Accounting for Sole Proprietors: Tax & Bookkeeping Tips

Carol Price4 said:I’m not booking this through the IRA module—instead, I'm running it through the Sales module, which is why I hit a bit of a snag since there aren't any toggle switches available... but honestly, I think if I just categorize the non-depreciable portion of the DI under expenses, I’ll land on the same number anyway.

The DI purchase was handled under Section 22, so it didn't hit the expense line initially; depreciation will go into expenses later, and since the full invoice was logged under receipts, the non-depreciable part should also head straight to expenses.

Does that sound right to you guys? Come on, Brenda Chase3, Henry Edwards33, Carol Price4, Henry Edwards33—where are you hiding??

I was sitting there trying to input everything, but I honestly couldn't figure out how to log this through Sales. If it were up to me, I’d much rather just record it under expenses—simply add a link and manually organize it that way. As it stands, I really don't see any way to get this recorded within the current module.

I don't have the Sales module.
On my end, everything just flows through the IRA and goes straight to expenses.

Carol Price4 said:Calling all small business owners working in Silicon Valley...

DI procurement - $13, Section 22, it was depreciated $1047 and then we moved to Sales...

I've generated an invoice in the Sales module, but since the non-depreciated value didn't hit expenses, how do I handle the payment? If I try to enter the receipt via the payment table, everything just gets lumped into receipts...

Honestly, I think sales tax is driving me crazy this month—I must be missing something totally obvious. Please help! 🙂

When I run into that exact scenario, I take whatever value is left over after calculating depreciation up until the point of sale and book it as a non-cash expense—basically the unwritten value. Then, I close out the invoice in the Sales module for the full 100% amount, so that entire invoice gets recorded as a wire transfer receipt for me. 🤷

Dear fellow members,

I was wondering if you might be able to help me clear up a few things. I’m currently weighing the pros and cons of switching my business structure over to a corporate income tax model, and I have run into a few points of uncertainty regarding how everything works under that setup. Specifically, I am curious about whether it is still possible to withdraw cash from the business account without providing specific documentation for every withdrawal. Additionally, I’m trying to understand the implications for payroll taxes—specifically, whether there is still a requirement to pay out an owner's salary to cover social security contributions, and if so, what the standard accounting procedure looks like for those entries.
Thank you.

silvertrucker9 said:Dear fellow members,

I was wondering if you might be able to help me clear up a few things. I’m currently weighing the pros and cons of switching my business structure over to a corporate income tax model, and I have run into a few points of uncertainty regarding how everything works under that setup. Specifically, I am curious about whether it is still possible to withdraw cash from the business account without providing specific documentation for every withdrawal. Additionally, I’m trying to understand the implications for payroll taxes—specifically, whether there is still a requirement to pay out an owner's salary to cover social security contributions, and if so, what the standard accounting procedure looks like for those entries.
Thank you.

The short answer to all of those is a resounding NO.

ruggedcyclist74 said:The short answer to all of those is a resounding NO.

The only thing I’d add—aside from the fact that you don't technically have to pay yourself a salary—is that those payroll taxes still have to be covered.😉

Brenda Chase3 said:I was sitting there trying to input everything, but I honestly couldn't figure out how to log this through Sales. If it were up to me, I’d much rather just record it under expenses—simply add a link and manually organize it that way. As it stands, I really don't see any way to get this recorded within the current module.

Yeah, you can't adjust it via Salesforce—it has to go through expenses.

Nicole Lee6 said:When I run into that exact scenario, I take whatever value is left over after calculating depreciation up until the point of sale and book it as a non-cash expense—basically the unwritten value. Then, I close out the invoice in the Sales module for the full 100% amount, so that entire invoice gets recorded as a wire transfer receipt for me. 🤷

That's exactly what I was asking—nice one, vejanka! That's the fix right there: record it as an expense in kind, because through Salesforce, everything has to be recorded as a bank deposit—there's just no other way to do it.

Thanks, ladies! ☕

I was wondering—does anyone know if the new base rates for self-employment tax calculations have been officially released yet?

Rachel Allen21 said:I was wondering—does anyone know if the new base rates for self-employment tax calculations have been officially released yet?

I found this draft proposal for the 2017 regulations, but I’m not totally sure if it actually passed yet.

Hello. A small business owner is looking at exceeding $230k in gross sales via issued invoices this year—meaning they'll have to register for state sales tax. From what I gather, it’s based on what's billed, not what's actually collected. Is there any way to defer this—perhaps by dating December's invoices as January 1st (even if the delivery was December 31st)? Is that even legal... I see some leeway in the tax code regarding issuance deadlines, but that seems specific to certain filings. Would an audit flag this as blatant tax evasion?...

I have a quick question for the group. I’m working with a small business owner who handles all their expenses in cash—basically paying out of their own pocket—since they aren't required to keep a formal petty cash ledger. What I'm wondering is, can they just withdraw the total sum of all those monthly expenses from their business bank account at once, or do they really need to make separate withdrawals for every single individual receipt? Also, when they're filling out the withdrawal slip, what should they actually write for the purpose of the transaction?

Rachel Allen21 said:I have a quick question for the group. I’m working with a small business owner who handles all their expenses in cash—basically paying out of their own pocket—since they aren't required to keep a formal petty cash ledger. What I'm wondering is, can they just withdraw the total sum of all those monthly expenses from their business bank account at once, or do they really need to make separate withdrawals for every single individual receipt? Also, when they're filling out the withdrawal slip, what should they actually write for the purpose of the transaction?

Look, if you're running a sole proprietorship and you're on the hook for income tax, you can withdraw cash whenever you damn well please... it's your money. When you go to the bank to grab the cash to cover those various business expenses, just write "Business Supplies" or "Operating Expenses" on the withdrawal slip and call it a day.

I’ve been doing some digging online, but I'm still feeling a bit uncertain, so I figured I'd ask here.
Basically, on December 31st, I processed the holiday bonuses (that $2,500 tax-free amount plus the $600 tax-free child gift)
Regarding these payments, my understanding is that I need to file the payroll reports by January 15th...
Which ID should go on the report? And for the date, should I use the actual payment date of Dec 31st, or just the date I submit the filing?
I'm also tripping up on the reporting period... for those specific fields in the form, should it be Jan 1, 2016, to Dec 31, 2016, or just Dec 1 to Dec 31, 2016?

Would it be an issue if I filed two separate reports this month—one for standard payroll taxes and another specifically for those tax-free benefits—or does everything have to be bundled into a single filing?

Thanks,

Brandon Jackson4 said:I’ve been doing some digging online, but I'm still feeling a bit uncertain, so I figured I'd ask here.
Basically, on December 31st, I processed the holiday bonuses (that $2,500 tax-free amount plus the $600 tax-free child gift)
Regarding these payments, my understanding is that I need to file the payroll reports by January 15th...
Which ID should go on the report? And for the date, should I use the actual payment date of Dec 31st, or just the date I submit the filing?
I'm also tripping up on the reporting period... for those specific fields in the form, should it be Jan 1, 2016, to Dec 31, 2016, or just Dec 1 to Dec 31, 2016?

Would it be an issue if I filed two separate reports this month—one for standard payroll taxes and another specifically for those tax-free benefits—or does everything have to be bundled into a single filing?

Thanks,

The report date is 12/31, and the period is 12/01–12/31.

Any updates on the new income tax brackets? Did they actually drop them? I guess we'll see.

Rachel Allen21 said:I was wondering—does anyone know if the new base rates for self-employment tax calculations have been officially released yet?

They did lower them—I'm just trying to figure out if the payments for December 2016 are being calculated using the old rules or the new ones... I guess it's a bit confusing.

Paul Carter40 said:They did lower them—I'm just trying to figure out if the payments for December 2016 are being calculated using the old rules or the new ones... I guess it's a bit confusing.

December follows the old way—January kicks off the new system.

Carol Price4, I saw you mention that the contributions for December 2016—which we pay this January—are still based on the old calculation method,
whereas the payments for January 2017, due in February, will follow the new rules (the ones where the amount is lower)
.
Does that change apply strictly to sole proprietors, or does it affect regular employees too?
Will employees see the new rates applied starting immediately in January?

Thanks,

Brandon Jackson4 said:Carol Price4, I saw you mention that the contributions for December 2016—which we pay this January—are still based on the old calculation method,
whereas the payments for January 2017, due in February, will follow the new rules (the ones where the amount is lower)
.
Does that change apply strictly to sole proprietors, or does it affect regular employees too?
Will employees see the new rates applied starting immediately in January?

Thanks,

Employees switch immediately—assuming they're getting paid in January. That includes the new deductions and minimum wage adjustments.

Brandon Jackson4 said:Carol Price4, I saw you mention that the contributions for December 2016—which we pay this January—are still based on the old calculation method,
whereas the payments for January 2017, due in February, will follow the new rules (the ones where the amount is lower)
.
Does that change apply strictly to sole proprietors, or does it affect regular employees too?
Will employees see the new rates applied starting immediately in January?

Thanks,

Nope—employees actually get taxed under the new rules (standard deduction of $3,800, 24% tax rate) during their January paychecks, but the contribution base doesn't shift until the February payout for the January wages.

Paul Carter40 said:Employees switch immediately—assuming they're getting paid in January. That includes the new deductions and minimum wage adjustments.

Actually, that's not quite right—only the taxation changes immediately. The contributions (the base $1.00) don't change until the February payroll for January's work.