Accounting for Sole Proprietors: Tax & Bookkeeping Tips

Edward Stewart said:Regarding my interest in JPMorgan Chase—specifically concerning the payout of interest or dividends... should I proactively upload a PDF document to the portal, or is it safe to assume the IRS already has all the necessary data on file?
Perhaps I could simply include the specific account number in the notes section to be thorough?

The tax form alone should be plenty.

Once you’ve filed the IRS forms for a sole proprietor who ends up having more prepaid tax than their actual liability, what’s your move? Do you actually file for a refund, or do you just leave that amount sitting there as a credit toward next year's taxes?

It really just comes down to what the business owner wants and how much tax they're looking at. Generally speaking, you set aside a deposit first, and then you just deduct that specific amount from the total down payment later on.

Thomas Diaz8 said:Once you’ve filed the IRS forms for a sole proprietor who ends up having more prepaid tax than their actual liability, what’s your move? Do you actually file for a refund, or do you just leave that amount sitting there as a credit toward next year's taxes?

Back when I was dealing with my 2017 taxes, I decided to just leave the extra amount sitting there as a credit for the following year.
I basically sent a formal request to the IRS to apply that surplus toward my future estimated payments, and once they processed the paperwork, they applied it exactly how I wanted...

Greetings!
Quick question for the group: if I'm running my own small business, should the excise tax I'm paying be treated as a deductible expense?

IRS filing,

In section 4.3 regarding income from self-employment and small businesses...

under 4.3.3, you enter Total Income, taxes paid, and surcharges.

Does "taxes paid and surcharges" refer to the estimated tax payments we made throughout 2017?

I don't owe any remaining tax for 2017, even though I was making quarterly installments all year long.
Should everything paid between January 1st and December 31st, 2017, be entered under 4.3.3?

Thanks,

Brandon Jackson4 said:IRS filing,

In section 4.3 regarding income from self-employment and small businesses...

under 4.3.3, you enter Total Income, taxes paid, and surcharges.

Does "taxes paid and surcharges" refer to the estimated tax payments we made throughout 2017?

I don't owe any remaining tax for 2017, even though I was making quarterly installments all year long.
Should everything paid between January 1st and December 31st, 2017, be entered under 4.3.3?

Thanks,

Exactly, that is essentially a tax prepayment—it’s the portion you paid upfront, which means you should be looking at a refund later (assuming what you mentioned about having no liabilities for 2017 means you already calculated everything and it came out to zero). So, if there aren't any losses listed in 4.3.2, then the entries for 4.3.3 should be identical to 4.3.1.

As for the attachments, the dropdown menu for mandatory documents only shows the Chamber of Commerce Form, so I just added that to my PDF (I grabbed an Excel template from the County Recorder, filled it out, and "printed" it to a PDF). I couldn't find any clear instructions regarding the Time Zone or the DI, so I went ahead and included them under "Miscellaneous" just to be safe, even though I had already entered them the standard way into the IRS system.

By the way, to expand on my previous post that Astrid replied to regarding capital gains income... I wasn't entirely clear on it myself, so I did a bit of digging. From what I can gather, the HHS doesn't really track that anymore because it's now treated as "final income"—meaning the taxes have already been settled at the moment of payout, so the taxation process is considered complete, and you don't even need to file LLC paperwork for it. I haven't quite figured out yet if this means the IRS will automatically reconcile those figures with the HHS data; specifically, if someone reports a lower income, whether they will ultimately end up receiving a refund.

Paul Carter40 said:Once you've signed and sent the DOH, just head over to your sent forms—look for the little green or blue checkbox, and there should be an option to attach documents in the dropdown menu. It’s gotta be a PDF, though.

Thanks a million! 🙂

Edward Stewart, thanks for getting back to me, you’ve been a huge help. Now I’m stuck on the PPI form.

It keeps flagging an error under Section III, Line 9 Total Expenses (The amount doesn't match the sum of III1 through III3, minus VAT in III7 and non-deductible expenses...).

I think the issue is depreciation—where does that actually go?
Does it fall under line 3, non-cash expenses, or line 4, write-offs?

I put it under write-offs (line 4), but the math just isn't adding up because total expenses are calculated as 1+2+3-7-8. Why are 4, 5, and 6 skipped over?
Logically, if I entered depreciation under line 3 (non-cash expenses), everything would balance out.

Is it possible depreciation gets entered in both fields, under both 3 and 4? (I saw something like that mentioned on an IRS page, but I can't be certain).
Thanks,

Brandon Jackson4 said:Edward Stewart, thanks for getting back to me, you’ve been a huge help. Now I’m stuck on the PPI form.

It keeps flagging an error under Section III, Line 9 Total Expenses (The amount doesn't match the sum of III1 through III3, minus VAT in III7 and non-deductible expenses...).

I think the issue is depreciation—where does that actually go?
Does it fall under line 3, non-cash expenses, or line 4, write-offs?

I put it under write-offs (line 4), but the math just isn't adding up because total expenses are calculated as 1+2+3-7-8. Why are 4, 5, and 6 skipped over?
Logically, if I entered depreciation under line 3 (non-cash expenses), everything would balance out.

Is it possible depreciation gets entered in both fields, under both 3 and 4? (I saw something like that mentioned on an IRS page, but I can't be certain).
Thanks,

If we look back at this very same thread from about two years ago...

A few posts prior to the one linked above, I came across a question regarding version 1 (specifically the number of employees), where the recommendation was to enter "0," yet the IRS system wouldn't accept it—it would only allow a minimum of 1.

TOTAL EXPENSES is written

Edward Stewart said:If we look back at this very same thread from about two years ago...

A few posts prior to the one linked above, I came across a question regarding version 1 (specifically the number of employees), where the recommendation was to enter "0," yet the IRS system wouldn't accept it—it would only allow a minimum of 1.

Last year, the PPI for 2016 was different.
Under 9 TOTAL EXPENSES, it showed 1+2+3+4+5+6-7-8, so I'm not sure how anyone had issues last year.
This year the PPI has been changed, and under 9 TOTAL EXPENSES it's now 1+2+3-7-8.
I think depreciation should be listed under both III3 and III4...

And as for the number of employees, what does a small business owner like me actually put down?

Has anyone ever accidentally entered 0.00 when they were adding a dependent child to their filing? Those zeros show up right next to the percentage for the standard deduction, and I left them there even though my plan is to claim the child for the tax credit for 2017—plus, I haven't shared the standard deduction with anyone else. Now I’m sitting here thinking I totally botched it. Any advice? Thanks!

Can someone walk me through how to actually fill out the section for the personal deduction? I downloaded the official County Recorder form online and even grabbed the one from JP Morgan Chase, but honestly, neither of them seems to be calculating the math correctly. Since I'm running my own LLC, I just need to figure out the deduction for myself. From what I can tell, that final field for my total monthly deduction should come out to $1267, but I'm stuck on how to handle fields 2, 3, and 4 to make sure that actually happens.

neonsurfer13 said:Can someone walk me through how to actually fill out the section for the personal deduction? I downloaded the official County Recorder form online and even grabbed the one from JP Morgan Chase, but honestly, neither of them seems to be calculating the math correctly. Since I'm running my own LLC, I just need to figure out the deduction for myself. From what I can tell, that final field for my total monthly deduction should come out to $1267, but I'm stuck on how to handle fields 2, 3, and 4 to make sure that actually happens.

For Section 2, you’ll want to put $3,800.00 for each month, and then under Section 5, you should list $3,800.00 per month as well.
That way, the sum ends up being $45,600.00 under sections 9.1 and 9.3 of the total income form.

Yeah, but what actually goes in fields 3 and 4?

neonsurfer13 said:Yeah, but what actually goes in fields 3 and 4?

If you don't have any active members on file, then you leave them blank. Just put zero.

Hey there,

I was hoping some of you pros might be able to point me in the right direction—I'm trying to figure out if starting an LLC would actually make sense in my situation. So, here’s the deal: I work full-time for my employer, but I have this old property. My plan is to renovate it to turn it into a vacation rental—you know, expand the square footage, build a pool, all that fun stuff—and I'd be financing the whole thing with a loan. Since I've never really dealt with business accounting for real estate—especially when the value keeps shifting because of all the investments—I'm wondering if opening a business is worth the headache. I'm thinking about the tricky parts, like what happens when you try to pull a property out of a business later, or whether I should join the VAT system for the investment side of things (though I'd be taking out the loan as an individual, even if the property ends up being an asset in the LLC). From what I gather, if I enter the VAT system, I'd probably need to stay in for at least five years. During those five or six years, I could theoretically write down the property value by 50% through depreciation, and maybe offset a big chunk of the investment VAT using outgoing invoices... plus, I assume I could offset a good portion of the rental income with depreciation too. But then, when it comes time to close the business, wouldn't I have to account for the difference between the remaining book value and the actual market value? That sounds like it could trigger some income tax, and I'm also a bit fuzzy on what happens with the VAT when you exit the system or close the shop, assuming I'm still in the system at that time. I'd love to get your thoughts—really just looking for an opinion on how the property is treated during that whole period, and when you think the best time would be to exit the VAT system to make it most profitable.
Does any of this even make sense to do, or would it be way better to just take out the loan, handle everything privately, and just register as a standard landlord and call it a day?
My ultimate goal isn't to make a quick buck right now—it's to have the property eventually pay for itself over the years. I want this to be some kind of financial safety net for us in maybe 15 years or so, once I'm not working full-throttle anymore.

Hey everyone,

I’ve got a bit of a headache regarding fixed assets here.
So, here’s the deal—on our books, we have this garage listed as a fixed asset, but it was actually fully depreciated last year. Now, my boss is talking about either selling the damn thing or just gifting it to his wife... and honestly? I’m totally lost. I have zero clue how you even handle that—like, how do I actually record this mess in the books and keep everything above board?

Thanks for any help you can throw my way!

Olivia Cruz86 said:Hey everyone,

I’ve got a bit of a headache regarding fixed assets here.
So, here’s the deal—on our books, we have this garage listed as a fixed asset, but it was actually fully depreciated last year. Now, my boss is talking about either selling the damn thing or just gifting it to his wife... and honestly? I’m totally lost. I have zero clue how you even handle that—like, how do I actually record this mess in the books and keep everything above board?

Thanks for any help you can throw my way!

Just start Invoicing her at market value... you record the sale of the fixed asset and then write it off from the books...

casualorca5 said:Just start Invoicing her at market value... you record the sale of the fixed asset and then write it off from the books...

Okay, so we're talking an outgoing invoice with sales tax that gets logged into the IRA.
But how exactly am I supposed to nail down the "market value"?
And when it comes to clearing them from the books—do I literally just yank them off the inventory list and call it a day?