Accounting Blog

Accounting Training, Tips, and News

  • Do you ever think , "Do I need a separate bank account for my business?" Find out here.

    Do You Need a Separate Bank Account for Business?

    posted by Amanda Cameron
    Newest Article
  • purchase order vs. invoice

    Clearing up the Confusion of Purchase Order vs. Invoice

    posted by Maria Tanski
    Recent Article
  • How Electronic Funds Transfer (EFT) Can Help Your Business

    Today’s harried business owners can save time and money by taking advantage of an EFT (Electronic Funds Transfer)process, which is available at financial institutions.

    Using EFT for banking can reduce the time and money spent paying expenses or receiving income. Within hours instead of days, a much-needed payment can be made to meet bill payment deadlines. Convenient for both buyer and seller, an electronic money transfer is secure and convenient for busy professionals who are striving to pay bills on time and manage receivables.

    Here are a few more ways EFTs can help your business:

    • With an electronic transmittal system in place, business owners can manage transfers on an as-needed basis, or set up a routine process.
    • Business owners don’t have to worry about running out of postage or forgetting to pay an invoice.
    • Business owners can use EFTs to pay recurring expenses such as office equipment rentals, payroll, and inventory payments, without spending time to write and mail checks, or paying a staff person to handle them.
    • Privacy is guaranteed by most or all financial institutions. The federal Electric Fund Transfer Act protects consumer rights with respect to unauthorized or inaccurate electronic fund transfers.

    One caveat: Business owners using electronic funds transfer must ensure adequate funds are in the account to cover all scheduled automated payments. If an electronic fund transfer is attempted from an account with an inadequate balance, the account holder may be fined or have to pay a service charge.

    Claiming Tax Credits for Dependent Children

    The IRS offers two tax credits: The Child Tax Credit and the Child and Dependent Care Credit. Knowing which tax credits a family can claim, and how to claim them, can save time and money.

    A family can claim a child tax deduction for a child that is resides with the family for more than half the year. However, if they intend to claim a child that another person may also claim, consult with an accountant to determine who should claim the tax credit. Qualifying children must be under 17 at the end of the tax year to claim the credit, and cannot provide more than half of their own support for the tax year in question. The maximum amount that can be claimed for the Child Tax Credit is $1,000.00 for 2011. More information on the Child Tax Credit is available on the IRS website.

    The Child and Dependent Care Credit can be used to assist families with care of children too young to be unsupervised, or disabled children who cannot care for themselves. Taxpayers must earn income from a salary, wages or self-employment to be eligible for the credit, and the credit cannot be used by those whose children are cared for by a parent or another dependent child. For the Child and Dependent Care Credit, the maximum that can be claimed is 35% of child care expenses. And while employing a nanny does make one eligible for the Child and Dependent Care Credit, doing so may involve other taxes and requirements. Find out more about the Child and Dependent Care Credit on the IRS website.

    Divorced or separated parents must comply with certain conditions to claim a child tax deduction, which include how much time each parent spends with the child, support arrangements, and how much each parent makes. Information on child tax deductions for divorced or separated parents is available on the IRS publication 504.

    Understanding the tax credits that a taxpayer is eligible for is key to avoiding costly and time-consuming mistakes.

    How to Raise Money: Get Our Free Whitepaper

    Money in lightbulb2Small business owners have one thing in common: an entrepreneurial spirit. You started your business because you believed in your product and knew you could sell it. But businesses need money to grow, and that’s in short supply these days. We will show you how to raise money.

    It’s a conundrum: you can’t grow your business without money, but these days, you can’t find money to grow your business! And with traditional funding sources drying up even for high-growth industries, what’s a small business owner to do? Here’s one option: Set up a private offering to your friends and family to raise money for your business. Your investors may get a better return than a traditional bank CD or money market account, and they’ll help you build your business in the process.

    The FREE whitepaper “How to Raise Money for Your Business” from Patriot Software, LLC, describes how small business owners can quickly, easily, and legally raise capital through a private lender investment program. You can infuse your business with the money you need to not only survive, but thrive. We’ll tell you how!

    Summer Day Camp Expenses May Qualify for IRS Tax Credit

    If you have young children, day care expenses may be a costly fact of life for you, as well as for any working parents on your payroll.

    You’re probably aware that you can take a tax credit for child care expenses. But did you know that qualifying summer day camp expenses may also apply? That’s where the Child and Dependent Care Credit comes into play. What is the Child and Dependent Care Credit? It’s a federal tax credit that can reduce your tax bill for certain qualified child and dependent care expenses.

    Keep these IRS tips in mind when determining whether your day camp or other child care expenses qualify for the Child and Dependent Care Expenses Credit:

    • The child must be under age 13 when the care was provided.
    • You cannot take the credit for overnight camp expenses.
    • You may qualify for the credit whether you use a home sitter or a day care facility.
    • Depending on your income, the credit can be up to 35% of your qualifying expenses.
    • You can use up to $3,000 of un-reimbursed expenses annually for one qualifying individual or $6,000 for two or more qualifying individuals.

    You will need to identify the child care provider to the IRS by providing the name, address, and Taxpayer Identification Number. If the provider is a tax-exempt organization such as a church or a school, you don’t have to show the TIN — just write in tax-exempt. Use Form W-10, Dependent Care Provider’s Identification and Certification, to request this info from the child care provider.

    If you pay someone to watch your child in your home, you may be required to withhold payroll taxes. For more information on this rule, check out IRS Publication 503, Child and Dependent Care Expenses.

    IRS Rules Will Weed Out “Ghost” Tax Preparers

    649809 ghost payrollHow much do you know about the person preparing your personal or payroll taxes, and how do you know they’re qualified?

    The Internal Revenue Service recently contacted 100,000 tax return preparers who didn’t follow the new IRS registration requirements effective January 2011. Preparers must now sign tax returns they prepare and include their Preparer Tax Information Number (PTIN), according to Accounting TodayTax preparers who receive the IRS notice may still be using Social Security numbers or outdated PTIN numbers.
    Unscrupulous tax preparers may try to avoid the new program by not signing returns they prepare. Consumers should not use paid tax preparers who refuse to sign tax returns or enter their PTIN, the IRS says.

    All this talk of “ghost preparers” is an IRS effort to improve oversight of the entire tax preparation industry. Last fall, the IRS launched a PTIN registration program, in which all tax preparers must register and pay a fee. Preparers must renew the PTIN annually.

    Also, starting this fall, certain paid preparers who aren’t CPAs, attorneys, or enrolled agents must pass a competency test and a suitability check. The IRS will also require certain preparers to complete 15 annual hours of continuing education credits, starting in 2012. The IRS may also conduct periodic tax compliance and background checks on tax preparers.
    Some small business owners may use an unregistered preparer to keep their small business tax preparation cost down. However, the IRS is planning to contact taxpayers who appear to have had help with their return but lack a tax preparer signature — a sign of a unregistered “ghost preparer.” The letter will explain how a consumer can file a complaint against their preparer and choose a tax preparer who’s legitimate.

    The takeaway: Make sure you check your small business tax return or personal tax return for your preparer’s signature and PTIN number. You want to be sure you receive the best service from a qualified preparer, and not a ghost (oooooooo).

    Ohio’s Estate Tax Repeal Offers Boost to Small Business Payroll

    Lawwmakers boost Ohio payroll with repeal of death taxDying in Ohio won’t be quite as costly for small business owners now that the state’s estate tax — also known as the “death tax” — has been put down by Gov. John Kasich. Maine and Oregon are also making changes to their estate taxes.

    Gov. Kasich’s move, signed into law July 1, helps the state look more attractive to Ohio’s 200,000 small business owners. Ohio’s small business payroll contributes more than $77 billion dollars to Ohio’s economy, according to the Wall Street Journal.

    Although the repeal doesn’t go into effect until Jan. 1, 2013, the elimination of the estate tax will hopefully help end the exodus of Ohio businesses planning to move to more business-friendly climates.

    In Maine, the estate tax exemption will double to $2 million Jan. 1, 2013. Oregon has new graduated rates from 10-16% for estates that exceed $1 million. Oregon’s changes to their estate tax goes into effect later this year.

    According to Forbes, 22 states, including Ohio and the District of Columbia, still impose an estate or inheritance tax on residents. Ohio currently imposes estate taxes on all personal assets which includes business assets, with the lowest exemption amount per estate at $338,333 but also the lowest top rate at 7%. As recently as January, Illinois enacted a state estate tax with an exemption of $2 million and a top tax rate of 16%.

    Don’t Be Fooled by Bogus Email, IRS Warns

    1231735 thumb print 1Don’t fall for the latest scam email claiming to be from the Internal Revenue Service, the IRS is warning on its website. A new scam email is circulating the Internet regarding electronic federal tax payments or the Electronic Federal Tax Payment System (EFTPS).

    The “phishing” email informs recipients that their federal tax payments made through EFTPS have been rejected. It instructs them to click a link which, unfortunately, is bogus, and downloads malware to infect the recipient’s computer. If you fall victim to this scam, the sender can capture your personal and financial information and commit identity theft.

    If you receive a suspicious email claiming to be from the IRS or referencing the EFTPS system or electronic federal tax payments, do not click on any links contained within the email, open any attachments, or reply to the sender. However, you should report unsolicited email claiming to be from the IRS at phishing@irs.gov.

    The IRS does not initiate taxpayer communications through email. This latest scam comes at a time when most employers are now required to use EFTPS to make federal payroll tax payments and other tax payments. It’s another way that scam artists are trying to hoodwink consumers into giving up their personal or financial information. Many phishing emails include seemingly genuine logos and mention specific programs such as EFTPS to appear more credible. Don’t fall for it!

    If you think you may be a victim of identity theft due to this phishing scam, follow the instructions on the IRS website to report the incident.

    Payroll News: President Obama Repeals 1099 Reporting Rules

    payroll newsGood news for small business owners — President Obama has signed the repeal of the controversial new 1099 reporting requirements.
    The proposed reporting requirements were part of the Affordable Care Act, and would have required all businesses to issue 1099-MISC forms to vendors for all services as well as goods over $600. The repeal of this law saves small business owners and payroll administrators from a burdensome amount of added paperwork.

    Here’s how the law stands now: you must issue a 1099 to anyone who is not an employee (excluding most corporations) if you pay them more than $600 for their services only. “With this bipartisan effort, we have removed a requirement that would have been an undue barrier to small business growth,” said Karen Mills, administrator of the Small Business Administration.

    For more information about the current 1099 requirements for independent contractors, visit the IRS website.

    Last-Minute Tax Filing Tips for Procrastinators

    time for taxesIf you’ll be spending your weekend frantically gathering business documents for the April tax deadline, you’re not alone. The IRS is expecting 10 million tax extension requests from super-procrastinators!

    Here are some last-minute tips from the National Association of the Self-Employed (and I’ve added a few of my own):

    Do some digging: Look for hidden business deductions, such as the home office deduction or mileage for business errands. I suggest opening up your personal checkbook and reviewing your monthly credit card statements to see if there are any potential deductions you may have missed.

    Retirement savings: You can deduct retirement savings, such as SEP contributions and IRA deposits, on your return up until the April filing date. (Translation: if you have the means to make a quick deposit in your retirement account, do it!)

    Tax Extensions: If you just can’t get your act together in time, you can get an extension.

    • For individuals and sole proprietors, file Form 4868.
    • For partnerships and corporations, see form 7004.

    One caveat: If you think you may owe, send in an estimated tax payment along with your extension, lest you be saddled with interest and late fees later on.

     

    Plan ahead: Remember — we’re in the 2011 tax year now. What can you do this year to reduce your tax liability next time around? If you use an accountant, ask what tax breaks are available for this year. Making equipment purchases or adding to your payroll may help you in the year ahead. A good accountant can advise you on some of the best moves for your business.

    Do yourself a big favor, and start a tax file for receipts and paid invoices to simplify next year’s tax filing process.

    Get help: If you’re going solo on your taxes, there’s help available. Visit the IRS website, or call their helpline at 1-800-829-1040.

    Don’t shoulder all of the accounting burden on your own. Try Patriot Software’s accounting software to help reduce the time you spend bookkeeping so you can get back to your business.

    Closing a Business Checklist

    1182890 closing a business checklistAre you closing the doors of your business this year? In your mind, you’ve probably been ready to move on for some time now. But there may be some loose ends you need to tie up first. Of course, the simpler your business structure, the simpler it will be to close up shop. While this is not an exhaustive list of closing procedures, here are some very general steps you’ll take.

    The Internal Revenue Service needs to hear about your closing business

    • Review the Business Closing Checklist from the IRS.
    • File an annual return for the year you go out of business. The type of return you file depends on the structure of your business (corporation, sole proprietorship, etc.)
    • Mark the check-box at the top of each return indicating that it’s a final return for your business.
    • File final employment payroll tax returns if you have employees.
    • Attach a statement to the final return showing the name of the person keeping the payroll records and where they’ll be kept for safekeeping.
    • Don’t forget to make your final deposits for your payroll taxes (941 deposits, etc.)
    • Decide what to do about your federal Employer Identification Number (EIN). While you can’t cancel the EIN assigned to you, you can close the business account. The IRS won’t reassign the EIN number, but actually reserves this number if you re-establish your business. Write to the Internal Revenue Service, Cincinnati, Ohio 45999, stating your reason for closing the account. Include the EIN Assignment Notice you received when you started your business, if you have it. Otherwise, include the complete legal name of the business entity, the EIN, and the business address.

    Your state would like to hear that you’re closing a business too

    Your particular state will likely require some action on your part. I can’t speak to everything that every state or territory would require (that would make a very long article), but I will say you should file a final business tax return with your state as soon as possible. Don’t wait until your normal filing date to file the final return, because the due date for final tax returns is often based on the date your business terminates — it might be due before the tax year even ends! Here are some additional to-dos:

    • Contact your state’s Secretary of State office for details on properly administering the closing of your business, or at minimum check out their website.
    • If your business is a corporation, you’ll most likely have additional work in the form of a Notification of Dissolution or Surrender.
    • Find out about state requirements specific to your type of business. (For example, if you own a restaurant, you may need to transfer or dispose of a liquor license if you have one.) Contact your state to find out more information.

    Other things to mark off your closing a business checklist

    • Of course, settle your accounts payable and accounts receivable.
    • Review your business closing procedures with your business lawyer.
    • Notify your accountant as soon as you decide your business is closing and allow them to direct you.
    • Close your business bank accounts, but wait until all checks and payments have cleared and there’s no activity on all accounts before you give your banker the go-ahead!

    Some of these details may be available in your accounting software to help speed up the process.

    How Electronic Funds Transfer (EFT) Can Help Your Business

    Today’s harried business owners can save time and money by taking advantage of an EFT (Electronic Funds Transfer)process, which is available at financial institutions.

    Using EFT for banking can reduce the time and money spent paying expenses or receiving income. Within hours instead of days, a much-needed payment can be made to meet bill payment deadlines. Convenient for both buyer and seller, an electronic money transfer is secure and convenient for busy professionals who are striving to pay bills on time and manage receivables.

    Here are a few more ways EFTs can help your business:

    • With an electronic transmittal system in place, business owners can manage transfers on an as-needed basis, or set up a routine process.
    • Business owners don’t have to worry about running out of postage or forgetting to pay an invoice.
    • Business owners can use EFTs to pay recurring expenses such as office equipment rentals, payroll, and inventory payments, without spending time to write and mail checks, or paying a staff person to handle them.
    • Privacy is guaranteed by most or all financial institutions. The federal Electric Fund Transfer Act protects consumer rights with respect to unauthorized or inaccurate electronic fund transfers.

    One caveat: Business owners using electronic funds transfer must ensure adequate funds are in the account to cover all scheduled automated payments. If an electronic fund transfer is attempted from an account with an inadequate balance, the account holder may be fined or have to pay a service charge.

    Claiming Tax Credits for Dependent Children

    The IRS offers two tax credits: The Child Tax Credit and the Child and Dependent Care Credit. Knowing which tax credits a family can claim, and how to claim them, can save time and money.

    A family can claim a child tax deduction for a child that is resides with the family for more than half the year. However, if they intend to claim a child that another person may also claim, consult with an accountant to determine who should claim the tax credit. Qualifying children must be under 17 at the end of the tax year to claim the credit, and cannot provide more than half of their own support for the tax year in question. The maximum amount that can be claimed for the Child Tax Credit is $1,000.00 for 2011. More information on the Child Tax Credit is available on the IRS website.

    The Child and Dependent Care Credit can be used to assist families with care of children too young to be unsupervised, or disabled children who cannot care for themselves. Taxpayers must earn income from a salary, wages or self-employment to be eligible for the credit, and the credit cannot be used by those whose children are cared for by a parent or another dependent child. For the Child and Dependent Care Credit, the maximum that can be claimed is 35% of child care expenses. And while employing a nanny does make one eligible for the Child and Dependent Care Credit, doing so may involve other taxes and requirements. Find out more about the Child and Dependent Care Credit on the IRS website.

    Divorced or separated parents must comply with certain conditions to claim a child tax deduction, which include how much time each parent spends with the child, support arrangements, and how much each parent makes. Information on child tax deductions for divorced or separated parents is available on the IRS publication 504.

    Understanding the tax credits that a taxpayer is eligible for is key to avoiding costly and time-consuming mistakes.

    How to Raise Money: Get Our Free Whitepaper

    Money in lightbulb2Small business owners have one thing in common: an entrepreneurial spirit. You started your business because you believed in your product and knew you could sell it. But businesses need money to grow, and that’s in short supply these days. We will show you how to raise money.

    It’s a conundrum: you can’t grow your business without money, but these days, you can’t find money to grow your business! And with traditional funding sources drying up even for high-growth industries, what’s a small business owner to do? Here’s one option: Set up a private offering to your friends and family to raise money for your business. Your investors may get a better return than a traditional bank CD or money market account, and they’ll help you build your business in the process.

    The FREE whitepaper “How to Raise Money for Your Business” from Patriot Software, LLC, describes how small business owners can quickly, easily, and legally raise capital through a private lender investment program. You can infuse your business with the money you need to not only survive, but thrive. We’ll tell you how!

    Summer Day Camp Expenses May Qualify for IRS Tax Credit

    If you have young children, day care expenses may be a costly fact of life for you, as well as for any working parents on your payroll.

    You’re probably aware that you can take a tax credit for child care expenses. But did you know that qualifying summer day camp expenses may also apply? That’s where the Child and Dependent Care Credit comes into play. What is the Child and Dependent Care Credit? It’s a federal tax credit that can reduce your tax bill for certain qualified child and dependent care expenses.

    Keep these IRS tips in mind when determining whether your day camp or other child care expenses qualify for the Child and Dependent Care Expenses Credit:

    • The child must be under age 13 when the care was provided.
    • You cannot take the credit for overnight camp expenses.
    • You may qualify for the credit whether you use a home sitter or a day care facility.
    • Depending on your income, the credit can be up to 35% of your qualifying expenses.
    • You can use up to $3,000 of un-reimbursed expenses annually for one qualifying individual or $6,000 for two or more qualifying individuals.

    You will need to identify the child care provider to the IRS by providing the name, address, and Taxpayer Identification Number. If the provider is a tax-exempt organization such as a church or a school, you don’t have to show the TIN — just write in tax-exempt. Use Form W-10, Dependent Care Provider’s Identification and Certification, to request this info from the child care provider.

    If you pay someone to watch your child in your home, you may be required to withhold payroll taxes. For more information on this rule, check out IRS Publication 503, Child and Dependent Care Expenses.

    IRS Rules Will Weed Out “Ghost” Tax Preparers

    649809 ghost payrollHow much do you know about the person preparing your personal or payroll taxes, and how do you know they’re qualified?

    The Internal Revenue Service recently contacted 100,000 tax return preparers who didn’t follow the new IRS registration requirements effective January 2011. Preparers must now sign tax returns they prepare and include their Preparer Tax Information Number (PTIN), according to Accounting TodayTax preparers who receive the IRS notice may still be using Social Security numbers or outdated PTIN numbers.
    Unscrupulous tax preparers may try to avoid the new program by not signing returns they prepare. Consumers should not use paid tax preparers who refuse to sign tax returns or enter their PTIN, the IRS says.

    All this talk of “ghost preparers” is an IRS effort to improve oversight of the entire tax preparation industry. Last fall, the IRS launched a PTIN registration program, in which all tax preparers must register and pay a fee. Preparers must renew the PTIN annually.

    Also, starting this fall, certain paid preparers who aren’t CPAs, attorneys, or enrolled agents must pass a competency test and a suitability check. The IRS will also require certain preparers to complete 15 annual hours of continuing education credits, starting in 2012. The IRS may also conduct periodic tax compliance and background checks on tax preparers.
    Some small business owners may use an unregistered preparer to keep their small business tax preparation cost down. However, the IRS is planning to contact taxpayers who appear to have had help with their return but lack a tax preparer signature — a sign of a unregistered “ghost preparer.” The letter will explain how a consumer can file a complaint against their preparer and choose a tax preparer who’s legitimate.

    The takeaway: Make sure you check your small business tax return or personal tax return for your preparer’s signature and PTIN number. You want to be sure you receive the best service from a qualified preparer, and not a ghost (oooooooo).

    Ohio’s Estate Tax Repeal Offers Boost to Small Business Payroll

    Lawwmakers boost Ohio payroll with repeal of death taxDying in Ohio won’t be quite as costly for small business owners now that the state’s estate tax — also known as the “death tax” — has been put down by Gov. John Kasich. Maine and Oregon are also making changes to their estate taxes.

    Gov. Kasich’s move, signed into law July 1, helps the state look more attractive to Ohio’s 200,000 small business owners. Ohio’s small business payroll contributes more than $77 billion dollars to Ohio’s economy, according to the Wall Street Journal.

    Although the repeal doesn’t go into effect until Jan. 1, 2013, the elimination of the estate tax will hopefully help end the exodus of Ohio businesses planning to move to more business-friendly climates.

    In Maine, the estate tax exemption will double to $2 million Jan. 1, 2013. Oregon has new graduated rates from 10-16% for estates that exceed $1 million. Oregon’s changes to their estate tax goes into effect later this year.

    According to Forbes, 22 states, including Ohio and the District of Columbia, still impose an estate or inheritance tax on residents. Ohio currently imposes estate taxes on all personal assets which includes business assets, with the lowest exemption amount per estate at $338,333 but also the lowest top rate at 7%. As recently as January, Illinois enacted a state estate tax with an exemption of $2 million and a top tax rate of 16%.

    Don’t Be Fooled by Bogus Email, IRS Warns

    1231735 thumb print 1Don’t fall for the latest scam email claiming to be from the Internal Revenue Service, the IRS is warning on its website. A new scam email is circulating the Internet regarding electronic federal tax payments or the Electronic Federal Tax Payment System (EFTPS).

    The “phishing” email informs recipients that their federal tax payments made through EFTPS have been rejected. It instructs them to click a link which, unfortunately, is bogus, and downloads malware to infect the recipient’s computer. If you fall victim to this scam, the sender can capture your personal and financial information and commit identity theft.

    If you receive a suspicious email claiming to be from the IRS or referencing the EFTPS system or electronic federal tax payments, do not click on any links contained within the email, open any attachments, or reply to the sender. However, you should report unsolicited email claiming to be from the IRS at phishing@irs.gov.

    The IRS does not initiate taxpayer communications through email. This latest scam comes at a time when most employers are now required to use EFTPS to make federal payroll tax payments and other tax payments. It’s another way that scam artists are trying to hoodwink consumers into giving up their personal or financial information. Many phishing emails include seemingly genuine logos and mention specific programs such as EFTPS to appear more credible. Don’t fall for it!

    If you think you may be a victim of identity theft due to this phishing scam, follow the instructions on the IRS website to report the incident.

    Payroll News: President Obama Repeals 1099 Reporting Rules

    payroll newsGood news for small business owners — President Obama has signed the repeal of the controversial new 1099 reporting requirements.
    The proposed reporting requirements were part of the Affordable Care Act, and would have required all businesses to issue 1099-MISC forms to vendors for all services as well as goods over $600. The repeal of this law saves small business owners and payroll administrators from a burdensome amount of added paperwork.

    Here’s how the law stands now: you must issue a 1099 to anyone who is not an employee (excluding most corporations) if you pay them more than $600 for their services only. “With this bipartisan effort, we have removed a requirement that would have been an undue barrier to small business growth,” said Karen Mills, administrator of the Small Business Administration.

    For more information about the current 1099 requirements for independent contractors, visit the IRS website.

    Last-Minute Tax Filing Tips for Procrastinators

    time for taxesIf you’ll be spending your weekend frantically gathering business documents for the April tax deadline, you’re not alone. The IRS is expecting 10 million tax extension requests from super-procrastinators!

    Here are some last-minute tips from the National Association of the Self-Employed (and I’ve added a few of my own):

    Do some digging: Look for hidden business deductions, such as the home office deduction or mileage for business errands. I suggest opening up your personal checkbook and reviewing your monthly credit card statements to see if there are any potential deductions you may have missed.

    Retirement savings: You can deduct retirement savings, such as SEP contributions and IRA deposits, on your return up until the April filing date. (Translation: if you have the means to make a quick deposit in your retirement account, do it!)

    Tax Extensions: If you just can’t get your act together in time, you can get an extension.

    • For individuals and sole proprietors, file Form 4868.
    • For partnerships and corporations, see form 7004.

    One caveat: If you think you may owe, send in an estimated tax payment along with your extension, lest you be saddled with interest and late fees later on.

     

    Plan ahead: Remember — we’re in the 2011 tax year now. What can you do this year to reduce your tax liability next time around? If you use an accountant, ask what tax breaks are available for this year. Making equipment purchases or adding to your payroll may help you in the year ahead. A good accountant can advise you on some of the best moves for your business.

    Do yourself a big favor, and start a tax file for receipts and paid invoices to simplify next year’s tax filing process.

    Get help: If you’re going solo on your taxes, there’s help available. Visit the IRS website, or call their helpline at 1-800-829-1040.

    Don’t shoulder all of the accounting burden on your own. Try Patriot Software’s accounting software to help reduce the time you spend bookkeeping so you can get back to your business.

    Closing a Business Checklist

    1182890 closing a business checklistAre you closing the doors of your business this year? In your mind, you’ve probably been ready to move on for some time now. But there may be some loose ends you need to tie up first. Of course, the simpler your business structure, the simpler it will be to close up shop. While this is not an exhaustive list of closing procedures, here are some very general steps you’ll take.

    The Internal Revenue Service needs to hear about your closing business

    • Review the Business Closing Checklist from the IRS.
    • File an annual return for the year you go out of business. The type of return you file depends on the structure of your business (corporation, sole proprietorship, etc.)
    • Mark the check-box at the top of each return indicating that it’s a final return for your business.
    • File final employment payroll tax returns if you have employees.
    • Attach a statement to the final return showing the name of the person keeping the payroll records and where they’ll be kept for safekeeping.
    • Don’t forget to make your final deposits for your payroll taxes (941 deposits, etc.)
    • Decide what to do about your federal Employer Identification Number (EIN). While you can’t cancel the EIN assigned to you, you can close the business account. The IRS won’t reassign the EIN number, but actually reserves this number if you re-establish your business. Write to the Internal Revenue Service, Cincinnati, Ohio 45999, stating your reason for closing the account. Include the EIN Assignment Notice you received when you started your business, if you have it. Otherwise, include the complete legal name of the business entity, the EIN, and the business address.

    Your state would like to hear that you’re closing a business too

    Your particular state will likely require some action on your part. I can’t speak to everything that every state or territory would require (that would make a very long article), but I will say you should file a final business tax return with your state as soon as possible. Don’t wait until your normal filing date to file the final return, because the due date for final tax returns is often based on the date your business terminates — it might be due before the tax year even ends! Here are some additional to-dos:

    • Contact your state’s Secretary of State office for details on properly administering the closing of your business, or at minimum check out their website.
    • If your business is a corporation, you’ll most likely have additional work in the form of a Notification of Dissolution or Surrender.
    • Find out about state requirements specific to your type of business. (For example, if you own a restaurant, you may need to transfer or dispose of a liquor license if you have one.) Contact your state to find out more information.

    Other things to mark off your closing a business checklist

    • Of course, settle your accounts payable and accounts receivable.
    • Review your business closing procedures with your business lawyer.
    • Notify your accountant as soon as you decide your business is closing and allow them to direct you.
    • Close your business bank accounts, but wait until all checks and payments have cleared and there’s no activity on all accounts before you give your banker the go-ahead!

    Some of these details may be available in your accounting software to help speed up the process.

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