Accounting for Sole Proprietors: Tax & Bookkeeping Tips

silvertrucker9 said:I appreciate the response, but my business isn't subject to corporate income tax, so the standard entry on these accounts doesn't quite work for me... the total amount on the invoice is $2500, which means I really need the expense to fall within the 2016 fiscal year. Plus, I'd have to figure out if an amended sales tax return is even possible in this situation...

Sorry about that! I totally lost my train of thought and forgot for a second that I'm filing under individual income tax. As soon as I see the word "post" in my head, I immediately start thinking about account ledgers 🕺
Ali Apis responded...😉

Jessica Gonzalez30 said:Sorry about that! I totally lost my train of thought and forgot for a second that I'm filing under individual income tax. As soon as I see the word "post" in my head, I immediately start thinking about account ledgers 🕺
Ali Apis responded...😉

I really appreciate the help from both the FBI and Ladd...🙂 now I'm just waiting to hear back from my aunt 😛 over at the IRS...

Best regards,

silvertrucker9 said:I really appreciate the help from both the FBI and Ladd...🙂 now I'm just waiting to hear back from my aunt 😛 over at the IRS...

Best regards,

If you look at the first page of the form, there’s a little note section where you can just explain exactly what was missing from your previous filing.

Anthony Gonzalez17 said:How on earth are we supposed to accurately report subsidies received for purchasing depreciable assets? Here is the situation: a client received USDA funding to build a vacation home. The property is classified as a depreciable asset with a 10% depreciation rate (or double declining balance at 5%). The annual depreciation amount comes out to roughly $22,000. Now, should the subsidy be recognized at 10% of the total grant received, or should it match the calculated depreciation amount? Because according to the tax code, the subsidy in the tax period is recognized in the amount of the calculated depreciation (Section 20, Subsection 7), yet my colleague insists—quite stubbornly, I might add—that it should be recognized at the same percentage used for profitable entities.

I guess I just do it this way: if my depreciation is $33333, I recognize the subsidy for that same amount, so $33333. It’s worked fine for me. Plus, that’s what it says in the HHS Regulation 1/2017 appendix on page 32. Just a heads up, you also need to keep records of any government subsidies you get. You'll need to attach those to the tax return.

When I was working on those 2016 tax returns—now we have to use the updated rates (24% and 36%), right? Maybe?

Actually, everything is still being handled according to the rules that were in effect back in 2016.

rowdybison3 said:I guess I just do it this way: if my depreciation is $33333, I recognize the subsidy for that same amount, so $33333. It’s worked fine for me. Plus, that’s what it says in the HHS Regulation 1/2017 appendix on page 32. Just a heads up, you also need to keep records of any government subsidies you get. You'll need to attach those to the tax return.

Much appreciated; that is precisely how I calculated it, and I have already got the records all prepared and ready to go.

Hey there, fellow forum dwellers!

Quick question for anyone here who actually knows their way around tax filings—maybe someone's an expert or just lives this stuff?
So, say an individual works part of the year, then hits a dry spell being unemployed, and then finally lands a new gig with a different employer toward the end of the year (back in 2016, specifically). Does that person need to manually file an annual return, or is the IRS just going to handle all the math and paperwork automatically?

Thanks!

Olivia Cruz86 said:Hey there, fellow forum dwellers!

Quick question for anyone here who actually knows their way around tax filings—maybe someone's an expert or just lives this stuff?
So, say an individual works part of the year, then hits a dry spell being unemployed, and then finally lands a new gig with a different employer toward the end of the year (back in 2016, specifically). Does that person need to manually file an annual return, or is the IRS just going to handle all the math and paperwork automatically?

Thanks!

There’s no obligation to file a return manually, because the IRS will just calculate everything themselves through their own reconciliation process...

ruggedlynx63 said:There’s no obligation to file a return manually, because the IRS will just calculate everything themselves through their own reconciliation process...

Thanks a ton!

Hi everyone,

I have a quick question regarding tax calculations. In a situation where the total annual personal deduction actually exceeds the calculated annual income, how should the monthly withholdings be determined? Specifically, is there a particular way to report this under section 9.7.2. on the tax return?
Thanks.
Best regards,

silvertrucker9 said:Hi everyone,

I have a quick question regarding tax calculations. In a situation where the total annual personal deduction actually exceeds the calculated annual income, how should the monthly withholdings be determined? Specifically, is there a particular way to report this under section 9.7.2. on the tax return?
Thanks.
Best regards,

Not at all. You don't need to enter anything there. If that happens, you won't have an obligation to make prepayments for 2017 because the IRS won't come looking for them. If you really want to, you can always choose to make voluntary payments if you suspect your income might jump higher later in 2017—just so you aren't hit with a massive tax bill at the end of the year—but based on your 2016 numbers, the IRS isn't going to demand any prepayments from you.

Does anyone have any intel regarding the hike in H&M dues? Every single small business owner I talk to is seeing a massive spike in their tax liabilities for the first quarter $76 🙄

placidlynx92 said:Does anyone have any intel regarding the hike in H&M dues? Every single small business owner I talk to is seeing a massive spike in their tax liabilities for the first quarter $76 🙄

The mandatory chamber dues for the small business organization system come out to 2% of the standard personal deduction from income—that’s all per the Internal Revenue Code.

Since the standard deduction jumped to $1.25 instead of staying at $0.87, it means the monthly chamber fee is now $25/mo rather than the old $17/mo, 🙂

Carol Price4 said:The mandatory chamber dues for the small business organization system come out to 2% of the standard personal deduction from income—that’s all per the Internal Revenue Code.

Since the standard deduction jumped to $1.25 instead of staying at $0.87, it means the monthly chamber fee is now $25/mo rather than the old $17/mo, 🙂

Carol Price4, you've clearly been reading the 👍 law

So, I’m looking at a situation involving a sole proprietor who picked up some government grants to help buy long-term assets back in 2015 and 2016. Here’s the dilemma: Is it actually possible for them to just decide *not* to claim depreciation for the 2016 tax year? Their income was pretty low that year, so they're thinking about it. Or, even better, could they just choose to depreciate only the specific equipment that was bought using those grant funds?

🙏

Hey everyone!
So, I’ve gotta send out an invoice to a company over in Austria for some consulting services (basically legal-to-legal stuff). For my sales tax filing, does this go under section I.4.? Does the system automatically pull that into the Collective report if I mark it as services within the European Union?
The whole invoicing thing is tripping me up because we haven't dealt with foreign companies before, so we've never actually had to cut a bill like this.
I'll be billing in USD, but I'll include the conversion to Euros based on the Federal Reserve exchange rate—no sales tax applied, obviously. I'll make sure to note: "Reverse charge per the Value Added Tax Act, Section 17," plus both our tax IDs, and just run the rest like any other standard invoice.
Quick question though—do I leave the "sales tax calculated on fees collected" part on there, or should I just scrap it entirely?
And for the paperwork, am I just filing the standard sales tax return by March 20th, and then hitting them with the Collective report at the same time?

Thanks a million for the help!

Olivia Cruz86 said:Hey everyone!
So, I’ve gotta send out an invoice to a company over in Austria for some consulting services (basically legal-to-legal stuff). For my sales tax filing, does this go under section I.4.? Does the system automatically pull that into the Collective report if I mark it as services within the European Union?
The whole invoicing thing is tripping me up because we haven't dealt with foreign companies before, so we've never actually had to cut a bill like this.
I'll be billing in USD, but I'll include the conversion to Euros based on the Federal Reserve exchange rate—no sales tax applied, obviously. I'll make sure to note: "Reverse charge per the Value Added Tax Act, Section 17," plus both our tax IDs, and just run the rest like any other standard invoice.
Quick question though—do I leave the "sales tax calculated on fees collected" part on there, or should I just scrap it entirely?
And for the paperwork, am I just filing the standard sales tax return by March 20th, and then hitting them with the Collective report at the same time?

Thanks a million for the help!

Everything you wrote sounds correct, but you really have to watch out for what *kind* of services you're talking about. For example, if they are related to real estate (like hotel services), the tax liability doesn't transfer—you'd actually have to charge VAT. Also, definitely keep that note about the VAT calculation based on fees collected. You're issuing the invoice following our domestic regulations, after all.

Mark Torres45 said:Everything you wrote sounds correct, but you really have to watch out for what *kind* of services you're talking about. For example, if they are related to real estate (like hotel services), the tax liability doesn't transfer—you'd actually have to charge VAT. Also, definitely keep that note about the VAT calculation based on fees collected. You're issuing the invoice following our domestic regulations, after all.

providing legal services..
thanks

So, how the hell do you actually close out an account held in dollars?
Like, let's say the invoice is sitting at $320.00, and on the day we settle it, everything gets converted into USD based on the Federal Reserve's mid-market rate.
The idea is that the payment should clear in dollars using the exchange rate from the actual day the money moves. But what happens if things get messy and the amount paid is either too low or too high? If they shortchange us, do I just mark off part of the invoice? And if they overpay—where does that extra cash even go? Is there any way to stop this headache before it starts?