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Small Biz Accounting Tips, Oct2013
October 11, 2013
Hello small business owners!

Well, it's October already. The leaves are starting to fall, and the nights are getting chilly. Don't you love Fall?

In this months newsletter we're going to talk about some tax issues, bonus payments, and we'll list out some business deductions.

So let's get started!


Accounting Journal Entries

Corporations are the only business type that actually pay their own income taxes. For the other types - Sole Proprietorships and Partnerships, the owners pay the income tax personally on their Form 1040.

For a Corporation, then, when they file a tax return they incur a liability equal to the amount of tax due.

And you'd make a journal entry like this:

Debit: Income Tax Expense...$3400
Credit: Income Tax Payable............$3400

This entry would post the expense and a liability equal to the amount due on the tax return.

Then when you send the check to the IRS, you'd make this journal entry:

Debit: Income Tax Payable...$3400
Credit: Checking Account.............$3400

This entry would zero out the liability, and deduct the amount paid out of your checking account.

For local taxes, though, all business types incur taxes due the city or village they are located in.

If you pay estimated tax payments to a city, here's the kind of entry you would make:

Debit: Prepaid Local Taxes....$140
Credit: Checking Account...............$140

At the end of the year you would have made 4 of these entries, one each quarter, and would have paid in $560.

When you file your local income tax return for your business, you would make an entry to expense those payments like this:

Debit: Local Income Tax Expense...$560
Credit: Prepaid Local Taxes.................$560

Some Tax Issues

If you're planning on paying out any bonuses to employees at year end, remember that bonus monies are gross wages and taxable to your employees.

And speaking of wages, are all you S-Corp owners out there paying yourself at least a small wage? The IRS has been watching this. They want to see a 'reasonable' salary for the owner. What's 'reasonable'? What would you be earning working for someone else at a similar sized business?

This time of year many businesses are shopping their benefits. I'm not going to go into Obamacare, if you have questions please contact your insurance agent for some helpful answers. What I wanted to share is a new discount plan I found for dental and vision costs.

I know our dental plan was almost worthless. All the dentists were 'out of network' and the costs savings wasn't all that great. Maybe you have that problem, too.

This isn't insurance, this is a discount Dental Plan.. The premiums start at $79.95 per year. There are lots of dentists with the plan, and the benefits are 15% to 60%, depending on the plan you choose, and there's several plans to choose from. You can also get a vision discount plan too.

Back to payroll, remember to pay yourself a reasonable salary if you have an S-Corp, and put any year-end bonuses thru payroll and pay those taxes for your employees.

For a refresher on some payroll issues, click here.

QuickBooks. Buy Now and Save Up to 20% + Free Shipping. If you need accounting software, try QuickBooks. It's easy to use, really! I've used it for years.

Year end customer gifts

One way to keep your business in front of your customers, and to remind them how important they are to you - is to send out some kind of business promo item like calendars or pens.

Or another nice thing to do is to send out business Holiday Cards , which is another great way to keep the relationship going with your customers.

Something else to consider - maybe for great employee gifts this year - is this great site I found. There are about 5 different sites, and all sales benefit a certain kind of charity - like Animal Shelters, World Hunger, Breast Cancer, and American Veterans. It's neat that you can buy something and really give back at the same time. Helping those in need shouldn't wait til the Holiday season. Check it out for some great Gift Ideas!

Taxes - Business Deductions

Some of you may not have a real, formal accounting system. Maybe you're not sure what kind of business deductions there are.

So, for you, I'm going to list some here.

Rent - of a building, warehouse, storefront

Lease - of a computer, copier, vehicle, etc.

Utilities - heat and lights

Phone - for your store and your cell phone used for business

Internet - for business use only

Advertising - newspaper, radio, tv, internet, local charity events, promo items like pens & calendars, etc.

Auto - gas, repairs for vehicle you use in the business for travel to/from clients or delivery

Postage - cost to mail invoices, bills, advertising pieces, etc.

Insurance - cost to insure a company vehicle, the building, your equipment, officer life insurance, errors & omissions coverage, directors & officers coverage, business liability coverage

employee benefits - premiums for medical/dental/life insurance, employer match of any pension contributions, disability insurance premiums

---more next month--

And, remember, if you need help, I'm here. I prepare and file business and personal income tax returns. My rates are very reasonable and I give great service! If you're interested, use my "Contact Me" page to send me an email and I'll call you back at your convenience. I'm here to help you!

Well, that's it for this month.

I'll be back next month with more tips and help for your small business bookkeeping.

Take care!


PS: Please feel free to let your fellow small biz owners know about this newsletter! Send them to my sign up page - the last button on my navigation panel.

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