assumed that would be the case for all the other months as well? Now I'm second-guessing myself entirely!🤔

Keith Martinez5 said:Well, freelancers don't really have "set" working hours... at least, that's what I put down, and I assumed that would be the case for all the other months as well? Now I'm second-guessing myself entirely!🤔

It looks like we’re using the "3" label for the rest of the months.
So, just to clarify—the Type 1 designation actually refers to full-time employment.
With him, it isn't really about whether he's putting in full-time hours—it’s more that he’s covered with benefits and insurance for the entire month.

Maybe it’s just the timing—is it actually 31 o'clock? I mean, looking at Keith Martinez5 🙂

Can someone please explain what exactly you’re putting in this infamous P-PPI form under the expenses section? Specifically, I’m looking at business meals, travel expenses, non-cash expenses, and then Article 22.

Up until now, I’ve been booking all business entertainment under Article 22 (since that’s how I handled it throughout the year and how my KPIs were calculated), while depreciation went under non-cash expenses.

But now I’m getting tripped up, especially with the distinction between travel expenses and business entertainment... I mean, what the hell are they playing at? I go through the trouble of breaking everything down perfectly just for them to call me and demand a written explanation because they still don't get it.

They’ve dumped so much extra work on accounting firms lately that I’m seriously wondering if some clerk at the IRS finally lost their job, or like, what the hell are they even doing over there?? Now we even have to be the ones auditing small business owners ourselves... honestly, what is wrong with this country? 🐔

Jessica Gonzalez30 said: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.

The issue is I sent them an invoice for $24000, but they only sent me $70,000.00. The rest of the $667 won't pay up because their invoice was made out to $667 personally instead of the LLC, so they just paid the difference. Now I've got this $2,000.00 gap showing as a debt, and I'm not really sure how to clear it without triggering some kind of sales tax headache.

rowdybison3 said:The issue is I sent them an invoice for $24000, but they only sent me $70,000.00. The rest of the $667 won't pay up because their invoice was made out to $667 personally instead of the LLC, so they just paid the difference. Now I've got this $2,000.00 gap showing as a debt, and I'm not really sure how to clear it without triggering some kind of sales tax headache.

I'm afraid there's no way around it.

Nicole Wells38 said:Can someone please explain what exactly you’re putting in this infamous P-PPI form under the expenses section? Specifically, I’m looking at business meals, travel expenses, non-cash expenses, and then Article 22.

Up until now, I’ve been booking all business entertainment under Article 22 (since that’s how I handled it throughout the year and how my KPIs were calculated), while depreciation went under non-cash expenses.

But now I’m getting tripped up, especially with the distinction between travel expenses and business entertainment... I mean, what the hell are they playing at? I go through the trouble of breaking everything down perfectly just for them to call me and demand a written explanation because they still don't get it.

They’ve dumped so much extra work on accounting firms lately that I’m seriously wondering if some clerk at the IRS finally lost their job, or like, what the hell are they even doing over there?? Now we even have to be the ones auditing small business owners ourselves... honestly, what is wrong with this country? 🐔

I'm dealing with the exact same headache. My software is pulling depreciation into section 3, "publication in progress," on the P-PPI form, when it's supposed to go into section 4, "waste expenses." So now what am I even supposed to do?

Olivia Cruz86 said:I'm dealing with the exact same headache. My software is pulling depreciation into section 3, "publication in progress," on the P-PPI form, when it's supposed to go into section 4, "waste expenses." So now what am I even supposed to do?

Honestly, I don't think it's a major issue if it stays listed under publication in progress. That is technically what it is. If the folks at the IRS aren't happy about it, they'll just give me a call to fix it.

My employer (they're a freelance consultant) just got hit with a Statement of Interest Paid from their bank... regarding some interest earned on a savings account they opened back in 2015.
Should this be reported on the annual tax return under 4.4. CAPITAL INCOME, specifically section 4.4.2. INTEREST DATA—meaning both the income itself and the withheld federal tax based on that statement???

Thanks

So, I’m looking at this situation with a local tradesman who used to be registered for sales tax back in the day but opted out around 2015. He’s sitting on a bunch of unpaid invoices from way back—we're talking 2010 through 2014—and since they're all under $1667, nobody ever bothered to sue for them. Can I actually write those off, or am I totally off base there? Or should I just go ahead and record them as paid? The issue is that these old bills have sales tax baked in at 23% and 25%. How on earth do I log all that in the KPI? If I mark them as paid, does he end up owing more tax on them? 🤔 His previous accountant basically just ignored the whole mess and let it sit, but now that I've taken over, I really want to get things squared away properly. 😵

Does anyone here have experience dealing with a significant income tax refund? We’re looking at a pretty substantial amount coming back to us—around $2333—mostly because of the prepayments we made, and since we're applying some tax credits to lower our taxable income. I was wondering if anyone else has filed for a refund like this recently? What does the actual process look like? Do you just file the request along with your tax return and wait for the direct deposit, or is there more to it?