Accounting for Sole Proprietors: Tax & Bookkeeping Tips

I could use a little bit of guidance if anyone here has dealt with a situation like 🙂
.
A small business owner I work with took some damage to their commercial auto policy—the one they use for their daily operations.
The VAT was paid directly from our account, but the insurance company settled the remaining balance by paying the vendor directly.

So, here’s how I handled the bookkeeping: I recorded the VAT paid via the checking account, and then I booked the rest of the invoice as an in-kind expense. To make sure everything balanced out, I also recorded the net settlement the insurance company sent to the vendor as in-kind income (based on an out-of-court settlement agreement). Does that sound like a sound way to book this?

Also, should I be reporting both that expense and that income as deductible or non-deductible in the KPI?

Which specific link are you guys using for the 2015 tax forms? I’ve tried both the IRS site and the e-file portal, but neither one will accept the withholding. Is anyone else running into this wall?

And once that's settled, does the passive interest get filed under receipts or what?

Thanks.

Jessica Gonzalez30 said:Up until now, the standard approach has always been to look at the date the law enters into force—but since everything seems to be shifting lately, I’m honestly just a little worried that things might have started moving backward behind my back without me realizing it.🤣

Then again, if you consider that prepayments are being made throughout 2015, yet the obligation to settle them is dictated by the Customs Act (meaning 2015 transactions get filed in 2016), it stands to reason that the new rates should apply 🙂. I went ahead and ran the numbers both ways—using the old rates first, then the new ones—but I haven't sent anything off yet. I'm just sitting here waiting...

I could really use some guidance on filling out my tax return... specifically when I get to page 4. Since I've been working as a freelancer all year round—all 12 months—I'm feeling a bit stuck. Does the base amount used to calculate income tax contributions get divided by 12, or is there a different way to handle it? Any help would be much appreciated, because honestly, I am totally lost right now!

placidlynx92 said:Then again, if you consider that prepayments are being made throughout 2015, yet the obligation to settle them is dictated by the Customs Act (meaning 2015 transactions get filed in 2016), it stands to reason that the new rates should apply 🙂. I went ahead and ran the numbers both ways—using the old rates first, then the new ones—but I haven't sent anything off yet. I'm just sitting here waiting...

I have to disagree there.
If I was paying prepayments back in 2015 based on a specific rate—say, 0.02%—then logically, when I sit down to do the final reconciliation for the 2015 tax year, I should stick to that same rate I used for the prepayments, rather than suddenly jumping to a new one. But, honestly, the exact same headache is going to pop up again in 2016 anyway 🤣🤣🤣

The logic just flies right out the window 🤣🤣

Robert Rifovac and his group said use the old rates... so, old rates it is. I'm not going to lose any sleep over it 🤣

Keith Martinez5 said:I could really use some guidance on filling out my tax return... specifically when I get to page 4. Since I've been working as a freelancer all year round—all 12 months—I'm feeling a bit stuck. Does the base amount used to calculate income tax contributions get divided by 12, or is there a different way to handle it? Any help would be much appreciated, because honestly, I am totally lost right now!

If you're running your own business and aren't employed elsewhere, there's no need to fill out section 4.2.8.—your business counts as your primary occupation, not a secondary one.

placidlynx92 said:If you're running your own business and aren't employed elsewhere, there's no need to fill out section 4.2.8.—your business counts as your primary occupation, not a secondary one.

So, just to be clear—I leave all of that blank and pay the contributions based on those new rates that kicked in back on January 1st, 2016, regardless of what the actual income looks like? My husband owns the business and it’s really his only line of work...

Keith Martinez5 said:So, just to be clear—I leave all of that blank and pay the contributions based on those new rates that kicked in back on January 1st, 2016, regardless of what the actual income looks like? My husband owns the business and it’s really his only line of work...

That’s exactly it.
Essentially, the tax rates themselves haven't changed—it's just that the obligation to calculate them and the specific payment accounts have been overhauled.

Jessica Gonzalez30 said:I have to disagree there.
If I was paying prepayments back in 2015 based on a specific rate—say, 0.02%—then logically, when I sit down to do the final reconciliation for the 2015 tax year, I should stick to that same rate I used for the prepayments, rather than suddenly jumping to a new one. But, honestly, the exact same headache is going to pop up again in 2016 anyway 🤣🤣🤣

The logic just flies right out the window 🤣🤣

Robert Rifovac and his group said use the old rates... so, old rates it is. I'm not going to lose any sleep over it 🤣

I'm about to go change it for the third time, 🙂🙂
but I'm holding off on hitting send just yet. 🤣

placidlynx92 said:That’s exactly it.
Essentially, the tax rates themselves haven't changed—it's just that the obligation to calculate them and the specific payment accounts have been overhauled.

Thanks, Lady G

placidlynx92 said:I'm about to go change it for the third time, 🙂🙂
but I'm holding off on hitting send just yet. 🤣

🤣🤣🤣
God forbid—why bother stressing over it if you already know you're probably going to tweak it at least one more time? Besides, anything could happen with federal regulations before February 28th. 🤣🤣

Jessica Gonzalez30 said:🤣🤣🤣
God forbid—why bother stressing over it if you already know you're probably going to tweak it at least one more time? Besides, anything could happen with federal regulations before February 28th. 🤣🤣

Personally, I think it’s best if I wait until you more experienced accountants reach a consensus on which rate we should actually be using. My big worry is that the people who play it safe and file using the updated rates will have their paperwork accepted without a hitch—meanwhile, those of us sticking to the old ones might end up getting absolutely nothing back.

Look, regarding the membership dues: I’m calculating the 2015 fees using the old rates, but obviously, the prepayments for 2016 have to be based on the new rates. It just makes sense. That’s what they laid out in the Chamber of Commerce guidelines, and honestly, it's common sense. The 2016 prepayments should follow the new scale, while the 2015 stuff stays at the old rate.

I already did it that way and sent off two forms...🎉
If they don't like it, they can try to charge me whatever they want. Let 'em.☕

Got another question about these income tax prepayments for 2016. I get how it works for people actually making money—you calculate the tax, you pay the amount. But what about the folks running at a loss? If you aren't even hitting the threshold to owe income tax, there’s no way to figure out an installment. Does that mean they just skip the prepayments entirely, or is there some annoying minimum amount they're forced to cough up? 🙂

Good afternoon! I have a few questions regarding the P-PPI form.
Specifically, I’m looking for some clarity on how to reconcile the differences between my bank statements and the income reported in the KPI:
1. Should owner loans be categorized under "other non-taxable receipts," similar to how we handle tax refunds from the IRS?
2. Where should I record sales tax? It’s included in the total deposits, but since the KPI requires me to report gross receipts excluding sales tax, I'm not sure where that gap goes.
3. For credit card transactions, the KPI asks for the full amount charged, but my bank account only shows the net amount after the processor takes their fee—how do I reflect that discrepancy on the P-PPI?

I really hope someone can point me in the right direction; the deadline for filing the DOH form is creeping up fast, and I still have so many unanswered questions!

THANKS IN ADVANCE!!!

Rachel Allen21 said:Good afternoon! I have a few questions regarding the P-PPI form.
Specifically, I’m looking for some clarity on how to reconcile the differences between my bank statements and the income reported in the KPI:
1. Should owner loans be categorized under "other non-taxable receipts," similar to how we handle tax refunds from the IRS?
2. Where should I record sales tax? It’s included in the total deposits, but since the KPI requires me to report gross receipts excluding sales tax, I'm not sure where that gap goes.
3. For credit card transactions, the KPI asks for the full amount charged, but my bank account only shows the net amount after the processor takes their fee—how do I reflect that discrepancy on the P-PPI?

I really hope someone can point me in the right direction; the deadline for filing the DOH form is creeping up fast, and I still have so many unanswered questions!

THANKS IN ADVANCE!!!

1. Yep.
2. You can either enter the total receipt including sales tax (minus VAT) and then subtract it with the next line item. Or, just enter the total amount without sales tax and then adjust it through expenses so everything "evens out." Most people do it that way—honestly, I do too, because my software doesn't separate sales tax for me.
3. Just look at how much the card payments actually hit the bank account and list that as the receipt. Then, list the processing fee as a non-cash receipt.

Arthur Bishop6 said:Look, regarding the membership dues: I’m calculating the 2015 fees using the old rates, but obviously, the prepayments for 2016 have to be based on the new rates. It just makes sense. That’s what they laid out in the Chamber of Commerce guidelines, and honestly, it's common sense. The 2016 prepayments should follow the new scale, while the 2015 stuff stays at the old rate.

I already did it that way and sent off two forms...🎉
If they don't like it, they can try to charge me whatever they want. Let 'em.☕

Look, I did everything by the old rates and I couldn't care less.

I'll use the new ones for 2016.

Better to have too much than not enough, right? 🤣

🙂 So... any updates on those corporate filings and sending over the paperwork for them? Are we actually going to have to deal with that headache, or can we just pretend it doesn't exist? Honestly, I’m getting zero intel here—and naturally, not a single subscription to a trade journal in sight this year either. 🙏

amberbadger17 said:🙂 So... any updates on those corporate filings and sending over the paperwork for them? Are we actually going to have to deal with that headache, or can we just pretend it doesn't exist? Honestly, I’m getting zero intel here—and naturally, not a single subscription to a trade journal in sight this year either. 🙏

I actually cancelled my subscription too, but I'm a bit confused—where did this idea about filing extra paperwork for advances come from? Also, just a heads-up, I went ahead yesterday and paid both the standard contributions and the advance for January 2016 into account 1430. Is that the right move, or should I have sent it to that other account ending in 16? Honestly, I'm feeling a little lost with all these shifting rules lately...

Hey, look, to be honest—I have absolutely no clue. I think I saw something about it in one of those old threads regarding small business taxes, but honestly, my memory is shot. Sorry if I'm spreading misinformation here. :-D