Business Receipts

Learning to track your expenses is the foundation to a solid business. By doing so, it allows you to monitor the growth of your business, build financial statements, keep track of deductible expenses, prepare tax returns, and support what you report on your tax return.

Here are five types of receipts that you should pay extra attention to:

1. Meals and Entertainment:

Conducting a business meeting in a coffee shop or restaurant is a great cost effective option, just be sure to document it well. On the back of the receipt, record who attended and the purpose of the meal or outing.

2. Out of Town Business Travel:

The IRS is wary of people claiming personal activities as business expenses. Thankfully, your receipts also provide a paper trail of your business activities while away.

3. Vehicle Related Expenses:

Record where, when, and why you used the vehicle for business, and then apply the percentage of use to vehicle related expenses.

4. Receipts for Gifts:

For gifts like tickets to a concert, it matters whether the gift giver goes to the event with the recipient. If they do, then the expense would be categorized as entertainment, rather than a gift. Note these details on the receipt.

5. Home Office Receipts:

Similar to the vehicle expenses, you need to calculate what percentage of your home is used for business and then apply that percentage to home related expenses.

Right from the beginning, you should establish a system for organizing receipts and other important documents. By doing so you can easily validate your business financials and taxes.

I always tell my clients that the burden of proof falls on the taxpayer, the IRS can reject any expense that can not be substantiated.

If you have any questions regarding what receipts you should be keeping contact me today! Contact Me

Establish Business Credit in 7 Steps

  1. Separate yourself from your business: Form a separate legal entity such as a corporation or a limited liability company
  2. Obtain an employer identification number (EIN) by going to the irs.gov website.
  3. Get a DUNS number: Dun & Bradstreet is the main purveyor of business credit information. Its system of following your business uses the DUNS number, so by getting one, you allow D&B to create a credit profile of your business.
  4. Open a business checking and savings account in the name of your business using your EIN and DUNS number.
  5. Get commercial credit: Whatever business credit accounts you have – phone, Internet, bottled water, put those accounts in the name of the business, using your EIN and DUNS number for identification. See if any of your vendors will do the same. Getting commercial credit is an easy way to begin creating business credit.
  6. Get a loan: This is where the business savings account comes into play. Although you do not have business credit yet, you do have a savings account in the name of the business. Take out a small loan and use the savings account as collateral — that is, as security for the loan. Once a bank gives your business a loan, you really begin to establish a business credit profile.
  7. Pay on time: Repay all of this credit on time, and in full.

Before long, you personal credit will be personal and your business credit will be business, and that is as it should be.

Tax Reform Changes: Deduction

Major changes to the US tax code for both individuals and businesses have passed. Here is a quick summary of the tax eliminations or reductions in deductions.

Increase in standard deduction:

The new tax law nearly doubles the standard deduction amount. More on the standard deduction in a separate post.

Child Tax Credit:

For families with children the Child Tax Credit is doubled from $1,000 per child to $2,000. In addition, the amount that is refundable grows from $1,100 to $1,400. The bill also adds a new, non-refundable credit of $500 for dependents other than children.

Personal and dependent exemptions:

The bill eliminates the personal and dependent exemptions which are currently $4,050 for 2017.

State and local taxes:

The bill limits the amount of state and local property, income, and sales taxes that can be deducted to $10,000. In the past, these taxes have generally been fully tax deductible.

Home mortgages:

The bill caps the amount of mortgage indebtedness on new home purchases on which interest can be deducted at $750,000 down from $1,000,000 in current law.

Health care:

The bill eliminates the tax penalty for not having health insurance after December 31, 2018. It also temporarily lowers the floor above which out-of-pocket medical expenses can be deducted from the current law floor of 10% to 7.5% for 2017 and 2018.

So for 2017 and 2018, you can deduct medical expenses that are more than 7.5% of your adjusted gross income as opposed to the higher 10%.

Self-employed and small businesses:

The bill has a a lot of changes for businesses. I will probably break this down in separate post but here are some of the major highlights.The biggest changes includes:

  • a reduction in the top corporate rate to 21%;
  • a new 20% deduction for incomes from certain type of “pass-through” entities. For more information Click Here
  • limits on expensing of interest from borrowing;
  • almost doubling of the amount small businesses can expense from the 2017 Section 179 amount of $510,000 to $1,000,000; and
  • eliminates the corporate alternative minimum tax (AMT).

Important Tax Deadlines

You should always know when and what you have to file, by doing so, it can save you a lot of headaches at tax time. To avoid paying penalties, mark your calendar with the following important tax deadlines.

January 16, 2018

4th Quarter 2017 Estimated Tax Payment Due

  • If you are self-employed or have other fourth-quarter income that requires you to pay quarterly estimated taxes, get them postmarked by January 15, 2018 tax deadline.

April 17, 2018

Individual Tax Returns Due for Tax Year 2017

  • If you haven’t applied for an extension, e-file or postmark your individual tax returns by midnight April 18, 2018.

Individual Tax Return Extension Form Due for Tax Year 2017

  • Need more time to prepare your tax return? File your request for a tax extension by April 17 to push your tax deadline back to October 15, 2018.

1st Quarter 2018 Estimated Tax Payment Due

  • If you are self-employed or have other first-quarter income that requires you to pay quarterly estimated taxes, get your Form 1040-ES postmarked by April 17, 2018 tax deadline.

Last Day to make a 2017 IRA Contribution

  • If you haven’t already funded your retirement account for 2017, do so by April 17, 2018. That’s the deadline for a contribution to a traditional IRA, deductible or not, and a Roth IRA. However, if you have a Keogh or SEP and you get a filing extension to October 15, 2018, you can wait until then to put 2017 money into those accounts.

June 15, 2018

2nd Quarter 2018 Estimated Tax Payment Due

  • If you are self-employed or have other second-quarter income that requires you to pay quarterly estimated taxes, make sure your payment is postmarked by June 15, 2018 tax deadline

September 17,  2018

3rd Quarter 2018 Estimated Tax Payment Due

  • If you are self-employed or have other third-quarter income that requires you to pay quarterly estimated taxes, make sure your third quarter payment is postmarked by Sept. 17, 2018 tax deadline.

October 15, 2018

Extended Individual Tax Returns Due

  • If you got a filing extension on your 2017 tax return, you need to get it completed and postmarked by October 15, 2018.

Last Chance to Recharacterize 2017 Roth IRA Conversion

  • If you converted a traditional IRA to a Roth during 2017 and paid tax on the conversion with your 2016 return, October 15, 2018 is the deadline for recharacterizing (undoing) the conversion. Doing so could save you money if the IRA has lost money since the time of the original conversion.

January 15, 2019

4th Quarter 2018 Estimated Tax Payment Due

  • If you are self-employed or have other fourth-quarter income that requires you to pay quarterly estimated taxes, get them postmarked by January 15, 2019 tax deadline.

The dates above have been updated for your 2017 taxes, the one that you file this year by the April 2018 deadline, including a few retroactive changes due to the passing of tax reform. Some tax information above will change next year for your 2018 taxes, but won’t impact you this year.

If you have any questions regarding a tax deadline Contact Me Today!

Tax Reform Changes: Some Relief

The tax reform provides some tax relief for individuals and families, by…

Increasing standard deduction:

The new tax law nearly doubles the standard deduction amount. Single taxpayers will see their standard deductions jump from $6,350 for 2017 taxes to $12,000 for 2018 taxes (the ones you file in 2019).

Married couples filing jointly will see an increase from $12,700 to $24,000. These increases mean that fewer people will have to itemize. Today, roughly 30% of taxpayers itemize. Under the new law, this percentage is expected to decrease.

Yes the standard deduction is doubling however, with the elimination of the tax exemption it’s not as favorable as it first appears.

Child Tax Credit:

For families with children the Child Tax Credit is doubled from $1,000 per child to $2,000. In addition, the amount that is refundable grows from $1,100 to $1,400. The bill also adds a new, non-refundable credit of $500 for dependents other than children. Finally, it raises the income threshold at which these benefits phase out from $110,000 for a married couple to $400,000.