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Small Biz Accounting Tips, Jan 2015
January 09, 2015
Hello small business owners!
In between very cold here here in the Midwest. And I've been thinking about payroll and payroll taxes.
I've got some dates for you to remember if you have employees, and some tips on year-end payroll reconciliations and reporting. And let's keep thinking about planning for the new year.
So let's get started!
Payroll Tax CalendarThe IRS has set up a list of important dates, which you can find the entire list in their Publication 509, Tax Calendars.
By January 31, give each employee a copy of their form W-2 and/or 1099, file Form 941-Federal Employment Tax Return for the 4th Quarter of 2013, and file Form 940-Federal Unemployment Tax Return and pay the tax due.
by February 15 - ask for new W-2 forms from any employee who claims exemption from federal income tax withholding. Last years form expire on the 16th.
by February 28 - file all PAPER 1099 forms with the IRS, file all PAPER W-2 forms with the Social Security Administration, and file any PAPER copies of Form 8027-Employer's Annual Info Return of Tip Income and Allocated Tips, with the IRS.
by March 31 - File any ELECTRONIC forms of the above forms with the respective agencies.
Hopefully this will keep you on track with payroll tax returns.
Journal Entries for Employee TaxesIf you have employees, you know that each quarter you have to file employment tax returns and pay employment taxes.
If you're on the Cash Basis, you just record the taxes when paid, so let's look at those journal entries.
Most states have an Unemployment Tax that you pay on a certain wage base each year. Let's say you paid 4th quarter Unemployment Taxes of $250.
So you'd make a journal entry like this:
Debit: State Unemployment Taxes Expense..$250 Credit: Checking Account..........................$250
You also have to pay Federal Unemployment Taxes. You would make a journal entry like this:
Debit: Federal Unemployment Taxes Expense..$130 Credit: Checking Account............................$130
You may also pay local withholding taxes each quarter. For this tax, each payroll period you post the payroll entry and part of that entry is a credit to 'Local Withholding Taxes Payable'.
This tax is one that the employee pays, and it's withheld from their paycheck. Then each quarter you the employer sends the money to the locality. The journal entry is posted like this:
Debit: Local Withholding Taxes Payable....$450 Credit: Checking Account..........................$450
Record keeping for PayrollAs a small business owner, you know that payroll generates a rather fat file of paper.
What should you keep and for how long?
The IRS suggests that you keep records of all employment taxes for 4 years. This includes:
*your employer identification number paperwork *amounts and dates of all wage, annuity, and pension payments *amounts of tips reported to you by your employees *records of all allocated tips *fair market value of any in-kind wages paid *names, addresses, social security numbers, and occupations of all employees *copies of all W-2 forms returned to you as undeliverable *dates of employment for all employees *periods of sicktime or injury and the amounts paid you paid to employees and/or that third parties paid to them in sickpay or disability payments. *copies of W-4 forms for all employees *copies of any Forms W-5 for Earned Income Credit Advance Payment Certificates *dates and amounts of tax deposits you made, along with any acknowledgement numbers given for those payments. *copies of all tax returns filed *records of any fringe benefits or expense reimbursements provided to employees, including substantiation.
And if in doubt, keep a copy of it. That's the safe route.
Planning for the coming year.
I've been talking about this for a couple months now, planning for the year ahead.
It's important to have that goal ahead of you to aim for and focus on - be it a 10% increase in Sales or to add a new product to your line.
I like to stress the use of Cashflow Analysis and Forecasting in business accounting. It helps you see what you have coming in and going out, what cash is available for you to use for new purchases or how much you need to invest in your business in order to reach your goals.
For more on analyzing your cash, click here.
QuickBooks is having a sale.
QuickBooks is a full accounting software system, and it's the #1 small business accounting software package on the market. I use it, so I know it has a lot of great qualities. You can invoice customers, pay bills, pay your employees, track your jobs or projects, and prepare all manner of reports. So if your business has outgrown your manual system, check it out.
A New Option for Small Business Loans
You hear all the time how hard it is to get a small business loan. Banks aren't all that fond of loaning to small businesses, unless you've got great credit and several years of business behind you.
Well, there's a new option. I found it for a personal loan, and they're expanding into small business loans, so I thought I'd let you all know about this. I introduced it in the last newsletter, but I thought I'd include it again.
If you're looking for some funds for your small business, look into Lending Club.
To qualify, you need to have been in business at least 2 years, have annual sales of at least $75,000, and have some business credit (a credit card or some vendor credit).
As I said, I'm using them personally, and it was a quick, easy process. Check it out, and see if it makes sense for your business.
Well, that's it for this months newsletter.
I'll be back next month with more news and tips to help you with your small business bookkeeping.
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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