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Florida Small Business Tax Laws and Rules

Florida Small Business Tax: Here’s What You Need to Know

With Miami recently named the top city to start a small business, now is a great time to get a startup off the ground in Florida. Most small businesses start out as sole proprietorships. Compared to many other business entities, sole proprietorships are simple to set up and run. Florida small business tax rules are also favorable for business owners and state laws are generally supportive of small business startups.

But  Individual advice from a Florida small business accountant is better than any information online, as your accountant will advise you according to your situation. Still, there’s nothing wrong with learning more about your small business tax liability in Florida.

Does Florida Have a Strong Economy?

Before looking into small business taxes, it’s good to consider the Florida’s economy. One of the benefits of starting a small business in Florida is the economic growth in the state. Of all US states, Florida has one of the fastest growing economies. According to statistics from 2018, if Florida were its own country, it would boast the 17th largest economy in the world based on GDP growth.

Some of the biggest industries in the sunshine state are as follow:

  • Tourism
  • Agriculture
  • International trade
  • Aviation
  • Life sciences
  • Financial services

While business in many other industries can thrive in Florida, the above represent the industries that employ the most people, generate the most revenue and make up the biggest part of the economy.

The labor force in Florida is expanding by more than 3% annually, while the rest of the US sees little to no growth in the same area.

Florida’s economy is growing at a fast pace. It helps that state laws in Florida encourage rather than dissuade people from starting businesses. When combining all of the benefits of starting a small business in Florida, including taxes and the economic outlook, the state is ranked as the 20th best state to start a small business overall. While that listing might seem mediocre, another survey listed Florida as the sixth best state to start a small business based on startup success.

How are Small Businesses in Florida Taxed?

Most small businesses are sole proprietorships. A sole proprietorship is a company owned by a single person. The owner of a sole proprietorship will usually have full say over what happens in the business, even if a small business employs a manager to make certain decisions, the owner will retain the ultimate authority in his or her business as the only owner.

Sole proprietorships are taxed on profit. This means that business owners will need to implement proper bookkeeping strategies to calculate their tax liability. Small business profits can be calculated monthly by adding up all income. Once a business owner know their total income, all business expenses must also be tallied. Subtracting all the expenses from the total income produces the profit.

While this system seems simple enough, both state and federal tax laws are always changing. Not all business expenses qualify for full deductions – meaning business owners can only subtract part of the costs of certain expenses.

To make matters more complicated, most small businesses in Florida will pay taxes in advance on a quarterly basis. What this means, is that businesses actually pay tax based on what they expect to earn in the future, not what they’ve already earned in the past. If a business underestimates its quarterly earnings and pays too little tax, outstanding taxes will need to be paid later, often with additional tax in the form of late payment fees.

Florida Self-employment Tax Rate

Self-employment tax acts as a replacement for Social Security and Medicare tax. As self-employed business owners don’t have these employment benefits, a self-employment tax compensates.

Florida’s self-employment tax rate is 15.3% for the first $128,400 net income of small businesses. Additional business tax rules apply across different income brackets, however.

Statistically speaking, Florida ranks fourth as one of the states with the lowest self-employment tax rates.

Should You Pay Tax on Your Side Business?

Paying self-employment tax when your business in your sole source of income is expected, but what about if you’re employed with a business on the side?

Unfortunately you’ll still need to pay self-employment tax. If your business makes more than $400 annually, you’ll be liable to pay self-employment tax, regardless of whether or not you hold a full-time (or part time) job.

Florida Sales Tax Rate

Sales tax is a tax levy on all product or services your business sells. As a result, almost all small businesses will qualify for some form of sales tax. One average, Florida sales tax is currently charged at 6%.

What this means, is that you will have to account for 6% sales tax on all the products or services you sell. If you need to sell something for $100 to make your desired profit, you’ll charge a customer for $106 to account for the money you’ll need to pay in sales taxes.

Forgetting to account for sales tax is a mistake many business owners make. Always calculate how much profit your business needs to make to be sustainable, then set your rates. Once you know what you desired rate is, add a 6% sales tax on top of this amount and put the money you get towards you sales tax aside. Never spend your sales tax money. Make sure you have enough left to pay all your taxes!

To calculate how much you need to add onto the cost of your product or service to account for sales tax, use your calculator to multiply your price by 0.06%. Once you have this result, add it to your price – this is the amount you’ll need to charge customers.

For example, if you have a product you want to sell for $50, your calculations will look as follows:

$50 x 0.06 = $3

The $3 is what you need to add onto your $50 to account for your small business taxes, so you’ll be charging your customer $53 for the product you sell.

In the past few years, Florida has consistently ranked 22nd for sale tax rates – meaning the sunshine state is relatively average as far as sales tax is concerned.

Florida Small Business Tax Summarized

Florida ranks 4th as one of the states with the lowest small business tax rates. This makes Florida a great state to start a small business. Tax laws in Florida do differ based on what type of business entity you own though.

While most small businesses operate as sole proprietorships, there are other business tax models in Florida. Florida taxes corporations at an approximate tax rate of 5.5%. However, there are many variables with regards to how much taxes a business entity will end up paying.

The best way to know for sure how much tax your business should pay, it’s best to hire an accountant to analyze your books. A Florida accountant will know what tax deductions, credits and exemptions your business qualifies for.

When consulting an accountant about your business’ tax liability, it’s imperative to have thorough financial records of your business on hand. If you don’t have any financial records yet, your first step should be hiring a reliable bookkeeper for your business. Once tax season comes around, your accountant will calculate your tax liability based on your financial books.

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How to get your first B2B customers - strategies for startup success

Startup Talk: How to Get Your First B2B Customers

B2B businesses are among the most profitable. Businesses have larger budgets at their disposal than individuals and often require products and services on an ongoing basis. The profitable nature of having businesses for customers is attractive to many entrepreneurs, but how can you get your first B2B customers?

Selling to Businesses vs Individuals

A lot of business models are centered around selling to other businesses specifically. Examples include marketing companies and many different kinds of Saas businesses.

Other business models have the potential to work with both businesses and individuals. Examples of businesses that can be both B2B or B2C include cleaning services, catering companies, auto workshops and printers. The benefit of working with businesses rather than individuals, however, is that businesses are likely to send ongoing work on a regular basis.

A cleaning service might get hired to clean company offices on a weekly basis, for instance. Similarly, an auto workshop might get work to do ongoing fleet maintenance on business vehicles. Printers and catering companies might get once-off work from individuals to print wedding invitations and prepare food – which is still a good source of income, but not ongoing. A business, on the other hand, will always have marketing materials to print and corporate functions to cater for.

Considering the benefit of B2B customers, even businesses with the potential to sell to individuals should market to business entities as well.

Turning Your Startup Ideas into a Profitable Business

There’s a good chance you’re sitting with a startup idea you haven’t acted on because you don’t know where to start getting customers. The difference between an idea and a profitable business is, after all, paying customers.

Or perhaps you already started your business on the side, but you’re struggling to generate enough income from it to make it your full-time job.

Whatever your current situation, your business will grow much quicker if you have B2B customers. B2B customers can offer you a better stream of reliable income than individuals.

But don’t get tunnel vision running after B2B customers. It can be tempting to offer a B2B customer a hefty discount because of the reliable income stream you expect to get. It’s okay to give loyal customers discount, but you’ll need to do some math beforehand.

Calculate How Many B2B Customers You’ll Need

First, calculate how much revenue you’ll need to run a sustainable business. Don’t forget to factor in all your business expenses, as well as taxes. A lot of entrepreneurs mistakenly forget to factor in taxes when calculating how much revenue they need. If you’re unsure about what you’ll need to pay in taxes, consult a tax professional to get an idea of your tax liability based on your income.

Knowing how much your business will make after tax will help you make accurate calculations. You can then proceed to calculate how much of your product or service you’ll need to sell to be sustainable.

With some business models, it’s easy to estimate how much a customer will be worth. With others, this can be much more complicated. To start out with, you just need to know how much you need to make to be sustainable, then reverse-engineer approximately how many B2B customers you’ll need to make that amount.

If, for instance, you run an office cleaning service and you charge a monthly rate between $500-$1500 for an office (depending on the size), your average B2B customer might be worth about $1000 monthly. If you need to make $15,000 to run a sustainable business and cover all your expenses, you’ll need about 15 B2B customers.

At first, calculate how much you’ll need to sell at your standard rate. Once you have a prospective B2B customer, consider if they will provide you with enough ongoing income to qualify for a discount. If not, don’t offer to give them one. Businesses often have more budget than individuals, so they might not expect a discount anyway.

How to Get Your First B2B Customers

Only go look for customers once you know how many you need and what you must charge them. Knowing this information will help you have a clearly defined goal to work towards. It’s no good getting ahead of yourself and onboarding customers when you aren’t charging them enough to be sustainable.

Once you’ve got a goal to work towards, follow the necessary steps to get your first B2B customers.

1. Define Your Target Customer

Every entrepreneur has heard this advice, so it’s nothing new. Despite that, a lot of entrepreneurs still don’t know how to accurately identify profitable target customers.

There are a few things to consider when identifying who to target as potential customers:

  • What business is most likely to require your services?
  • What businesses will be easier to sell to?
  • What businesses will have enough financial resources to spend on your product or service?
  • Will your product or service be fundamentally important to the operation of these businesses?

For example, if you run a printing shop, you might target all businesses. Most businesses could use pamphlets, so you might end up casting your net too wide when approaching potential customers.

In this case, take a step back and ask yourself, what businesses might need a lot of printed materials? Surprisingly enough, it might not be businesses in need of only corporate materials. Events planning companies, for instance, might have regular work printing event invitations and plans, which could include personal events like weddings and baby showers. Apart from this, they might also have regular work for printing event banners and advertising posters.

Event planning firms could make good customers for printing businesses because your service would be a fundamental part of what they do. Getting printed materials is a service they’ll always require. They’ll have lots of work from their different clients, so one event planner might bring in the same amount of business as 10 other customers combined.

Identify what kind of business could be the same kind of valued customer for your startup, then approach these companies first when prospecting.

2. Identify Your Selling Points

Once you know what businesses to approach, think about how you’ll sell your product or service to them. What is your business’ main selling points? A selling point can be anything that helps your business stand out above the rest.

If you run a cleaning service, it could be that you use environmentally friendly cleaning agents, for instance. Environmentally aware businesses would appreciate this thought.

Or, perhaps your main selling point could be that you offer your services after hours. If you’re looking to target offices, many customers might like the idea of getting cleaners to come in after their employees’ head home. No noisy vacuum cleaners disturbing employees while they work, or areas left uncleaned because they were being occupied by working employees.

Whatever industry your business serves, make sure your target customers will value your selling points. There’s no point in using selling point that won’t arouse interest from prospects. Explain why your selling points are valuable and how they solve a problem your competition doesn’t cater for.

Don’t Be Too General

When coming up with selling points, there are a few common ones that businesses use. Some examples include:

  • X Years’ experience in our industry!
  • Fully licensed and trusted service.
  • Exceptional service and friendly staff.

These aren’t bad selling points in all cases, but many startups can’t brag about their industry experience.

Plus, these selling points are generalized. Your prospects have heard them before – probably more than once too. Any business can claim to have “exceptional service and friendly staff”, but this doesn’t always mean it’s true. A lot of businesses who claim to have friendly staff will inevitably have bad service and rude staff.

It’s not to say you can’t use general selling points at all, but you need to combine them with unique selling points as well. A unique selling point can often add credibility to more general ones.

3. Try Cold Calling or Emailing

It can be scary to make phone calls or send emails to businesses you have never contacted, but don’t let this put you off.

Once you have your selling points, write a professional cold email or some cold calling scripts. You don’t need to follow your cold calling scripts to the T, just have some notes on hand for reference. Also anticipate common questions your prospects might ask, and have a summarized answer ready in writing.

Alternatively, you could also visit potential customers at their location (if it’s open to the public) and hand out a business cards with a short 2-minute brief.

4. Contact the Right People

Contacting the right people can make the difference between whether you get interest or get shrugged off. Especially if you’ll be approaching bigger businesses, make sure you get through to the right person.

The right person to contact will be someone who has the authority to make buying choices regarding your product or service. If your business is somewhat technical, they also need to be someone who will understand the technical advantages of your product or service – someone who will be able to appreciate your superior product or level of expertise.

LinkedIn can be a great place to source the right people to contact. As an added benefit, it’s also a great place to reach out to these people about your product or service.

Compile a list of businesses and individuals to contact, then start making cold calls and sending emails, or connecting with people on LinkedIn.

A lot of online business advice instructs entrepreneurs to inform their personal network of their new startup. This could help in some cases, but in most cases your existing personal network won’t be enough to bring in enough customers. That’s why networking is an important step in growing your business. With enough perseverance, you should get your first B2B customers soon!

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Accounting Jobs without a Degree

These certifications commonly require the passing of several examinations. To maintain CPA licensure and related certifications, CONTROLLERS are typically required to complete continuing education. Bookkeeping and accounting can appear to be the same profession to the untrained eye. To enter either profession, you must have basic accounting knowledge.

Accounts Receivable: We offer specialized accounts receivable services. Get more information on our accounts receivable services and sub-services.

Use the blended training CD – Intuit, the company that created QuickBooks, offers a training CD for those who want to go one step beyond the tutorials. This CD gives students a software description instead of complete training, but there are no exams to pass and the cost is reasonable. To get the most out of this program, they must be motivated and be able to learn through the demonstration and examples. About CostHelper CostHelper is based in Silicon Valley and provides consumers with unbiased price information about thousands of goods and services. Our writers are experienced journalists who adhere to our strict editorial ethics policy.

You also need to track invoices and payments in order to handle potential client disputes, issue refunds, and understand how to budget effectively for the next year. Digital records make it easier than ever to store, manage, and analyze your records. The role of an accountant in your QuickBooks business, while potentially encompassing some bookkeeping tasks, is often more advisory and analytical in nature. An accountant will be in a position, through analysis of past performance, to offer financial projections and advice on future financial elements of your business.

The first thing you need to know about the CPA Exam is what requirements you must meet to be eligible to take the test. Once you meet these requirements, you need to apply for the exam and pay the fees before you get a Notice to Schedule (NTS) and can reserve your seat at your first exam. From applying to sitting for your first exam, the process can take a few to several months.

You’ve got QuickBooks. Do you still need an accountant? We take a look at what QuickBooks can and can’t do.

A trustworthy accountant lets you know upfront what they do and don’t know and never tries to hide the scope of their knowledge. AICPA (American Institute of Certified Public Accountants), about 660,000 of those accountants are certified public accountants (CPA). If you’re in the market for small business accounting help, you probably want to know what you can do to find the best accountant for your business’s needs. But an equally important question is how to avoid hiring a bad accountant.

You can also use these reports in order to get ready for tax time with the help of your accountant. FreshBooks is designed for self-employed individuals and also has basic accounting services. The difference is that this accounting software is packed with statement of retained earnings example more features than QuickBooks. Accountants sometimes have on-staff bookkeepers to provide these services, usually at $30-$50 an hour. Bookkeeping and Accounting Clerks compute, classify, and record numerical data to keep financial records complete.

accounting vs bookkeeping

Your vendors have to be paid by a specific time to avoid interest charges, but you don’t want them paid early and deplete the cash needed for daily operations. Depending on your business, your bookkeeper may have to file timely reports with regulatory agencies. The IRS is always hovering, wanting quarterly payroll reports, estimated income taxes, and other reports in the correct amounts submitted when due. The educational requirements to become an accountant do not differ much from the requirements to become a controller.

Merging of Bookkeeping and Accounting Functions

You can also search the IRS database of practitioners who have received disciplinary action over the past 25 years. The best way to go about finding a business accountant is by tapping into your network. Talk to business advisors, lawyers, your baker, consult reliable accounting blogs or fellow small business owners who you might know. You can also get referrals by attending small business events hosted by your localChamber of CommerceorSmall Business Development Center. assigning total control to the accountant and not reviewing reports and statements.

Accelerated Programs

  • By outsourcing your requirements to us, you can save about 50% of your costs and concentrate more on your core competencies.
  • If you want to become a Certified Public Accountant (CPA), one of the biggest obstacles you will face in the pursuit of your CPA license is passing the professional credentialing exam.
  • Our writers are experienced journalists who adhere to our strict editorial ethics policy.

Request a free, online demo of Smart Service to discover how you can supercharge your business. Of course, QuickBooks will only prove useful to your accountant if you use it religiously to track every last penny that has anything to do with your business. With more and more people choosing to handle the majority of their payments online, this represents a convenient and forward-thinking option for your clients.

An accountant’s main roles are to deal with higher level compliance such as filing accounts and tax returns, and to advise the business owner on the strategic management of their business. A good accountant will also conduct regular tax planning to minimise business and personal tax liabilities, and provide advice on cash flow management. They can act as a sounding https://beautysecrets.casmara.com/2019/04/16/what-is-accounting-definition-and-meaning/ board for your ideas and make introductions to a range of other trusted service providers. Bookkeeping is where accountants generally start their careers as the barriers to entry are lower and pay is decent. A Single Entry System of accounting is a form of bookkeeping in which every one of a company’s financial transactions is recorded as a single entry in a log.

Some employers prefer a master’s degree in business administration or similar field. A master’s degree in this area provide complex instruction in financial strategy and helps individuals develop strong leadership skills.

accounting vs bookkeeping

What can an accountant do that a bookkeeper can t?

We take a look at what QuickBooks can and can’t do. QuickBooks stores and analyzes data for you, but you still need a human accountant to give you sound financial advice and to keep up with the latest changes in tax legislation. Here are some things QuickBooks can and cannot do for your small business.

accounting vs bookkeeping

Take advantage of the best bookkeeping software on the market combined with the best field service management software. Request a Smart Service demo today to take your business to the next level. You won’t find the same, real-time integration normal balance in any other competing field service software. Smart Service-QuickBooks integration means you can avoid entering financial data more than once. Only CPAs, tax attorneys, and Enrolled Agents are able to represent a taxpayer before the IRS.

To me, this is an important distinction, which is why I have a CPA who helps me review my books and who gives me tax advice, as well as preparing and submitting my business and personal tax returns online. They may not have the education required to handle these tasks, but https://accountingcoaching.online/ this is possible because most accounting software automates reports and memorizes transactions making transaction classification easier. Sometimes, an accountant records the financial transactions for a company, handling the bookkeeping portion of the accounting process.

What is a controller job salary?

Bookkeeper Business Launch is not a scam. It is a complete online course that provides a step-by-step guide to building a flourishing career in virtual bookkeeping. The lessons provided in Bookkeeper Business Launch are well laid out. Every module is broken down to make learning quite easy.

The Difference Between the Roles of the Accountant and the Roles of the Controller

These professionals typically start out as accountants or auditors and need to be organized and thorough in their work so that they can ensure accuracy. Accounting managers commonly work in an office environment accounting vs bookkeeping during standard daytime hours, although overtime is common when year-end reports are due. At One Accounting, we bundle our services into a fixed monthly fee, rather than charge by the hour.

CONTROLLERS also manage other employees in accounting and auditing departments. Those interested in pursuing a career as a CONTROLLER often inquire about the educational and professional requirements. The primary requirements include a minimum of bachelor’s degree, finance experience, licensure and certification, and personal abilities. In simple and very general terms, a bookkeeper will likely be the person that assists you with the ongoing financial recording and transactions that keep your business running smoothly.

The accounting process involves recording, interpreting, classifying, analyzing, reporting and summarizing financial data. Recording financial transactions is the first part of and the foundation of the accounting process. Other firms may have team members who provide bookkeeping services as well as payroll and tax returns.

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Bookkeeping Business From Home And How To Set It Up

Bookkeeping Business From Home And How To Set It Up

They will make sure that your QuickBooks file matches your bank and credit card statements. At all times, you will be able to access categorized statements to quickly get an overview of your finances. Each month you will be able to review your financial statements with their team.

online bookkeeping

Contact all local networking groups and attend their breakfast meetings. All you need to say is that you are a local bookkeeping service, fully accredited and qualified and charge the best rates, come and see me afterwards. It will also help with your confidence when meeting other business people in any context.

Bookkeeping Certifications

Similar to Freelancer.com, Peopleperhour offers free and paid membership plans. Every user can submit up to 15 bids (proposals) per month for free; after that, you must purchase additional bids.

These tools streamline the bookkeeping process and help you make sure everyone gets paid on time. Bookkeepers handle the day-to-day tasks like recording transactions, posting debits and credits, producing invoices, running payroll, and maintaining the general ledger and accounts. Essentially, they generate all the data that accountants will then turn into information. The complexity of bookkeeping really depends on the size of the organization.

online bookkeeping

In this article, we have hand-picked the best bookkeeping services for your online business. I’m an accountant with 12 years experience but I’m not licensed for the cpa just yet. I am wanting to start a virtual bookkeeping business part time but I have no clue on how or where to start. I would like to learn more about getting quick books licensed and obtaining the software since most clients from my past audit profession where using some version of quick books. According to Small Business Cost Helper, hourly rates for bookkeeping services can run between $20 and $50 per hour, depending on the challenges and nuances of the position.

Do you use QuickBooks in your current position or for your business? If you want to master those complicated income, expense and banking transactions using the software, this course is for you.

Apart from tutorials and articles, the website also features illustrations and exam questions which can help you learn the basics immediately. Apart from lessons, Miss CPA also makes recommendations of the best books to learn accounting. If you’re already an experienced bookkeeper, the answer may be “no”. Bookkeepers and accounting firms should reach out to clinicians and doctors in their area to offer their services. Medical professionals are busy individuals and are often in need of reliable bookkeepers to help them with their books.

Their at-a-glance visual reports help you see the big picture and give you actionable insights to grow your business. Miss CPA is another efficient accounting website you ought to visit. It provides lessons and lectures that can help students, bookkeepers, and accounting professionals learn more about the important concepts of accountancy. It covers the fundamentals of accounting, such as bookkeeping, managerial accounting, financial accounting, business and finance.

  • The AIPB offers bookkeepers (and even those who are not bookkeepers) a way to expand upon their knowledge by getting certified.
  • Look for what they have missed off and highlight it in your ad.
  • Do you use QuickBooks in your current position or for your business?
  • Virtual bookkeeping jobs are widely available yet often overlooked.
  • As your online business grows, bookkeeping becomes a chore that you may want to outsource.
  • Get yourself or your bookkeeping firm listed on different reliable online directories.

Upwork is best for bookkeepers who are interested in remote bookkeeping jobs from home. The company was started over 10 years ago by a Silicon Valley tech who came up with the idea after hiring a close friend in Athens for a web project. According to their website, they post millions of jobs annually and freelancers make more than $1 billion via the site each year. Ninety percent of the bookkeeping jobs require that you have experience using QuickBooks. For a crash course in QuickBooks, check out our free QuickBooks course.

Another feature that Indeed offers is the ability to read reviews of prospective employers. Getting the perspective of existing or former employees is a good way to learn how well the employees are treated.

As the trend toward stricter government controls continues, demand will continue to rise, suggesting excellent career prospects https://www.bookstime.com/ for anyone with this skill. CPAs are the highest level of accounting and booking certification you can achieve.

If you have any questions, you can post your queries in the site’s Q&A section. bookkeeping You can learn more about accounting abridgments in the abbreviation section.

However, because they are busy, they usually don’t have time to look for one. Bookkeepers who work for multiple firms may visit their clients’ places of business. They often work alone, but sometimes they collaborate with accountants, managers, and auditing clerks from other departments.

online bookkeeping

Best Freelance Bookkeeping Job Sites at a Glance

Bookkeepers typically work alone or in small groups that share common tasks. You must be good with math and have excellent skills with one or more spreadsheet programs.

If they offer ‘Established 1899’, make yours ‘Modern Fast and Friendly Service’. Or you could counter it with ‘Fully Accredited’ if they do not mention that. Look for what they have missed off and highlight it in your ad. You will find that these people only advertise occasionally (as you will also do in time yourself) because most clients come from recommendations.

With their virtual CFO plan, they also offer technology advisory, HR services, daily bookkeeping, custom and KPI reporting, and dedicated CFO/CPA to manage your account. They offer small businesses a dedicated account manager, financial statements, cash and accrual basis reporting, bills, invoicing, and payroll. FreeAgent is web-based accounting software that makes your bookkeeping simplified. It connects with your bank accounts and allows you to track expenses, send invoices and estimates, monitor cash flow, and get a bird’s eye view of your income, expenses, and profits.

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tax deductions for small business

Tax Deductions for Small Business You Should Know

Tax deductions can go a long way in helping you get more out of your get mall business. A lot of business owners might feel hesitant to take full advantage of all the tax deductions they qualify for, but this shouldn’t be the case. As long as your business is doing its part and paying tax, there’s no reason why you shouldn’t take advantage of permissible tax deductions. After all, the extra money you get for your business by deducting certain expenses can be spent on growing your business which, in turn, will mean that you can contribute even more to the economy.

With that in mind, there are a number of things you can (and should) legally deduct from your taxes.

Rent for Your Business Premises

Renting your business premises is probably one of your larger business expenses. For that exact reason, tax deductions on your rent can make a big difference for your business financially. The more expensive the rent on your premises, the bigger the advantage of deducting this expense, so if you have a large business premises with hefty rent, this can help to lighten the load.

It doesn’t matter what kind of business you have either. Shop owners, healthcare practitioners and even automotive businesses can all take advantage of this deduction. The only prerequisite is paying rent on your business premises.

Vehicle Maintenance and Upkeep

Vehicles are another big business expense for a lot of small businesses. By keeping track of all your business expenses related to your company vehicles, you can deduct your vehicle expenses from your tax. Examples of vehicle expenses that can be tax deductible includes money spent on fuel, vehicle maintenance and repairs, parking and even tolls.

If you’re not keen on all the extra admin involved in tracking each individual vehicle expense, you also have the option of using the IRS standard mileage rate, which is currently sitting at 58 cents per mile driven.

Another alternative is to choose whatever option gets you the best tax return. To calculate this, you will have to keep track of all your vehicle expenses, which means it will involve a lot of work, but it might be worth it if your business owns any vehicles that are more expensive to maintain due to higher fuel consumption or more expensive service parts.

Any vehicle used for business purposes can qualify for this deduction, whether it’s a car, truck or even motorcycles. There are some exceptions to motorcycles, thought. For instance, you’re not allowed to use the IRS flat rate for a motorcycle. The only way you can get deductions for a motorcycle, is by keeping track of all your business-related transport expenses.

Computer Software

Almost all businesses have computers. As a result, most small businesses can benefit from deducting computer software. Whether you have an office and you pay an annual expense for your operating system, word editors and slideshow software, or you have a graphics design firm and you run programs to create images, you can deduct your computer software as a small business expense.

To take full advantage of this deduction, look into all the software and even online tools you use for your small business. You might even be able to deduct the fee you pay to your email service provider or money spent on bookkeeping software.

Advertising and Marketing Expenses

Money spent on advertising and marketing is a business expense, often a big one. You’ll be happy to learn that all the money you spend on advertising in tax deductible, which makes sense, as all advertising is related to business.

There are so many different things that you can deduct as a marketing or advertising expense. If you start to add it all up, it will quickly amount to a staggering figure. Here are some of the things you can potentially deduct as marketing expenses:

  • Business cards
  • Pamphlets
  • Paid advertisements in your local newspaper
  • Advertisements on billboards
  • Promotional materials and goods
  • Your company website expenses
  • Online marketing expenses

This means that any marketing expense can be deducted from your tax. Whether you want to make branded keychain holders to hand out at a corporate event, or print promotional pamphlets, these expenses will usually be tax deductible.

If you spend money on any online marketing-related software or services – such as an email newsletter service provider or pay per click advertising – it might also be worth investigating whether you can deduct these expenses. Perhaps you find you’re unable to deduct the expense for your email newsletter as computer software, but you can deduct it as an advertising or marketing expense instead.

Office Supplies

If you have an office for your small business, there’s a good chance you spend a lot of money each here on office supplies. Whether you’re buying printer ink, paper or pens. Even coffee, tea, milk and cookies can count if you regularly stock your office with these items for your employees.

No matter what industry you work in, your business will have admin, which means your business can deduct for office supplies. It’s easy to get so lost in deducting for expenses directly related to your industry, that you forget to deduct business expenses related to your admin.

Money spent on postage, shipping and delivery fees might be another hidden deduction you can get, which can help a lot if your business regularly makes use of such services.

Furniture and Equipment

Any equipment you purchase for your business (such as computers or printers) and even furniture can be deducted from your tax. There is, however, a catch here. You have the choice between either a full deduction for these items in the year you purchased them, or to depreciate them over a seven year period.

What you choose will depend on what’s best for your business. If you’re uncertain about which option is better and more applicable to your situation, it’s always best to consult your accountant about the matter.

Business-Related Education

If you spent money the past year on education for yourself, or any of your employees, you might just be eligible for a tax deduction. Expenses for seminars, workshops, classes and college programs can be seen as a business expense if it’s related to your industry.

To comply with safety regulations, businesses often have to send employees for first aid and safety training. If this is the case for your business, it’s good to know these forms of training will almost always be a tax deductible expense, as it is education related to your business.

The only important rule for deducting education as a business expense is that it has to be related to your business. You can’t deduct education expenses if you undertook it for personal reasons. If, for instance, you went for cooking classes or dog training lessons, you probably won’t be able to deduct this unless it’s related to your industry and it can benefit your business.

Cleaning Expenses

Cleaning is part of your business upkeep, so if you hired a professional cleaning company to clean at your business premises, there’s a good chance you can deduct it as a business expense. Regardless of if you hired a company to do mundane cleaning work at your office, or if you made use of a specialized cleaning service, cleaning is a tax deductible expense for your business, as it’s a necessary part of keeping your business premises hygienic and safe.

Some cleaning expenses that you may be able to deduct include:

  • Pressure washing your business premises both inside or out
  • Regular or high-rise window cleaning services
  • Carpet cleaning
  • Dry cleaning uniforms
  • Everyday cleaning services

Cleaning is an expense your business will incur every year, so adding it to your tax deductions can make a big difference.

Business-Related Supplies

Business supplies are one of the more obvious expenses, but it’s important to check all of your expenses in this area to make sure you’re getting all the deductions you can.

If you run a store, for instance, it’s obvious that you can deduct all the stock you bought in the past year as a business expense. At the same time, businesses that provide a service must also remember that all supplies they need to complete their service are business supplies. This could be building materials for a contracting firm, or cleaning supplies for a cleaning company.

However, there may be some hidden supplies that your business could possibly get deductions for. If you buy any cleaning supplies to clean your business premises, or if you buy uniforms, there’s a good chance you’ll be able to deduct these expenses.

Always Consult Your Accountant

To so stay within the legal bounds of tax deductions, it’s always best to get an expert opinion. Hiring an accountant can help you stay current with your taxes and avoid penalties for illicit tax deductions or practices. As an added benefit, the money you spend on financial services for your business (like your accountant) is also tax deductible!

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How to Register Your Small Business for Tax?

If you recently started a small business, or your looking to do so, tax is an important subject that you simply can’t ignore. You must know how to register your small business for tax, or whether tax registration is even necessary in for your business.

A lot of small business owners feel intimidated by tax rules, so much so that it might deter some people from starting a business altogether. The idea of an already unstable income combined with uncertainty on how to fulfil tax obligations is a major sore point.

Don’t let the fear of tax get in your way of achieving something great. Tax can seem daunting, but it doesn’t have to be. There are a few simple ways in which you can make sure that your business is paying tax the right way. One of the first ways to start, is to register your business for tax in a way that suits your industry.

Does My Small Business Need to Pay Tax?

Paying tax won’t be an issue if your business doesn’t need to, so asking the question of whether you need to pay tax is a logical place to start. Unfortunately, no profitable small business is normally small enough to qualify for tax exemption.

Very few people expect a child running a lemonade stand to pay tax on their earnings. Realistically, these earnings are too small to amount to anything significant. Similarly, if someone bakes cookies and sells them from home, it may be more of a hobby than a serious business venture, and this is likely to reflect in the earnings.

You’ll know if your small business is more of a hobby than anything else. If you’re a hobbyist, chances you’ll end up spending all your earnings to support your hobby, meaning you won’t truly have a profit, so you’re not running a business, as all your earnings go back into your hobby rather than to contribute to your personal expenses.

It should be noted that the gap for earning without being liable to pay taxes is very narrow. Even if you’re working alone without any employees as a sole proprietorship, your earnings are be taxable. This is especially true if you’re a freelancer, contractor or any other kind of service provider and you earn most of your income through your business.

If your earnings are substantial enough that you can buy groceries, pay rent or afford to cover any of your personal expenses with your business earnings, you should consider yourself to be a small business owner, which means your business is tax liable.

Different Ways to Register Your Small Business for Tax

How you pay small business tax will depend on how you registered your business with the IRS. If you’re still in the process of starting your business, here are the different ways you can register:

  • Sole proprietorship: This is the simplest business structure. It’s easy to start, seeing as you don’t need any formal registration to run your business as a sole proprietor. As a sole proprietor, you’ll be entitled to all of your business earnings, with no legal distinction between yourself and your business. The benefit of running a sole proprietorship is that it’s simple and easy, the disadvantage is that you’ll also be liable for any debt incurred by your business, meaning your personal assets are at risk.
  • Partnership: Where two or more persons decided to start a business venture together, a business is considered to be a partnership. Depending on how a partnership is registered, business partners (like sole proprietors) can be responsible for all business losses, placing their personal assets at risk. This is known as a general partnership.
  • Limited liability company (LLC): Registering an LLC is a good option for many different business owners. The main benefit of an LLC is that the business owners or any shareholders aren’t liable for business debts or legal fees incurred, protecting personal assets. Additionally, business owners have the choice whether their LLC company should be taxed as a personal proprietor, partnership, S-corporation or C-corporation.
  • Corporation: Corporations are owned by stockholders and require a set structure. Corporations can fall in either one of two categories – S or C-corporations. It’s unlikely that you’ll register your new small business as a corporation, seeing as stockholders are required to elect a board of directors for a corporation. Although some small business owners register as the sole stockholder and appoint themselves as the a single-person board of directors, this business model doesn’t lend itself well to most small businesses that are just starting out.

As mentioned above, there are different ways in which you can register an LLC for tax. While registering an LLC to be taxed as a sole proprietorship or partnership won’t change the tax rules that your business falls under, there are two unique corporate tax regimes for LLC companies. Here’s some more information about registering your business as an S or C-corporation.

  • S-corporation: With the S-corporation model, the business entity pays no income tax. Instead, the tax liability of the business tax is distributed to the S shareholders on a personal income tax level. To qualify as an S-corporation, a business must be a domestic corporation (i.e. not foreign) and have no more than 100 shareholders. Additionally, an S-corporation may only have 1 class of shares. Certain businesses, such as financial corporations, are ineligible to be registered as S-corporations.
  • C-corporation: Unlike an S-corporation, C-corporations are taxed independently of their business owners. With a C-corporation, there’s no limit with regards to how many shareholders a company may have. Furthermore, rules regarding foreign shareholders are more relaxed. Because of this, most major corporate companies are taxed as C-corporations

For most new businesses, sole proprietorship is the most popular choice. It’s easy and doesn’t require any upfront investment in terms of registering your business. Once your business expands, however, registering it as an LLC to be taxed as sole proprietorship can be a good way to protect your personal assets.

Tax Rates for Different Small Businesses

Your taxable income will differ depending on how your business is registered for tax. Here are the business tax rates:

  • Sole proprietorships pay a 13.3% tax rate
  • Partnerships pay a 23.6% tax rate
  • S-Corporation pay a 26.9% tax rate
  • C-corporations pay a 17.5% tax rate

Keep in mind that for these tax rates to apply, your business must fall within the guidelines of a small business in your industry. For new businesses, this usually isn’t a problem. Most freelancers, contractors or even healthcare professionals with a healthcare practice quite easily fall into the specifications set for small businesses. Similarly, small building contract firms, plumbers or other service providers are usually eligible to qualify for small business tax rates.

Different Kinds of Small Business Taxes

Although it can be tempting to register your business as a sole proprietorship simply to take advantage of the 13.3% tax rate, there are other taxes that small business owners must pay, which can complicate your choice.

Depending on your business model, there are different kinds of tax you might have to pay such as:

  • Income tax
  • Employment/Payroll tax
  • Self-employment tax
  • Excise tax
  • Sales tax
  • Property tax

While all businesses are required to pay some form income tax, you won’t be liable to employment tax if you have no employees, not would you need to pay excise tax if you don’t sell eligible products such as cigarettes or liquor.

If you register your business as a sole proprietorship, you’ll usually have to pay self-employment tax. Self-employment tax covers tax expenses that are normally at least partially covered by your employer, such as Social Security and Medicare. You are liable to pay self-employment taxes if you’re self-employed and your net earnings in the past year were at least $400.

How to Pay Small Business Tax for the first time?

Whether you’re starting a new business, or you already have a young startup and you need to pay tax for the first time, consulting an accountant is the best way to help you stay on track with your tax obligations.

Although owning a sole proprietorship can simplify your taxes, there are various reasons why getting an accountant is still the best choice, especially when you’re just starting out.

Firstly, you may choose to register your business under a different tax regime than sole proprietorship, which can complicate your taxes. Even if you register as a partnership, tax rules can become daunting.

Secondly, your first year or two of business will be a busy time. You’ll need to learn a lot about your industry to succeed. You’re unlikely to have enough time to learn enough about filing your small business tax correctly, which could place you at risk for penalties for late payments and other mistakes.

Most importantly, consulting an accountant is a great way to get professional, trustworthy advice on how you should register your business for tax, giving you a head start on your small business tax.

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Hiring an Accountant Vs Preparing Your Business Taxes with TurboTax

When it comes to filing taxes, there has been one question that has been the bone of contention; to hire a certified public accountant to do your taxes for you or to buy a tax filing software program such as Turbo Tax?

One thing is for certain; taxes are costs in and of themselves. Therefore, if there is a way to automate the tax preparation and filing process, one should, by all means, consider it. And that is what tax filing software programs are purported to do.

However, even though these programs are quite straightforward to use, Turbo Tax and other tax filing software suffer from certain issues that are typical of any robot.

These issues become more evident when your financial situation starts becoming broader. At this point, it becomes wiser to spend extra and hire a professional.
This article will discuss why you should stop using tax software and hire a professional instead.

What You Need to Know About Tax Software

Whenever the tax conversation is taking place, people are usually either talking about tax planning or tax compliance.

Tax planning refers to the process of planning transactions way ahead before you actually do them. This allows you to make more thoughtful decisions that work towards minimizing the total amount of tax you need to pay.

On the other hand, tax compliance refers to the process of the actual preparation of your returns. Thus, it involves filling out your forms while making reports on transactions that have already happened.

And this is where the bone of contention actually lies. Tax preparation and filing software are designed for one job only; tax compliance. Thus, it will do the actual job but it will not help you make better decisions that will reduce the total amount you pay in taxes.

Consequently, as you broaden and diversify your financial profile, you will have to make increasingly complicated decisions. These decisions will be greatly affected by the amount of tax knowledge you will have, thus the dire need for financial planning. And that is why you need an accountant.

What You Should Know About Using an Accountant

A certified public accountant is the name given to a qualified accountant. For one to attain that title, they are required to pass certain numerous rigorous examinations in order for the government to grant them a license to work as a CPA. Nonetheless, CPAs in the United States are limited by geographical jurisdictions. Thus an accountant from one state cannot work in another.

CPAs, therefore, are tax experts who have intricate knowledge about taxes and the various laws affecting them. Knowledge combined with experience allows them to know what your business can do to reduce its tax costs.

This means that every business needs to seek regular advice from such a professional. However, when are the times that you absolutely need a professional?

Situations Where You Need an Accountant

1. You Find Tax Preparation and Filing too Complicated

As mentioned earlier, tax filing programs such as Turbo Tax allow you to learn how to perform your filing. While they are not that hard to use, you will need to invest your time so as to perform that task.

However, if tax filing is not your cup of tea or would rather focus your efforts on the aspects of your business that you are good at, then you are better of hiring an accountant to do that for you.

CPA for business taxes only makes for enhanced efficiency in your business since each process is going to be handled by someone who is good at it. Nonetheless, when you decide to hire a CPA, keep in mind that you will still be responsible for gathering all the data your tax professional needs to do your taxes.

2. It Is Still a New Business

If you just recently purchased your business from another person or it has been less than a year since you opened it, using an accountant is only wise.

This is because, unless you have experience running a similar business in the past, it is highly likely that there are tax laws and deduction rules that you do not know of. Hiring an accountant will ensure that you do not make costly mistakes that most entrepreneurs make when their business is still in its infancy.

3. The Status of Your Business Has Changed

There are certain complicated business moves that you can make that might warrant the need for a CPA for business taxes. One such move is a business state change.

For example, let us assume that you decided to convert your business from a sole proprietorship to a corporation. Part of this change means making sure that you properly file all the relevant paperwork. Moreover, you also need to calculate all your expenses and deductions for both types of business status to ensure that the business has no shortcomings.

This is easier said than done since you will be essentially dealing with new laws. Any errors that arise will result in fines and potential legal action. Getting an accountant to do this for you will ensure you avoid costly mistakes.

4. You Moved During the Year

As mentioned earlier, a CPA from one state is not usually able to practice in another state, and for good reason; tax laws vary between states. This means that if you move from one state to another, your tax situation is likely to get complicated.

This is why you need an accountant to help you sort your taxes out while determining how to divide your taxes payable or the refund owed between states.

5. You are Passing Through a Major Life Event

Marriage, getting kids, or divorce are life events that will impact your tax situation. If you just got married, how will you proceed to file your taxes? Will you do it separately or jointly? An accountant will help you understand the best way to go around that situation.

The same also applies to when you have kids. Another benefit of that bundle of joy is that it comes with certain tax deductions. But do you know the full extent of those deductions? A professional accountant will help you know what your options are so you can start enjoying some tax write-offs.

Divorce is an all-around messy situation. Which parent will claim the children as deductions? What rules govern taxes when it comes to child support and alimony? An accountant knows everything there is to know about these murky waters. They will help you navigate your way through them to ensure that you not only avoid problems with the law but to also ensure that you get the best deal possible.

6. You Want a Peaceful Life

Establishing a long term relationship with an accountant is one of the best life decisions you could make. You will never have to worry about your taxes being off, moreover, you will continue to enjoy their advice as your business continues growing. This means that all your ducks will be in a row at any single time. This not only helps your business but also enhances the quality of your life.

Tax filing software programs such as Turbo Tax can be beneficial when looking to save on filing costs. However, they do not give you insights that will help grow your business. An accountant not only takes care of all filing processes, but they also look into how they can help your business make better decisions so as to reduce those expenses. This results in major savings and growth in the long term.

Looking for an accountant to help you with your business taxes? Talk to Choice Accounting Solutions today and we will customize a solution for you and your business.

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2019 Tax Penalties Small Businesses Need To Avoid

As any business owner knows, tax season is filled with plenty of stress. With the tax code changing annually, it is difficult to keep up with the various changes. Because of the complexities associated with small business taxes, it is never smart to trust your fate with the IRS to an amateur who knows little about how to properly file tax returns for a business. After all, it just takes only one or two mistakes to not only find yourself owing more than you thought, but also possibly facing fines and a potential audit. Rather than spend the 2019 tax season facing these prospects, here are the most common tax penalties your business should avoid.

Late Filing Penalties

While filing your taxes may not be the most fun thing you will ever do in 2019, it is best to complete the task as soon as possible. If you procrastinate until the last minute, you may find yourself facing tight deadlines, which if not met can result in costly penalties. As an example, if your business is classified as an S Corporation or Partnership, the late filing penalty is done so as a dollar amount per-owner per-month. For 2019, this amount is $200 per owner for each month the tax returns are late, which as you can see can add up in a hurry. In addition to these penalties, it’s important to note that while April 15 is the standard tax filing deadline for individuals, small businesses have a deadline of March 15, so it’s best to get busy as soon as possible.

Estimated Tax Penalties

While it can be difficult to accurately estimate how much your business will owe in taxes, failing to so can prove even more costly in the long run. If you wind up underestimating what you owe, you’ll be facing additional interest charges from Uncle Sam. Based on current guidelines, which can be adjusted on a quarterly basis, this penalty stands at four percent. To avoid this problem, most tax experts recommend business owners simply estimate their 2019 taxes at the same amount they paid in 2018.

Failing to File W-2 Forms

Since each employee of your business must be issued a W-2 form, it is crucial you remember to file a form for each employee. If you fail to do so, expect the IRS to be standing around with their hand out, waiting for your contribution. As the current guidelines stand for 2019, if you file the elusive W-2 forms within 30 days of the January 31 deadline, your penalty will be $50 per W-2. However, if you file between February 1-August 17, the fine doubles to $100 per form. And if you really procrastinate and file the W-2 forms after August 17, be prepared to pay $260 per form. As you can see, it will be much simpler to work with a seasoned tax professional to make sure each and every employee on your roster has a W-2 form that has been filed.

Trust Fund Penalties

Considered one of the costliest penalties enforced by the IRS, trust fund penalties can be a tremendous headache to any small business owner. According to IRS guidelines, as a business owner you are required to deposit withholding amounts from your employees with the United States Treasury. If you fail to do so, even through no fault of your own, be prepared to pay significant penalties. In these situations, you will be held personally liable for all deposits that have not been made, up to 100 percent of the amount of the deposits. To avoid facing these substantial penalties that could possibly put you and your business through severe financial hardship, always verify these deposits are made correctly and on time, especially if you use a third-party payroll company.

Accuracy Penalties

While it stands to reason that the tax returns for your business must contain accurate information, there are additional IRS penalties that can be levied against you and your business, especially if the IRS determines the income and expenses on your returns are grossly underestimated based on a blatant disregard for its rules and regulations. To ensure Uncle Sam does not throw a temper tantrum at your expense, make sure you receive tax advice from a knowledgeable and experienced tax expert who understands the ins and outs of working with small businesses. Otherwise, expect to be hit with a 20 percent penalty for underpayment.

1099 Penalties

Just as it is important you file the necessary W-2 forms for your employees on time, you must also do the same for 1099 forms you use with any independent contractors to whom you have paid at least $600 over the past year. If you fail to file these forms in the proper manner, you can expect the same types of penalties you’ll incur for failing to file W-2 forms. In fact, the IRS is so concerned about your possibly forgetting to do so, they have made the fines the same for both W-2 and 1099 late filings. Therefore, if you remember from earlier, you can find yourself paying anywhere from $50-$260 per form that is not filed. To keep this from happening, be sure you remember all independent contractors with whom you did business over the past year, since forgetting them will take plenty of money out of your pocket.

Excessive Contribution Penalties

While it seems logical that the IRS will penalize you and your business for failing to contribute enough to employee retirement plans, you can also find yourself in trouble with Uncle Sam if you make excessive contributions. But while it seems as if you cannot win any way you go on this issue, all hope is not lost. Though the penalty for making excessive contributions to employee retirement funds is currently six percent, and will be applied to you each year until the error is corrected, getting solid tax advice from the outset of tax season will help you avoid this expensive mishap.

Tax Fraud Penalty

If there is one thing that will get Uncle Sam and the IRS mad at you in a hurry, it is having them believe you committed tax fraud. If this is the case, not only will you be facing harsh financial penalties, but also possible criminal charges against you and your business. Needless to say, this is one scenario you want to avoid at all costs. However, if the worst happens and the IRS determines you did indeed commit tax fraud, expect to be hit with a penalty of 75% on your tax return, which could result in thousands or even millions of extra dollars you will be expected to pay. Therefore, while it may seem as if everyone fudges a bit on their tax returns, it is best to file returns that are true and accurate to the best of your knowledge. Along with getting the best possible individual to prepare your taxes, always have the services of a tax attorney nearby as well. By doing so, you can be sure any and all questions you may have can get answered.

While it appears as if the IRS is simply waiting around for you to make one error after another on your taxes, the fact is virtually all these penalties can be avoided rather easily. By putting your trust in a seasoned tax professional, staying up-to-date on the latest changes, and being proactive throughout the year, the 2019 tax season can come and go without any unexpected and costly surprises.

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Average 2019 Cost of Accounting Services for Small Businesses

The costs of small business accounting services can vary depending on the size of the business. Other factors to consider are the types of services needed and if they are ongoing throughout the year. The professional background and experience of the accountant should also be considered when weighing the costs. The price of accounting services can differ from a one-time consultation fee to short term problem solving to a full time service. According to a recent survey by the National Society of Accountants (NSA) for the years 2016-2017, fees charged on average for business needs can be broken down into several categories:

  • 57.3% of gross income goes to tax return preparation
  • 15% goes to write ups
  • 8.9% goes to payroll
  • 3.6% goes to bookkeeping and Quickbooks
  • 2.6% financial statement presentations
  • 5.2% from other services

The cost of accounting service from the survey are a good way to measure fees for small business accounting and tax preparations in 2019. The accounting services that participated in the survey predicted raising their fees by 6.1% on average in 2017, higher than the 5.3% increase of 2016. Almost 50% of accounting and tax firms automatically increase their fees biannually. Almost 75% of accounting firms charge extra for incomplete and messy files which requires more time. The standard deadline and extension fees are also extra. Extra charges also apply for speedy returns. Therefore according to history it is possible to expect for 2018-2019 to also have an increase in costs for these services.

Will There be an Increase or Decrease in Demand and Service Prices?

The demand for small business accounting services is predicted to keep growing up to 10% from 2016 to 2026. Many accountants will be retiring and new jobs are being created while others still need to be filled. According to accounting web.com, the number of small businesses is growing with the economy. This creates demand for accounting services. For instance, there have been a lot of IPO’s in recent years. When a company goes public on the market, the responsibility of financial reporting necessary requires a professional accountant. This trend has also been fueling the need for quality accounting services.

Daily accounting responsibilities are getting more and more automated due to advancing technologies in the field. Qualified accounting services will need those who can take charge and move into advisory and analytical positions for small businesses. Globalization means more clients worldwide. More small businesses are doing business all over the world through websites on the Internet. This requires complicated multiple tax codes from more than one country. More complicated tasks will reflect the cost of accounting services. We will see the biggest demand for professional accountants in the states of Texas, New York, California, Pennsylvania, and Florida.

The bureau of Labor Statistics has predicted a higher than expected 19% increase in demand due to steady growth from 2016 to 2026. Financial Managers handle accounting, auditing, investments and goals for small businesses. The need for cash and risk management will bring more growth with the growing economy. The Bureau of Labor Statistics is predicting even higher demand as growth is expected to continue for small business accounting services with no decrease in demand in sight.

Different Pricing on Services

At choiceaccountingsolutions.com, they can help with the needs of a growing small business with affordable and competitive cost of accounting service. We are based in Miami yet our pricing is in line with other online accounting services. Accounting costs are decided in part by how big the business is and what services are needed. A consultation is alway a good idea to communicate with the small business and offer pricing they can afford.
Below you will find several services we offer and how the cost of accounting service can vary.

Payroll Processing

Payroll is a continuous process that needs attention regularly. Each employee’s paycheck and taxes must be calculated and processed. Payment to the IRS as well as employees need to be correct and on time all the time. This can be a daunting extra task for a small business owner to take on top of other daily duties. Choice Accounting Solutions can advise and get the groundwork done as well as take care of any inconsistencies.

Bookkeeping

Bookkeeping like payroll is an ongoing job. For a low price of 99$, Choice Accounting Solutions has customizable packages that can be tailored to fit your small business needs. Certified Bookkeepers prepare your taxes, generate reports every month, take care of regular data entry, and general bookkeeping. To keep it simple as possible, all your small business has to do is upload your financial business documents every month. Choice Accounting Solutions will do the work from there. Then we send the business files back via Dropbox for your small business approval. They can also help with preparing for a business loan should you need one. With a free consultation you’ll see how the price of accounting service is affordable and doable.

Tax Preparation

Small businesses have to pay taxes at the local, state, and federal levels of government. They are also required to pay them quarterly with the balance due at years end. This is a huge responsibility that has to be done right to avoid many headaches with the IRS! Choice Accounting Solutions can get it done so you can avoid the hassle of penalties and late charges with the IRS.

We are also able to help with the IRS Debt Negotiation process. Sometimes small businesses can get behind and fall in debt to the IRS. If this should happen, it is wise to seek professional help immediately. The IRS does have debt relief help. We can help you with an “Offer in Compromise”. This is a settlement with the IRS for less than what you owe and gets it taken care of so you don’t have to lose sleep!

Choice Accounting Solutions can help with all your small business needs. Located in Miami we service nationwide online. Our prices reflect and are in line with or better than other online accounting services. Get in touch with them today for your free consultation and your small business will be ready for 2019!

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Accounts Receivable and Bad Debts Expense

Most of us are used to exchanging money for goods and services. This makes transactions easy and prevents issues of debt collection. In most lines of business, however, credit is essential. We sell our products and services with the assumption that the customer will receive their invoice and promptly remit payment.

There are several advantages to offering credit to your buyers. First, you will open up your business to a wider market, as many prefer the sale/invoice/payment model. Second, you will incur occasional losses when your customers don’t follow through.

In accounting, a sale on credit that is not paid in a timely manner is known as a bad debt expense. Handling this issue carefully is essential to keeping your books and your business on track.

The Basics of Accounting for Bad Debts

In the accrual method of accounting, a sale is recorded as soon as it is made. When you make a $100 sale, you record $100 income. This then increases your revenue and net income. Whether and when the buyer pays is an issue between them and your billing department.

When a buyer then fails to pay, you must reduce the amount of revenue accordingly. In addition, you list these unpaid funds as a bad debts expense (or credit loss) on your income statement. These adjustments should be made as soon as possible, although the losses cannot be claimed and written off on taxes until a later date.

This may sound simple, because it is a very simplified version. In reality, the issue becomes much more complicated.

Assessing Credit Risk

One of the best ways to handle bad debts is to prevent them. This can be done by carefully assessing the credit risk of your customers.

A customer with bad credit already has a history of unpaid debts. This should be considered carefully before extending credit to them. You may not want to become yet another creditor whose calls they are ignoring.

Before giving a line of credit, do a thorough credit check. Some companies even ask for references. However, even with these checks and balances, occasional bad debts will occur. Some people experience sudden changes in financial resources and simply cannot pay.

Every company that sells on credit will eventually have credit losses. It is important to include bad debts as well as projected bad debts in your receivable accounts.

How Bad Debts Affect Accounts Receivable

When you first sold the item, you recorded the sale as income called accounts receivable. However, there is a good likelihood that a certain percentage of your clients simply will not pay up. This can become a problem because the income you are owed is reported as one of your assets, which means your income reports and company balance sheet are not accurate.

Business owners often have to supply documents such as income reports and balance sheets when they are applying for credit, when they are working with investors, and in their own tax accounting. It is important for these documents to paint as accurate a picture as possible, which means accounting for this lost income and projecting how much income will not be paid.

Dealing with Bad Debts Expense: The Allowance Method

Most companies account for bad debts using the Allowance Method. This involves estimating a dollar amount or a percentage of their accounts are not eventually paid. They then amend their income reports with a negative contra-asset amount that is called Allowance for Doubtful (or Uncollectible) Accounts. This allows an imprecise but more accurate financial picture.

This method is popular because you can complete your accounting and income report without needing to know exactly who will not pay nor the exact amount. It simply gives an estimate of how much income you will actually be receiving in the near future.

As you bring in more income, you will need to adjust your Allowance for Doubtful Accounts and subtract the additional projected bad debts from your income.

How do you decide on a percentage or a dollar amount for this method? If your company has been offering credit for a long enough period of time, you can simply project based upon your past. Otherwise, many people project conservatively, erring on the side of projecting more unpaid debt than they will likely have. Many people struggle with whether to choose a percentage or a firm dollar amount. A firm dollar amount is usually the simplest method because it does not require constant recalculation. You can easily add to it if your sales increase to the point where it is no longer enough.

Using this method, when a debt is not paid, you simply remove the amount from your Accounts Receivable and your Allowance for Doubtful Accounts. No further action is needed. If the debt is paid later, you can reverse both of these changes.

Dealing with Bad Debts Expense: The Direct Write-Off Method

Most companies use the allowance method in dealing with income reports and similar documents. However, the IRS requires a different type of calculation called the direct write-off method.

In this method, the company only reduces their account receivable when they know that the debt will not be collected from that customer. This can take several months and leaves your income artificially high in the intervening time, which is why investors and banks prefer the allowance method. The IRS, on the other hand, is invested in seeing your profits over-reported and your losses under-reported.

This method is also preferred by the IRS because it is very precise and deals only with information available right now, rather than projections. In addition, it is easy to fix your accounting if the situation changes. If a debt is somehow repaid after you have directly written it off, you can simply subtract the amount from your credit losses and add it to your income.

Which Method Should You Choose?

In an ideal world, accountants and business owners would choose the method that works best for them and stick with it. In the real world, this is usually not possible Using the allowance method is best practice in the world of business accounting. On the other hand, the IRS demands that you instead use direct write-off. Ultimately, most businesses will have to be familiar with both and use both on a regular basis.

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