Record Keeping & Taxes ROBIN HAYDEN, MBA, CPA Certified Fraud Examiner HOUCK & ASSOCIATES, PC CPA’s (360) 892-4348 firstname.lastname@example.org Background Practicing CPA Specializein businesses up to 20 employees Certified Fraud Examiner ROBIN HAYDEN 1/23/2010 Separation requirements Separate checking account Separate business and personal – Finances, expenses Separate charge card ROBIN HAYDEN 1/23/2010 Receipts Request & keep all receipts – With notes Restaurant receipts – Business purpose, people etc Separate file for all fixed asset receipts – Equipment, furniture etc ROBIN HAYDEN 1/23/2010 Advice Business income to business account not personal account Government letters – Ignoring them will be painful Bookkeeper does NOT sign checks ROBIN HAYDEN 1/23/2010 Entity Choice Sole Proprietorship Partnership Limited Liability Company Corporation S-Corporation – tax planning opportunity ROBIN HAYDEN 1/23/2010 Entity Choice Attorneys & Accountants – Differing viewpoints and priorities Need to hear from both Then make entity type selection ROBIN HAYDEN 1/23/2010 Record Keeping - Why IRSrequirement and state law Business making money?? Who owes and what is owed CPA needs them Business Trends 1099’s and W2’s ROBIN HAYDEN 1/23/2010 Record Keeping - How Computers – Quick Books, Peachtree, etc. Manually – General Ledger, check register Reports – Balance Sheet, Income Statement At least monthly updating ROBIN HAYDEN 1/23/2010 Inventory Items made or bought to sell to others Take inventory regularly Inventory is an asset – On the balance sheet until sale – Moved to expense when sold ROBIN HAYDEN 1/23/2010 Accrual vs Cash Basis Cash basis is like checkbook – Money flow recorded as it happens Accrual – Money owed or owing recorded on date of transaction – Recommended if have inventory ROBIN HAYDEN 1/23/2010 Income Taxes - General All income taxable Usual & customary expenses are deductible Keep records 7 yrs or asset life Corporate returns due earlier than individual ROBIN HAYDEN 1/23/2010 Income Taxes - Deductions Health insurance – fully deductible Business meals and Entertainment at 50% Disability or Life insurance – very rarely deductible Fines and penalties – not deductible Owner draws are not an expense ROBIN HAYDEN 1/23/2010 Income Taxes - Autos Standard Mileage $.445 per mile Standard mileage only for four vehicles otherwise use actual cost Record all costs plus mileage log Take percent of costs based on mileage for business ROBIN HAYDEN 1/23/2010 Self Employment Taxes Paid by partner and sole proprietors Social Security and Medicare equal to 15.3% net business income 50% deductible on 1040 page 1 ROBIN HAYDEN 1/23/2010 Payroll Taxes –Before Hiring File SS-4 for Federal ID number File revised Master Business Application with State W-4 and I-9 from each employee Get Circular E for withholding and deposit rules ROBIN HAYDEN 1/23/2010 Payroll Taxes –Witholding Tax deposits usually on 15th of month after month paid Severe penalties for withholding incorrectly Never skip payroll tax deposits – Much more costly than credit card debt Special rules for family of sole proprietors and partnerships ROBIN HAYDEN 1/23/2010 Sales Tax Washington Department of Revenue class Collect the sales tax or you are liable (not the customer) Levied on Tangible Property Not levied on wholesale items – Need a reseller certificate on file ROBIN HAYDEN 1/23/2010 Resources IRS: www.irs.gov WA Dept. of Revenue – www.dor.wa.gov Labor & Industries – www.lni.wa.gov Employment Security Department – www.fortress.wa.gov/esd/portal ROBIN HAYDEN 1/23/2010 Doing Business in Other States Each state has own laws: Find out first May need to register May need to pay various taxes May need to collect sales tax ROBIN HAYDEN 1/23/2010 Questions?
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