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Home › Society › Economy › Business, Accounting & Taxes › Accounting for Sole Proprietors: Tax & Bookkeeping Tips

Accounting for Sole Proprietors: Tax & Bookkeeping Tips

Started by ruggedheron13 · · 👁 51 views · 2.2K replies

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Participants ruggedheron13rowdyhawk25shadowwalker79Robin Cook4Brenda Chase3stormybadger8placidlynx92Taylor Rogers2Henry Edwards33Lisa Hernandez5driftingfox24Robert Young4cosmictinker24Joshua Barrett31James Morgan21David Green642Kyle Rogers8Chris Murphy8Nicole Lee6fadedcrane92Thomas Brown50Keith Martinez5Nancy JonesCharles Stewart69 …
Paul Carter40 Paul Carter40 Member
32 messages
joined Nov 2015
#1701 ·
Hey there, I have a quick question about sales tax.
So, my small business is registered for sales tax. We're looking at picking up some equipment from a supplier over in Canada—let's say it's worth roughly $3.25.
I was wondering how the tax situation works here—do we pay their local tax, or is it more about how we handle the US sales tax on the purchase? Thanks!
Olivia Cruz86 Olivia Cruz86 Active Member
114 messages
joined Nov 2014
#1702 ·
So, we put an invoice on the books back in February for some services provided by a firm over in Mexico. As of right now, the bill hasn't actually been cleared yet.
Regarding the aggregate tax filing—when does that actually need to hit the IRS's desk? Are we talking about the period when the payment actually clears, or do we just have to file by March 20th regardless of whether the cash has moved or not?

Thanks!
Brenda Chase3 Brenda Chase3 Regular
367 messages
joined Dec 2016
#1703 ·
Paul Carter40 said:Hey there, I have a quick question about sales tax.
So, my small business is registered for sales tax. We're looking at picking up some equipment from a supplier over in Canada—let's say it's worth roughly $3.25.
I was wondering how the tax situation works here—do we pay their local tax, or is it more about how we handle the US sales tax on the purchase? Thanks!

A small business needs to have a valid Sales Tax ID, which you obtain through the IRS. When you travel to Canada, you simply provide that Sales Tax ID to the supplier, and they will issue an invoice using the reverse charge mechanism. You would then record the acquisition of goods from the European Union; to do this, you take the Euro amount on the invoice and multiply it by the average exchange rate set by the Federal Reserve on the date of the invoice to establish your cost basis. Our local sales tax is applied to that amount, functioning as both an input credit and a liability. This gets documented in your sales tax forms as well as the standard reporting filings. There is quite a bit of detail explained in the existing thread regarding the European Union, so I suggest browsing through those specifics.

In the event that the machine was purchased without providing a Sales Tax ID, the Canadian suppliers will just charge their own local sales tax. In that scenario, you pay the full invoice including their tax. While you can still record the purchase normally, you won't be able to claim any tax credits or report it anywhere else.
Rachel Allen21 Rachel Allen21 Member
13 messages
joined Apr 2014
#1704 ·
I have a quick question regarding the sale of long-term assets at a value below their book value. Here’s the situation: we're looking at an asset that's partially impaired—so the selling price, excluding sales tax, would be $667, while its current book value sits at $2167. I was wondering, do we need to account for sales tax on the difference of $1500 as well? If that's the case, what's the best way to handle it? Specifically, should this be recorded in the "other data for input tax adjustment" section of the sales tax return?
Mark Torres45 Mark Torres45 Member
11 messages
joined Jun 2016
#1705 ·
Jose Myers said:Aren't those local government grants given to small business owners actually considered taxable income?

I was just handling a tax return for a freelancer who had all their bookkeeping done elsewhere and just handed me the paperwork, but I wasn't about to be lazy and just take their word for it. So, I dug through everything, only to find out that the grant isn't being treated as income. The guy who handled the books is telling me, "No, that doesn't count as revenue." Am I losing my mind here, or am I just exhausted? Hahaha.

If we're talking about grants meant for purchasing long-term assets, they only count toward receipts for the specific amount of depreciation calculated on that asset. If the grant wasn't used for its intended purpose or wasn't fully spent, then that remaining portion goes into receipts. You also have to keep a record of all received subsidies showing exactly what was bought, how much depreciation was taken, and what remains unspent. You need to attach that record when filing the Income Tax Act return.

Section 31 of the Income Tax Act
(7) Exception to paragraph 1 of this section: business receipts for the tax period based on government aid, grants, and subsidies intended for the purchase of long-term depreciable assets are included in the tax base only in the amounts of the recorded expenditures resulting from the depreciation of that long-term asset during the same tax period.

(8) When applying paragraph 7 of this section, the taxpayer is required to maintain records of received government subsidies and grants for the purchase of long-term assets, as well as the amounts of depreciation calculated.
Olivia Cruz86 Olivia Cruz86 Active Member
114 messages
joined Nov 2014
#1706 ·
So, quick question—do I need to file my Aggregate Report for services provided to a firm over in Canada by March 20th, 2017 (assuming the invoice was sent to them back in February)? This is even though they haven't actually paid me yet! Or am I supposed to just wait and bundle it all together with the VAT return once the money actually hits my account?

thanks
ruggedlynx63 ruggedlynx63 Active Member
59 messages
joined Mar 2018
#1707 ·
Olivia Cruz86 said:So, quick question—do I need to file my Aggregate Report for services provided to a firm over in Canada by March 20th, 2017 (assuming the invoice was sent to them back in February)? This is even though they haven't actually paid me yet! Or am I supposed to just wait and bundle it all together with the VAT return once the money actually hits my account?

thanks

Look, both the ZP and the sales tax returns have to be filed by the 20th of the month following the period when the goods or services were actually delivered... it doesn't matter if you've seen a dime of that money yet, because they need to be reported on the sales tax return in the exact month the transaction occurred...
Olivia Cruz86 Olivia Cruz86 Active Member
114 messages
joined Nov 2014
#1708 ·
ruggedlynx63 said:Look, both the ZP and the sales tax returns have to be filed by the 20th of the month following the period when the goods or services were actually delivered... it doesn't matter if you've seen a dime of that money yet, because they need to be reported on the sales tax return in the exact month the transaction occurred...

So, basically, I need to get that zbirni report turned in by Monday along with the VAT form for the service provided.
If I'm booking an invoice through IRU-samo, do I leave out the payment date since the client hasn't actually paid yet? And what am I supposed to put for the period on the ZP? The invoice is dated February 10th, 2017. I'm totally lost on how to handle this when the money hasn't even moved yet.
Olivia Cruz86 Olivia Cruz86 Active Member
114 messages
joined Nov 2014
#1709 ·
Olivia Cruz86;63011785 said:

So, I put this invoice into the IRA—tax-free, obviously, since it's listed under Services within the European Union... I didn't include the payment details yet because, let's be real, it hasn't actually been paid. The date on the IRA is February 10, 2017, which matches when the invoice was issued. I pulled it into the sales tax forms under sections I.4. and VIII.5. Then there's the zbirni report for the period of Feb 1st through Feb 28th, 2017, with the total service value at $794.
Does that sound right? Can someone please tell me if I'm doing this correctly? I'm planning to file all the forms on March 20, 2017.

Thanks!
Keith Martinez5 Keith Martinez5 Active Member
167 messages
joined Mar 2014
#1710 ·
Good afternoon, everyone!

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https://www.peticija24.com/signature...bnih_obrazaca/
rowdybison3 rowdybison3 Member
13 messages
joined Feb 2016
#1711 ·
Anthony Gonzalez17 said:Much appreciated; that is precisely how I calculated it, and I have already got the records all prepared and ready to go.

Regarding the federal grants, people seem pretty split on how to handle it. I actually got a call from the FBI because my Form W-2 was giving them trouble. There’s also a lot of conflicting info about depreciation amounts and recognized income, so I'm honestly a bit lost on what's right. Some advisors say you should recognize a proportional share rather than just the depreciation amount.
Thomas Diaz8 Thomas Diaz8 Member
28 messages
joined May 2015
#1712 ·
I suppose I should ask: can someone working as a freelancer rent a vehicle from their spouse—meaning they pay a monthly lease fee—and then legitimately write off all the associated vehicle expenses as business costs? By "expenses," I’m referring to things like gas, maintenance, tires, insurance, and so on. To provide some context, the individual hasn't previously owned a leased car or held any long-term vehicle assets under their name.
Anthony Davis12 Anthony Davis12 Newcomer
1 message
joined Mar 2017
#1713 ·
Hey everyone, I was hoping someone could lend me a hand with filling out my Form W-2... I handle my own bookkeeping since I run my own small business here in the States, but I’m having a bit of a hard time tracking down some specific info online...

Here’s the breakdown of my situation:
- all my expenses through my bank account from the start to the end of the fiscal year totaled $33333
- this includes one fuel receipt for $167 (where 30%, or $50, isn't deductible, leaving $117 as the deductible amount)
- it also includes a business trip categorized as a representation expense $267 (of which 70%, or $187, isn't deductible, so $80 is what counts)
- on January 1st, I recorded a personal vehicle valued at $6667, and by the end of the year, after 40% accelerated depreciation, it's at 8,000.00

So, my questions regarding the Form W-2 are:
- my cash expenses are sitting at 0.00
- for expenses paid via bank transfer—how much should I actually list there? $33333 or should it be less, after subtracting those non-deductible representation costs, which would come out to $33097
- for in-kind expenses—what goes in this section? Is it just the $6667 for the personal vehicle or something else?
- for write-off expenses—what am I supposed to enter here?
- for representation expenses—what should I put down for that?
Olivia Cruz86 Olivia Cruz86 Active Member
114 messages
joined Nov 2014
#1714 ·
I really need some help here—looking at my tax return, the total annual tax liability came out to $7066, but the prepayments made were $9640 (they actually used the debt side instead of what was actually paid, since I paid $10569). This leaves a refund of $3503, so we submitted a request to just roll that over to cover future tax prepayments.
On the IRS portal, under code 1619 for the annual calculation $10498, it shows $9640 was paid against a $2,575.37 balance from the annual filing.
Then, they calculated the income tax prepayment based on $10498 for the upcoming period and immediately charged us for 3/17 and 4/17
And now honestly, I am completely lost. How on earth did they calculate $10498 when my math keeps coming up as $7066? Am I just being an idiot or am I totally misreading this statement?
Brandon Rogers41 Brandon Rogers41 Newcomer
5 messages
joined Apr 2017
#1715 ·
Anthony Davis12 said:Hey everyone, I was hoping someone could lend me a hand with filling out my Form W-2... I handle my own bookkeeping since I run my own small business here in the States, but I’m having a bit of a hard time tracking down some specific info online...

Here’s the breakdown of my situation:
- all my expenses through my bank account from the start to the end of the fiscal year totaled $33333
- this includes one fuel receipt for $167 (where 30%, or $50, isn't deductible, leaving $117 as the deductible amount)
- it also includes a business trip categorized as a representation expense $267 (of which 70%, or $187, isn't deductible, so $80 is what counts)
- on January 1st, I recorded a personal vehicle valued at $6667, and by the end of the year, after 40% accelerated depreciation, it's at 8,000.00

So, my questions regarding the Form W-2 are:
- my cash expenses are sitting at 0.00
- for expenses paid via bank transfer—how much should I actually list there? $33333 or should it be less, after subtracting those non-deductible representation costs, which would come out to $33097
- for in-kind expenses—what goes in this section? Is it just the $6667 for the personal vehicle or something else?
- for write-off expenses—what am I supposed to enter here?
- for representation expenses—what should I put down for that?


You just pull everything directly from your KPI.
Since your total bank transfer expenses are $100,000.00, you'll subtract the entertainment amount you're putting in column 5; so, for column 2, you’d enter $99,200.00 (you're essentially breaking down the costs here to keep everything transparent).
In column 5, you'll list the total entertainment expense as $267
For column 4, you'll enter the total write-offs, which in your case is 8,000.00.
Then, in column 8, you put the non-deductible amount, which would be $237
As for non-cash expenses, you don't need to enter anything there. While those figures are in your KPI under depreciation, you actually record them in the write-off column here so the cost breakdown remains clear.
neonsurfer13 neonsurfer13 Active Member
71 messages
joined May 2007
#1716 ·
Hey everyone...

Right now, I don't have to deal with any of that sales tax or digital receipt stuff because all my service payments go straight through my business bank account. But I'm thinking about starting some online sales where customers can pay by card using PayPal. The actual transaction wouldn't happen on my site—it would be handled entirely through PayPal's own checkout pages. Basically, I just send the customer a link, they fill out their info and pay, and I never even touch the cash or see the credit card details.

Does this mean I suddenly fall under those strict IRS reporting requirements?

If it does, I'm totally lost here... am I supposed to start reporting everything, including the old service invoices I've been doing via direct bank transfer, or just the new ones coming through PayPal?

And how am I even supposed to log these PayPal transactions if there isn't an automatic way to sync them up?
Brandon Rogers41 Brandon Rogers41 Newcomer
5 messages
joined Apr 2017
#1717 ·
Rachel Allen21 said:I have a quick question regarding the sale of long-term assets at a value below their book value. Here’s the situation: we're looking at an asset that's partially impaired—so the selling price, excluding sales tax, would be $667, while its current book value sits at $2167. I was wondering, do we need to account for sales tax on the difference of $1500 as well? If that's the case, what's the best way to handle it? Specifically, should this be recorded in the "other data for input tax adjustment" section of the sales tax return?

No, you don't. You just calculate it based on the actual sale amount, though you'll still need to report the full market value as revenue, regardless of the fact that you sold it for less.
Henry Edwards33 Henry Edwards33 Regular
678 messages
joined Aug 2015
#1718 ·
Brandon Rogers41 said:No, you don't. You just calculate it based on the actual sale amount, though you'll still need to report the full market value as revenue, regardless of the fact that you sold it for less.

Market value is pretty simple: it’s just the actual price someone is willing to pay to close the deal.
In this particular scenario, we’re looking at a higher book value.

Determining actual market value is a pipe dream. You can't just point to a number and call it reality; instead, you have to rely on an artificial valuation. At the end of the day, the only "real" value that matters is whatever gets stamped out in a formal report by a certified appraiser.

I get it all the time—these self-proclaimed "experts" constantly tossing around market value figures like they actually know what they're talking about (looking at you, Brandon Rogers41).🙄
driftingmoose39 driftingmoose39 Newcomer
2 messages
joined Apr 2012
#1719 ·
Hello,
I have a question regarding the annual income tax filing for self-employed freelancers. Does the total tax liability for 2016 get reduced by prepayments made specifically by December 31, 2016, or does it include all prepayments applicable to the 2016 tax year (including those paid in January or February of 2017)? My accountant insists that my obligation should be offset by all prepayments pertaining to 2016, but according to the IRS guidelines, it seems they only accounted for what was actually paid by December 31, 2016. As it stands, I'm looking at a significant balance due along with a mountain of interest penalties. Who is correct here? Is there a specific place where this rule is documented...
Thanks in advance for any help you can provide.
Brandon Rogers41 Brandon Rogers41 Newcomer
5 messages
joined Apr 2017
#1720 ·
Henry Edwards33 said:Market value is pretty simple: it’s just the actual price someone is willing to pay to close the deal.
In this particular scenario, we’re looking at a higher book value.

Determining actual market value is a pipe dream. You can't just point to a number and call it reality; instead, you have to rely on an artificial valuation. At the end of the day, the only "real" value that matters is whatever gets stamped out in a formal report by a certified appraiser.

I get it all the time—these self-proclaimed "experts" constantly tossing around market value figures like they actually know what they're talking about (looking at you, Brandon Rogers41).🙄

Fair enough, market value doesn't really help anyone except maybe the IRS when they want to start an argument, but even if you sell something for less than its book value, that difference has to be recorded as receipts, since you can't depreciate more than what's legally allowed before writing it off as an expense.

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