Accounting for Sole Proprietors: Tax & Bookkeeping Tips

graniterider10 said:Like I mentioned before, you need to get the Agreement notarized... make sure you have all three copies, because you'll need to take one of them to the IRS.
What else? Honestly, everything is changing. I think the only thing staying the same is the existing business checking account. Everything else is being updated to the new owner's name, and actually... you don't really gain anything from this transfer. The only thing is, maybe closing it down will be complicated... I don't know. Just make sure you don't cancel your dad's certificates right away, because you're still going to need them for a while to file forms under his SSN.

Oh wow, nobody mentioned that to me 🙂. The folks at the bank and the IRS told me to just show up with the transfer resolution from the Secretary of State's office; they didn't say a word about an Agreement. I'll double-check everything and let you know once it's all finalized and how the whole process went 😁 🤦 thanks!

Nicole Lee6 said:Honestly, I haven't been recording those because there wasn't a specific key to use outside of the KPI 😬 and frankly, I don't think I'm going to start now.

The reason I'm asking is mainly about my upcoming tax filing and that PPPI form—which, let's be real, definitely won't align with my numbers for this year. I'm just waiting to hear back from the local Police Department regarding some inquiries. According to their logic, you're supposed to have documentation to cover every single cent moving through your existing business checking account; plus, interest is paid directly out of the account without being officially recorded. To me, this whole setup feels pretty nonsensical for a small business owner. As has been mentioned several times on this forum already, once all the business obligations are met, the money sitting in that existing business checking account actually belongs to the owner, not the entity itself. As long as the bills are paid, what I do with my own capital should be my business... at least, that's how I see it, but life isn't always that simple...

Honestly, the IRS couldn't care less about what you spend as long as you pay your taxes, but they sure love to nitpick every single cent coming in (between the sales tax thresholds and all that stuff).
In my case, they actually demanded copies of my bank statements for every single deposit under my tax return—which, fine, I get why they'd want that for huge loans or whatever—but they even flagged a tiny bit of interest amounting to $0.46 that hit my account on New Year's Day.
And this was despite everything being perfectly documented through June in the attachments I sent with my filing.

But here’s the kicker... On one of those statements, there was this random deposit that got immediately reversed because someone messed up the reference number, so it showed up on both the debit and credit sides. Then the whole headache started, with them claiming it wasn't listed properly outside of the standard accounting entries, even though you could clearly see it line by line right underneath. During the call, I realized mid-sentence that the lady I was talking to didn't even know how to read a basic bank statement—she was tripping over terms like "debit" and "credit" and rambling about double-entry bookkeeping (which wasn't even an issue here 🤦) and all sorts of nonsense.

Kate Adams7 said:Honestly, the IRS couldn't care less about what you spend as long as you pay your taxes, but they sure love to nitpick every single cent coming in (between the sales tax thresholds and all that stuff).
In my case, they actually demanded copies of my bank statements for every single deposit under my tax return—which, fine, I get why they'd want that for huge loans or whatever—but they even flagged a tiny bit of interest amounting to $0.46 that hit my account on New Year's Day.
And this was despite everything being perfectly documented through June in the attachments I sent with my filing.

But here’s the kicker... On one of those statements, there was this random deposit that got immediately reversed because someone messed up the reference number, so it showed up on both the debit and credit sides. Then the whole headache started, with them claiming it wasn't listed properly outside of the standard accounting entries, even though you could clearly see it line by line right underneath. During the call, I realized mid-sentence that the lady I was talking to didn't even know how to read a basic bank statement—she was tripping over terms like "debit" and "credit" and rambling about double-entry bookkeeping (which wasn't even an issue here 🤦) and all sorts of nonsense.

I'm registered for sales tax... honestly, I think the whole system here is just way too overcomplicated. When I look at how things work abroad—for example, you can just buy things with cash, inventory management isn't a nightmare, prices can be negotiated... even inspections and audits are usually scheduled ahead of time rather than these guys just showing up like cowboys... man, I'll never get used to it in a civilized society. In a functional system, the IRS should be more of a partner and advisor to the entrepreneur.

Hey everyone,

So I’ve got a bit of a situation regarding my FARC card on the official government portal:

Up until now, I’ve been pretty diligent about keeping an eye on my debt and credit balance through that FARC card, but ever since they switched over the way my individual tax contributions—you know, Social Security and stuff—are handled via those new federal forms at the start of the year, I’ve totally lost track of where I stand. I can pull up the new form, sure, but all it shows me is a list of what I paid and when I paid it; it doesn't actually update my total balance or show if I owe anything. If they seriously killed the auto-updating feature just because they moved everything over to these new forms, then honestly, that’s just pathetic. It makes any potential debt feel completely cryptic again, like, I have no clue if the system thinks I still owe money and is just quietly stacking up late interest against me behind my back.

EDIT: Wait, I think I might have figured it out... it looks like they migrated everything to these different accounts, like moving the retirement funds over to account 2330... and so on. Am I on the right track here?

Keith Martinez5 said:The reason I'm asking is mainly about my upcoming tax filing and that PPPI form—which, let's be real, definitely won't align with my numbers for this year. I'm just waiting to hear back from the local Police Department regarding some inquiries. According to their logic, you're supposed to have documentation to cover every single cent moving through your existing business checking account; plus, interest is paid directly out of the account without being officially recorded. To me, this whole setup feels pretty nonsensical for a small business owner. As has been mentioned several times on this forum already, once all the business obligations are met, the money sitting in that existing business checking account actually belongs to the owner, not the entity itself. As long as the bills are paid, what I do with my own capital should be my business... at least, that's how I see it, but life isn't always that simple...

Since when does it matter what leaves the business account? What matters is what comes in, because that's what determines your tax liability. If money goes out and you haven't booked it as a business expense, the government actually wins because you end up paying higher taxes. An entrepreneur can certainly pay for personal expenses out of the business account, and obviously, those won't be listed in the KPI.🤔

Nicole Lee6 said:Since when does it matter what leaves the business account? What matters is what comes in, because that's what determines your tax liability. If money goes out and you haven't booked it as a business expense, the government actually wins because you end up paying higher taxes. An entrepreneur can certainly pay for personal expenses out of the business account, and obviously, those won't be listed in the KPI.🤔

It’s exactly like Brenda Chase3 said. The IRS can ask for an explanation if something doesn't add up, even regarding the debit side of the business account (I had to handle that once about ten years ago for a client). We just explained it to them—clarifying how much was withdrawn as personal income versus how much went toward bills—and that was the end of it. I've only seen them request that kind of breakdown once in my entire career, but honestly, it wasn't a problem at all.

Brenda Chase3 said:It’s exactly like Brenda Chase3 said. The IRS can ask for an explanation if something doesn't add up, even regarding the debit side of the business account (I had to handle that once about ten years ago for a client). We just explained it to them—clarifying how much was withdrawn as personal income versus how much went toward bills—and that was the end of it. I've only seen them request that kind of breakdown once in my entire career, but honestly, it wasn't a problem at all.

I think you guys are absolutely right—account and vejanka—I’ve never had the nerve to pay for personal stuff out of my business checking account, I just don't dare to... but apparently, it's perfectly fine. Maybe I'm just being overly cautious...

I mean, sure, why not? Once you’ve covered all your business expenses in a sole proprietorship, whatever profit is left over is basically your money to play with. It doesn't really matter if you spend it straight from the business account, pull out cash, or just move it over to your personal checking. You're going to be paying income tax on those earnings regardless of whether you spend them or let them sit there.

With a big corporation, what the books say and what's actually sitting in the bank account are usually two totally different stories, but with a small business, they tend to line up a lot more closely.

Hey, I could really use some help here—I need to invoice a company over in the United Arab Emirates for some contract drafting services, so how should the invoice look and how do I handle the bookkeeping? Specifically, what’s the deal with the sales tax forms?
We’re registered for sales tax here in the States, and I’m assuming they are too... I don't have all the specifics yet, but I want to be ready to go.

Thanks!

Which account am I supposed to hit for those monthly income tax prepayments based on my annual filing—the 1430 or the 1619?

So, when we're dealing with pass-through items or incorrect tax designations, should we be booking those "outside of KPIs"?
Up until now, I’ve just been putting together a list of those specific receipts—the ones that don't actually count as income—and submitting them along with the filing...

What’s the deadline for filing my JOPPD regarding self-employment contributions?🕺

Robin Cook4 said:Which account am I supposed to hit for those monthly income tax prepayments based on my annual filing—the 1430 or the 1619?

1430

Henry Edwards33 said:What’s the deadline for filing my JOPPD regarding self-employment contributions?🕺

You’ve got until the 15th of the month to file the JOPPD for the previous month's contributions. Honestly, the specific date doesn't matter much, as long as you make sure the payments actually clear by then...

So, I totally overpaid my Verizon bill $1.00 by mistake... now Verizon is giving me back those $1.00 on my next statement..
How am I supposed to log these accounts so everything actually balances out correctly?

cosmictinker24 said:You’ve got until the 15th of the month to file the JOPPD for the previous month's contributions. Honestly, the specific date doesn't matter much, as long as you make sure the payments actually clear by then...

Thanks.

May 15th falls on a Sunday. Should I just date them for the 15th and actually file everything on the 16th?

The issue is the taxes haven't been paid yet, and they won't be settled by May 15th.

Olivia Cruz86 said:So, I totally overpaid my Verizon bill $1.00 by mistake... now Verizon is giving me back those $1.00 on my next statement..
How am I supposed to log these accounts so everything actually balances out correctly?

Just book the full invoice amount, then apply the payment using only the amount from that $1.00 credit. That’ll leave the remaining balance open, which is exactly what you need to show the outstanding difference you still owe.

Henry Edwards33 said:Thanks.

May 15th falls on a Sunday. Should I just date them for the 15th and actually file everything on the 16th?

The issue is the taxes haven't been paid yet, and they won't be settled by May 15th.

Just book the full invoice amount, then apply the payment using only the amount from that $1.00 credit. That’ll leave the remaining balance open, which is exactly what you need to show the outstanding difference you still owe.

The software isn't letting me book the invoice for $138 if I set the payment to 417... it keeps saying the payment total exceeds the invoice amount??

cosmictinker24 said:The software isn't letting me book the invoice for $138 if I set the payment to 417... it keeps saying the payment total exceeds the invoice amount??

So, it’s a March bill that got paid in April, but there was an overpayment of $1.00. Did I get that right?
You close out the March bill for the full amount, then you take that $1.00 overpayment and apply it toward the April bill, paying just the difference.

Henry Edwards33 said:So, it’s a March bill that got paid in April, but there was an overpayment of $1.00. Did I get that right?
You close out the March bill for the full amount, then you take that $1.00 overpayment and apply it toward the April bill, paying just the difference.

So, I closed out the March statement with $138... (paid 417.00)
But now, the April statement shows $137, though it's been reduced by $1.00, leaving a balance of $136 to pay.
If I pay that $136, but I enter the bill with $137 and mark it as paid at $136, I still have an unpaid balance for $1.00... I guess I just don't see how to carry that over and close it out on the April statement?
Sorry to bug you, I'm just totally lost here...