Introduction
I remember well what my grandmother would say when her guests load more on the plate than they will eat. "Don't take more than you can chew on." Or: "His eyes were bigger than his stomach." When I was planning this article, I knew that there was a lot of information, but all of this could have “bit off more than I could chew on.” So, I'm going to break this article down into two, so that I can be fair for each of you who can struggle to figure out what to do with this last line in the account editing window. In the first article, we will look at part of the income tax and deductions from Schedule C, and the second will look at K1 and balance sheets together with the forms M-1 and 8825A-E.
Remember that this is what I do for a living, so I need to know this information, I need to be delighted with this (yes, I know, I need a hobby), because this is a big part of my practice. Do not feel bad if you are lucky enough to nod in the middle of information about a particular section of the number, I will try to make it as informative and interesting as the subject of taxation will allow. (The IRS does not like it when we cheerfully discuss taxes!)
Ii. Chart C Income and expenses.
Depending on the version of Quickbooks you have, you may or may not see the “List C” description in the tax line information. No matter what this place you would have incurred income and expenses for your business.
1. Gross income or sales. You can have as many income accounts as you need and assign this tax line to them. Regardless of whether you call daily sales of accounts or sales of credit cards, this is the income you bring to your business in your daily activities.
2. Returns and benefits. When you buy products for your company, sometimes it becomes necessary to return them to the supplier. You cannot delete the original record or purchase information, but you can record income using this tax line, because technically, although it is not income, it is income, because your money is returned to you.
3. Other income. This refers to income not generated through sales or returns, interest on your business verification account (and not to investments, that is, to another line). The payments that you transfer to your customers, returned checks, late payments, etc. This will help you distinguish what your business generates on a regular basis, and help you get a more accurate picture of your finances.
4. COST (Cost of goods sold) - Purchases - for those enterprises that must purchase materials for the construction or assembly of products for their customers. For example, a chair manufacturer must purchase legs, a seat, cushions separately, and sometimes from different vendors. The retail store must buy goods for resale. That is where these purchases should go.
5. COGS - The cost of labor is not a salary, it is the cost of receiving the product and delivering it to the customer. The work of subcontractors, etc.
6. COGS - Additional Section 263A. Expenses. This includes the capitalization of certain inventory items in the possession of the company owner. The good news is that if the business does not produce more than 10 million dollars a year, most likely it does not apply to you.
7. COGS - Other expenses. If this is related to your business, to get the goods sent to you or sent to your customers, this is where the costs are. Delivery marketing materials, or items for use in your business do not go here.
deductions
8. Compensation of officers / shareholders. If you have a business that will pay you a regular salary, this amount will go here. The good news is that most business owners who initially started their companies, if they have made significant investments, can extract some of their “salary” into the “Share Distribution” category, which means that you will receive only a part of them come in, and thus he is not personally taxed. Many small businesses do not even pay owners until the business becomes more durable.
9. Compensation of other officials. Same as above, without the “Distribution” option, if “other” employees are not partners who also invested in a corporation.
10. Salary and wages - this, of course, is where you invest what you paid to your employees, not 1099 suppliers, but weekly, hourly workers.
11. Repair and maintenance. This is self-evident, just make sure that your accountant properly depreciates your equipment so that repair costs do not exceed the useful life of the asset.
12. Bad debts - what is bad debt? When you sell goods or services in your account, keep in mind that some customers will not pay you. Be prepared to either confiscate the goods sold, or continue to pay for services. At what point does debt become bad? I would say, probably in 180 days, and your chances of collecting are close to zero. There are two ways to handle bad debts in your account. One Account for Bad Debt. This assumes that a certain percentage of your receivables will become bad. (.5 - 2%) You create an account in QB and estimate that a certain percentage will never be paid, and you will place it in this account. Two, just consider those who have indicated that they will not pay or cannot pay, and add them to Bad Debt after 180 days. Keep in mind that if bad debt is paid next year, you must write back to take this amount from a bad debt account and return it to receivables.
13. Rentals. Office space, warehouse space, warehouse space go here.
14. Government taxes are NOT government sales taxes, these are government taxes that you pay to manage your business.
15. Local property tax - county, city, parish, etc. D. Charges your property in this particular county, city or parish.
16. Payroll Taxes — Quickbooks automatically sets appropriate payroll taxes when you sign up for the Add To Service service. If you are not subscribed to the QB payroll, you need to enter the correct information on employee and employer contributions to Social Security and Medicare.
17. Other. Taxes In the northern states, which seem to be tax residents and businesses do not exist, such things as parking taxes, etc. Have you ever thought about moving to Florida?
18. Licenses. Each lesson (legal, that is) requires a license to work. They are usually paid to the county separately from the county taxes. These fees will be in this tax line.
19. Interest expenses. Do you pay interest? Again, this is self-evident.
20. Depletion is a depreciation option based on natural resources, so if your business does not own forests, oil reserves or farms, you will not have to deal with depletion.
21. Advertising. Experts say that if you do not spend 10% of your income on advertising, you do not spend enough money. However, you should be wise about this. Any kind of marketing from the yellow pages advertising (least effective) on radio, television and an ad bench will go here.
22. Retirement / Profit Sharing — The deal you can do with potential employees is to pay less hourly rewards and pay bonuses depending on performance. This keeps a kind of “ownership” among employees, and bonuses will be added here.
23. Employee benefits — insurance packages will be posted here, etc.
24. Food and entertainment. When you do your daily business, you have to eat. Remember that only 50% of these expenses are deducted, however, if you have a full-time party and payment for food for all of them, all this is deducted. Oh, and the IRS is not stupid, you can not have a full-time party every day.
25. Other deductions. If you are unsure of this category and seem to be not anywhere else, use this option and be sure to ask your accountant later where he will go.
Hope this small article was helpful. Some of this information is clearly understandable, and some is not. The second part of this article will appear soon.
