Accounting for Sole Proprietors: Tax & Bookkeeping Tips

Kate Adams7 said:It really should be. You don't actually need a code for taxes or payroll contributions anyway.

Thanks! It worked fine last month, too—I even processed my own salary payment without using that new recipient ID requirement (that 40002... number)—but the system still flagged it saying the transfer wouldn't be recorded correctly. I'm honestly a bit stumped on what that actually implies... maybe it just gets categorized as a standard miscellaneous deposit?

I was working on my payroll entry and I made sure to include a solid call-back number, but then I completely blanked on entering the ROOM NUMBER 😬 honestly, whatever...

Keith Martinez5 said:Thanks for the tip! I'll definitely try one of those routes... I did attempt to call them to explain that I'd be sending over a corrected invoice, but my Italian isn't quite fluent enough to navigate that conversation successfully, so I think that option is pretty much off the table.

What about just emailing them in English?

If you're going to fix it, you need to issue the credit memo and send it over to them.
The adjustment will hit the next sales tax filing.
Before you do anything, just double-check that they're actually registered in the system.

You could always check in with your contact at the IRS...

Zachary Hughes12 said:What about just emailing them in English?

If you're going to fix it, you need to issue the credit memo and send it over to them.
The adjustment will hit the next sales tax filing.
Before you do anything, just double-check that they're actually registered in the system.

You could always check in with your contact at the IRS...

Unfortunately, they don't speak any English... I tried calling the LAPD, but they weren't able to help me either. I ended up submitting an inquiry through the official website, so now I'm just playing the waiting game to see what they say—most likely, I just made a mistake on my end...

Keith Martinez5 said:Thanks! It worked fine last month, too—I even processed my own salary payment without using that new recipient ID requirement (that 40002... number)—but the system still flagged it saying the transfer wouldn't be recorded correctly. I'm honestly a bit stumped on what that actually implies... maybe it just gets categorized as a standard miscellaneous deposit?

Those new requirements for net payment references are mostly about how banks handle SEPA protocols when they're looking at your credit score and stuff like that. As far as the IRS is concerned, I'd bet they don't really care, as long as the deposits match up with the payroll forms we file. But hey, I guess we won't know for sure until tax season hits next year.😁

Could someone please clarify how to handle VAT entries for a sole proprietor under a lease agreement? I’ve acquired a truck—I have an invoice from the leasing company showing the full price and a separate one for the down payment, though neither shows any VAT. This is a finance lease. I've looked everywhere for guidance and can't seem to find a clear answer; it feels like it should be straightforward, yet I'm stuck...

Keith Martinez5 said:Thanks for the tip! I'll definitely try one of those routes... I did attempt to call them to explain that I'd be sending over a corrected invoice, but my Italian isn't quite fluent enough to navigate that conversation successfully, so I think that option is pretty much off the table.

Honestly, I am constantly running into walls when dealing with people from Italy... they have this incredibly laid-back, slow-moving way of doing things that can drive you crazy. But look, the actual process is pretty straightforward: if a business has a valid number registered in the Visa system, you just apply the reverse charge; if they don't, then they owe our local sales tax. If you messed up the paperwork, you just issue a credit memo to void the old one, send the new one, and you're done with it.

Sam Evans said:Honestly, I am constantly running into walls when dealing with people from Italy... they have this incredibly laid-back, slow-moving way of doing things that can drive you crazy. But look, the actual process is pretty straightforward: if a business has a valid number registered in the Visa system, you just apply the reverse charge; if they don't, then they owe our local sales tax. If you messed up the paperwork, you just issue a credit memo to void the old one, send the new one, and you're done with it.

That’s exactly what I did, so now I’m just crossing my fingers that they actually received the invoice and will get everything squared away...

I've got a question about bad debt write-offs for small business owners. Basically, I want to
write off some old accounts receivable that have been sitting open for five years now. These businesses are completely shuttered, so there's zero chance I'm ever seeing that money. When I go to write them off or close things out, am I stuck paying the sales tax on them, or can I just list those invoices as income to offset the loss?

I’m looking for a bit of guidance here. I run a restaurant, and we had a credit card transaction processed back on September 20th. However—somehow—one of my employees went in on September 29th and voided that charge, switching the payment method to cash instead. Now I’m stuck on the bookkeeping side of things: should I be recording this transaction twice—once on the 20th and again on the 29th—or should I just log it in my sales journal under the 29th? To make matters more confusing, the deposit for the 29th was already finalized using that specific receipt, and the credit card processor has already sent over the funds from the original charge.
I hope that makes sense! If anyone has dealt with this kind of mess before, I would truly appreciate the help. THANKS!!
Rachel Allen21 is online now
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Arthur Bishop6 said:I've got a question about bad debt write-offs for small business owners. Basically, I want to
write off some old accounts receivable that have been sitting open for five years now. These businesses are completely shuttered, so there's zero chance I'm ever seeing that money. When I go to write them off or close things out, am I stuck paying the sales tax on them, or can I just list those invoices as income to offset the loss?

Yep. You owe the sales tax, and you have to book that money as income. 😁

Rachel Allen21 said:I’m looking for a bit of guidance here. I run a restaurant, and we had a credit card transaction processed back on September 20th. However—somehow—one of my employees went in on September 29th and voided that charge, switching the payment method to cash instead. Now I’m stuck on the bookkeeping side of things: should I be recording this transaction twice—once on the 20th and again on the 29th—or should I just log it in my sales journal under the 29th? To make matters more confusing, the deposit for the 29th was already finalized using that specific receipt, and the credit card processor has already sent over the funds from the original charge.
I hope that makes sense! If anyone has dealt with this kind of mess before, I would truly appreciate the help. THANKS!!
Rachel Allen21 is online now
Quincy Multi-Quote This Message Quick reply to this message

Technically, I don't see an issue with the sales tax side of things—the revenue wasn't hidden or anything, since they just swapped out the payment method.

Though, honestly, waiting nine days to run a void is definitely not standard procedure. Your best bet is probably just to write up a quick memo explaining what happened and file it away, just in case anyone ever asks why the books look wonky.

If it were me, I’d just do that and call it a day. 🤔

amberbadger17 said:Yep. You owe the sales tax, and you have to book that money as income. 😁

Personally, I’m keeping them "on standby"—just waiting for the right moment when the laws finally shift. 😁

Hey there
I was wondering if there's a limit on how much I can pay for a bill in cash? Is there some kind of cap on that? I run a small business here in the States and I'm registered for sales tax, specifically running an agricultural business.

rowdybison3 said:Hey there
I was wondering if there's a limit on how much I can pay for a bill in cash? Is there some kind of cap on that? I run a small business here in the States and I'm registered for sales tax, specifically running an agricultural business.

$1.75

amberbadger17 said:Yep. You owe the sales tax, and you have to book that money as income. 😁

Man, I know a small business owner here who’s drowning in unpaid invoices. Some of those debts are stuck in some endless legal settlement limbo where he'll likely see zero cents, some he actually sued over only to drop the case because chasing them is a total waste of time, and some companies just shuttered overnight. So, does the IRS still demand sales tax and count that as income in kind even when you haven't seen a dime?

Hey there. I’m trying to work out some sales calculations here. For a specific product order, I ended up getting 3 items for free. I'm honestly a bit stuck on how to run the numbers since I actually want to sell those freebies too, if that's even an option.
Right now, it looks like this:
4 products at 61.60 tax 25% total 245.40
5 products 61.60 25% 308.00
1 product 52.80 25% 52.80
3 products 79.20 discount 99.99% 0.02

SUBTOTAL 607.22
DISCOUNT 237.58
TAX 151.81
TOTAL DUE 759.03

graniterider10 said:Hey there. I’m trying to work out some sales calculations here. For a specific product order, I ended up getting 3 items for free. I'm honestly a bit stuck on how to run the numbers since I actually want to sell those freebies too, if that's even an option.
Right now, it looks like this:
4 products at 61.60 tax 25% total 245.40
5 products 61.60 25% 308.00
1 product 52.80 25% 52.80
3 products 79.20 discount 99.99% 0.02

SUBTOTAL 607.22
DISCOUNT 237.58
TAX 151.81
TOTAL DUE 759.03

Looks like you missed something—if you add up the lines, it comes to 606.22, but you've got 607.22 written down below. $0.33??

You didn't actually get those items for free—you charged them 2 cents for the 3 units. So, when you divide that by 3, you get 0.006, which you can just round up to $0.00 for the unit cost—then just shave off a penny somewhere else to make the totals match up perfectly...

Carol Price4 said:Looks like you missed something—if you add up the lines, it comes to 606.22, but you've got 607.22 written down below. $0.33??

You didn't actually get those items for free—you charged them 2 cents for the 3 units. So, when you divide that by 3, you get 0.006, which you can just round up to $0.00 for the unit cost—then just shave off a penny somewhere else to make the totals match up perfectly...

Alright. I'll give that a shot. 😉
Thanks. 😉

rowdybison3 said:Hey there
I was wondering if there's a limit on how much I can pay for a bill in cash? Is there some kind of cap on that? I run a small business here in the States and I'm registered for sales tax, specifically running an agricultural business.

Well, it really depends on who you're paying.
If you're settling up with a corporation, there's a limit of $1667, but if you're dealing with a sole proprietor, everything needs to go through their business bank account regardless of the amount.