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Filtering by Tag: taxes

Intro to Estimated Taxes: Do I owe these and when are they due?

Jessica Mishra

Many entrepreneurs don't know about estimated taxes because as an employee you typically aren't responsible for submitting periodic tax payments to the IRS. Your company does that for you by withholding on your behalf. 

As a self-employed person, you could be responsible for submitting period estimated tax payments. These are payments you submit quarterly. Basically instead of paying all of your taxes at year-end, you break them up into 4 payments. It is important to know the rules here because if you do not submit on time and you were required to do so, you could owe late penalties. 

How do I know if I owe?

Always remember to check in with your accountant or CPA on the tax rules as they specifically apply to your business, but I want to give you a general rule for estimated taxes.

You will typically owe estimated tax payments if you expect to owe at least $1,000 in tax (this is the amount of tax you owe not your profit or revenue) for a certain tax year. States have their own requirements so remember to ask your accountant or look this up for your specific state. This is the rule for individuals. Corporations have a different requirement. 

When do I pay?

The deadlines change slightly each year. To see the deadlines each year just google "1040-ES" (this is the tax form for estimated tax payments) and click on the form from the IRS website. The deadlines are listed in the instructions there. For 2017 see the deadlines below:

1st Payment.............April 18, 2017 

2nd Payment...........June 15, 2017

3rd Payment............Sept. 15, 2017

4th Payment............Jan. 16, 2018

How to pay?

There are several ways to submit payment. I personally prefer the electronic submittal. It is very easy! To see the options go to the How to Pay Estimated Tax section here

Please reach out if you have any questions!

Why hiring a bookkeeper can actually save you money

Jessica Mishra

I want to share with you some real world experiences I have had with clients, in which, if they had hired a bookkeeping firm they might have avoided costly mistakes. I don’t mean to say this was their fault. They are entrepreneurs and entrepreneurs do their best to cut costs as much as they can. However, there is a point where it is more helpful than not to have some key experts on your team.

I will be the first to tell you that I don’t like how many accounting software companies out there try to empower business owners to hit the ground running and use their software with minimal training. To me this is like if you decided to build a house and just sort of threw together some blueprints without working with an architect. Certified Public Accountants (CPAs) are required to meet certain accounting education requirements, obtain work experience hours under an experienced CPA, must pass a grueling 4-part exam, and maintain continuing education annually. I don’t say this to make us sound overly important, I just want to make the point that accounting is not easy and it takes time to learn all the ins and outs of maintaining the finances for a business.

I am going to tell you why an experienced bookkeeping firm (led by a CPA) is a must for business owners at a certain point in their business development. Let’s talk about the areas where costs can pop up that can easily be avoided.

Tax penalties due to missed deadlines

These come in all sorts of types and sizes. I have had clients who incur penalties related to late payroll tax filings, late sales tax filings, or late estimated tax payment filings. Let’s face it taxes are complicated. If you are a business owner, you are focused on running your business and it is easy for deadlines to slip your mind.

Tax penalties due to changes in tax law

Tax law in constantly in flux. Sales and payroll taxes are one of the more complex areas when it comes to tax filings and payments. Letting an expert handle these payments frees you up to handle the other important functions of your business. You might spend countless hours researching changes in tax law or making sure you are up-to-date. Letting an expert like an accountant handle this will save you so much time and ensure it is done properly.

Accounting mistakes resulting in underpaid income taxes

If accounting it not done correctly it can significantly impact the tax liability owed for a company. In other words, I have seen several clients do something wrong in their record keeping and later find out that they owe thousands of dollars in taxes that they previously did not think they owed (and that also comes with tax penalities).

To give a real world example this certain type of error happened to 3 of my clients. Without getting into too many details, this error involved liability accounts. My clients booked what they thought were expenses to an expense account instead of back to the appropriate liability account. This basically serves to overstate expenses and as a result understate income in a previous tax year. That means a larger tax liability is owed than what was paid.

My heart drops when I have to tell clients about this. It is very frustrating and again no fault of the business owner. They were doing the best they could and did not study accounting in school. So, back to the point. Hire an expert to help you with this stuff. It may seem like a cost you can’t afford now, but the cost of high tax penalties or major mistakes in your tax filings is way worse.

Start the conversation and at least talk with a bookkeeping firm. They can tell you if it is the right time to start with their services. Don’t forget to ask if the firm is led by a Certified Public Accountant. If you are very small and just starting out, you may not face some of these more complex issues, but in time I recommend building your team of experts. It is an insurance policy you will not regret!

 

 

 

QuickBooks Online: A breath of fresh air for your biz

Jessica Mishra

Does any of this sound familiar? You are a small business owner. You are currently using spreadsheets to track your income and expenses. Or, maybe you are simply scrolling through bank statements at year-end and trying to pull out any income and expenses that might be related to your business. You feel overwhelmed by all things finance, and you maybe even put off the organization of your finances to focus on, well anything else. Setting up a new record keeping system and/or learning a new software seems daunting. We've all been there, but it's time to take control. No more procrastination, just time to make a choice and act on it. 

This post is designed to tell you about some of the benefits of signing up for QuickBooks Online. I write this post from first-hand experience. Yes, I am a Pro-Advisor for Intuit QuickBooks, but this post comes from direct interactions with the software. I use it to manage my own business, and the truth is, I love it. Clients tell me the same thing! I hope to provide some clarity regarding the potential switch!

Access it from anywhere

Yep, that's right. You could be on a beach in Hawaii working on your QuickBooks (although I hope if you are on a beach you are not working on QB). This software sets you up for financial freedom. You can manage your QuickBooks account from your laptop at any time from any place. There is also a great QuickBooks app that can make your life easier on-the-go. In addition, there are several other apps that interface with QuickBooks that can help you with expense tracking, creating a mileage log (how many of you are currently tracking your business mileage accurately?), and can take pictures of receipts and store them for you. QuickBooks Online is the wave of the future. Further, if you have an admin or other employee that you would like to have access to your account, no problem at all. They can access from anywhere too!

Easy access for your accountant

Sharing info with your tax accountant or financial advisor used to be clunky. You might be sending a file back and forth or your accountant had to come to you at your place of work. Now, by simply entering your accountant's email in the right place, you give them access to your QuickBooks - again from any place or at any time. If you eventually want to hire a bookeeper, they can work remotely as well. No more scheduling issues or coordinating who will work in the file when. Ahhhh, simplicity. 

Security

QuickBooks Online stores your data using the type of encryption that most banks use. Many people worry about storing data on the Cloud, but you can rest easy. Before you may have stored data on your laptop hardrive which can either be hacked or physically stolen. The cloud can offer a security that you may not have had before. You can also exchange financial documents with your bookkeeper or tax accountant through QuickBooks Online. No need to send these files through email anymore (which as you know can be quite risky these days). 

Invoicing like a dream

This section is for any of you that invoice your clients or customers. Speaking for myself, this process for me used to be very time consuming. I would manually create an invoice, had no good numbering system, had to enter each piece of information each time I created an invoice, and had no good way of tracking customer data or outstanding invoices.

With QBO, you can auto-fill all of your customer's data just by chosing their name from a menu. You can also auto-populate your products and services so you don't have to enter the description of the product/service, rate, and even tax info each time. You can even set the account that will record the income for each product/service automatically, and you can automate invoices if you have a need for regularly occuring invoices. I can now create an invoice for a client in about 2 minutes and send it directly to their email. I can also see how many invoices are outstanding at any given time (so I know to send a friendly reminder if it has been a while). So easy it almost seems too good to be true. 

A LOT less data entry (this is a big one)

Do you like free time? Well QBO is about to give you more of it. Features like QBO's bank feed, automation of invoicing/bill pay, and QuickBooks payments can all be huge time savers. Let's take the bank feed for example. QBO allows you to link any of your banks, credit cards, even Paypal accounts. All the data feeds seamlessly into QBO and all you have to do is review, code, and approve each transaction. No more manual entry of each check or expense that you receive or incur. QBO also allows you to create rules so that it will remember repeat transactions. I am telling you, this is a HUGE time saver. 

More insight into your business

As soon as you hit the homepage of QBO, you are being told about outstanding invoices, the types of expenses you have incurred recently, what your profit is looking like for the month, and data is displayed regarding the reconciliation of your bank accounts. Further, there are a series of helpful reports that are very easy to run if you are looking to understand your business profit from month-to-month or want to investigate a missing payment, for example. Having more clarity as to the working of your business allows you to make informed decisions regarding future growth. 

Support - you are not alone in this

QuickBooks online even offers a support hotline. Have a question on how to add another column on your invoice? Call them. Want to know how to run a customized report? Call them. Want to know why you are seeing a certain error message? You guessed it, call them! If you are feel hesitant about learning a new software, don't worry because they will support you through the transition. I myself have them on speed dial. 

I hope this post takes away some of your hesitation. If you want a guide through the financial frontier, I offer QuickBooks training sessions (which can easily be done remotely). Shoot me a note if you are interested. Further if you have QBO set up and want someone to manage it for you, I also offer bookkeeping services. As I always say, don't hesitate, automate!