Why Tax and Accounting Services are Essential for Small Businesses

As a small business owner, you probably agree that dealing with taxes and accounting is at minimum a chore… and even a headache at times. It can be stressful to sift through tax paperwork and determine the right forms that need to be filled out. Plus, you need to worry about cash flow, tax payment deadlines and more. One of the best investments you can make is hiring tax and accounting services, so you don’t have to get caught in the busy work.

Today, we’re sharing detailed information that you need to know about tax filing for your business. If you have questions, you are always welcome to reach out to our team here at Easier Accounting. Our goal is to support your small business so you can focus on the processes and systems that will set you up for success in the future.

Hiring a pro team will take the stress off your shoulders. Not only will the accounting team do your taxes, but we can also support your business throughout the year by running financial reports and keeping up with transactions that are moving through your accounts.

Step-By-Step Guide for Small Businesses

Here is an overview of the step-by-step process that should be followed if you are setting up your financial system and preparing for taxes in the future.

How is Your Business Structured? The type of entity used for your business will impact the way your taxes are filed. It is important to know your entity in advance so that you can choose the right tax and accounting services to match your needs. The most common types of small businesses include a Sole Proprietorship, Partnership, S Corporation, or Limited Liability Company (LLC).

Record Your Transactions: Don’t wait until tax season before you start working on the preparation for the filing. The truth is that tax preparation should be happening throughout the year. As transactions come through your business, you need to be tracking the money that is flowing in and out of your accounts. Records are the foundation of a successful tax filing. You need to have these records ready to go when it is time to prepare your tax filing.

The specific records that are needed will vary depending on the business entity you are using. As a general rule, you need all information related to both income and expenses:

Income

  • Sales transactions (receipts)
  • Returns
  • Interest from bank accounts
  • Any other money that comes into your account throughout the year

Keep in mind that ALL income received needs to be reported. So, make sure that you are keeping detailed records as the business receives various forms of payment.

Expenses

At the same time, expenses need to be tracked and verified. While it might seem like a hassle to track every penny that is spent, these expenses can add up to big tax deductions. Not only do you need to know how the money was spent, but you need to be able to back up the transaction with documentation, such as a receipt or invoice.

  • Marketing costs
  • Vehicle expenses (mileage log)
  • Fees and commission paid out
  • Outsourced services, including Form W-9
  • Interest costs
  • Office supplies
  • Travel, including transportation, hotel, and food/entertainment
  • Rent or mortgage
  • Utilities, internet, and phone services
  • Maintenance or repair work
  • Insurance premiums
  • Inventory purchases
  • Business development costs
  • Employee salaries, including Form W-2, Form W-3, Form 940, and Form 941

Some of these forms need to be completed and distributed before it’s time to file your taxes. For example, employee tax forms and W-9’s for outsourced services need to be postmarked by January 31st for the previous calendar year. Make sure to hold onto copies of these forms, so they are ready for your tax and accounting services when it’s time to file your taxes a few months later.

Choosing the Right Tax Forms: One of the complicated aspects of tax preparation is the variety of tax forms used by the IRS. You don’t need to file every available form! Instead, talk to an experienced tax and accounting services provider so you can choose the forms that apply for your business entity.

For example, certain forms need to be filled out for an LLC that aren’t required for a Sole Proprietorship. Tax forms might include self-employment taxes, FUTA taxes, Individual Income Tax Return, Profit or Loss from Business, and more. If your business is set up as a Corporation, then you might need to file forms regarding Shareholders, Schedule E, among others.

Why DIY is a Problem

Choosing the applicable forms is just the first step. Once you know which forms are required for your business, then you need to fill out the necessary information. You can search online to find tutorials regarding the various fields and entries that need to be managed on each form. There are also software programs that walk you through the process of entering the information for the forms.

Even though a DIY approach for tax preparation and filing seems like an affordable solution, the truth is that you are likely leaving money on the table due to errors and overlooked deductions. One small change on a tax form can have a drastic impact on the amount of money that is paid each year.

If you don’t have formal training and experience with tax preparation, then the best solution is to hire experienced tax and accounting services to handle the paperwork on your behalf. All you need to do is provide the business and financial information to your accounting team. Then you can sit back and relax, knowing that your accountant will oversee every aspect of the tax filing. Business owners often find that professional tax filing services help to reduce overall costs by minimizing the tax burden each year. Our goal is to keep your tax preparation within the guidelines and bounds set by the IRS, while maximizing write-offs whenever possible.

What You Can Expect from Tax and Accounting Services

Choosing a full-service, outsourced accounting team means that you will talk to your accountant throughout the year. There is no reason to wait until tax season before having a conversation about your tax preparation. Good tax and accounting services provide support before, during, and after tax preparation.

Here is an overview of the year-round support available for your small business:

  • Before Tax Season: The goal is to create a strong, effective accounting system that makes it easy to track your expenses and income throughout the year. The right software will make it easy to gather the necessary information when it is time to file your taxes each year. Ongoing tracking enables you to take advantage of the available tax write-offs. Additionally, your accountant will provide information regarding how tax laws are changing each year, so you can keep up with the newest rates and other details that impact your business.
  • It’s Time to File Your Taxes: During tax season, your accountant will review the financial reports and other applicable information. If you need both a business tax return and a personal tax return, then it is best to have the same preparer handling both filings. These services are designed to maximize the overall tax benefits available for your personal and business needs.
  • After Tax Season: When things quiet down and tax season is over, it feels good to know that your accounting team is always just a phone call away if you need support. Many business owners find it beneficial to have an accounting team assisting with payroll processing and ongoing bookkeeping services. Additionally, it is important to call your accountant right away, so you have representation if an audit occurs.

Do You Need Small Business Tax Services?

How do you know when it is time to invest in small business tax services? In the beginning, paying for professional tax preparation support might seem like a big expense, especially if you are pinching pennies to get your new business venture off the ground. But it is worth the investment to hire an accounting team from the beginning.

Tax and accounting services for small businesses give you the foundation needed that will help your company flourish. A good financial and accounting system gives you a clear picture of the financial health of your company. This information is essential, helping you see potential areas of growth and other ways you might be spending in the wrong categories. An accountant can help with much more than basic tax preparation, which is why it makes sense to start with these services right away.

Our team at Easier Accounting offers years of experience helping small business owners like you. We have hands-on experience with various tax and accounting services, including tax preparation, payroll processing, and more. If you are considering the benefits of hiring an outsourced accounting team, then we’d love to have a conversation to see if our services are a good fit for what you need. Call us right away to learn more about the options for your business needs: (888) 620-0770.

Business Owners: Avoid These Common Cash Pitfalls

Cash flow matters at all stages of business ownership. Whether you are trying to get a new business venture off the ground, or you’ve been in business for years, it is common to rush into cash pitfalls that can drain your bank account. But these problems can be avoided if you are proactive with your financial system.

A good accounting and bookkeeping team, such as Easier Accounting, can offer the ongoing cash flow support that you need throughout the year. Our team has worked with many small businesses, and we’ve seen the trends that often happen within growing companies. This experience gives us the insight to help our clients sidestep some of the common issues that impact cash flow.

Why Cash Flow Matters

It seems obvious that you need money on the bank to keep your business running. But there are times when you know that the money will be coming through receivables, so it might seem like a good idea to tap into credit if you have immediate expenses that need to be covered. This short-term strategy can lead to a domino-effect of financial issues in the future, especially if you don’t have a good bookkeeping and accounting system in place.

Not only do you need to be looking at the money that comes into your business when customers buy your products and services, but you also need to be looking ahead to the future to see how much money needs to be spent on expenses. For example, a big tax bill can sneak up on you if you aren’t tracking the flow of money, causing you to be cash-poor and unable to keep up with the costs of running your business.

When the bills need to be paid, and you don’t have any money in the bank, the cash flow issues could potentially result in business failure. Rent needs to be covered, employee paychecks need to be paid, inventory needs to be restocked, and you have a long list of other expenses that are required to keep your company running. Make sure that you have enough cash in the bank to cover these expenses each month.

Common Cash Pitfalls

Learning about common cash pitfalls can be an effective way to bring awareness to your business practices, helping you avoid these issues. You can learn from the mistakes of other business owners so that you don’t have to walk the same difficult path of cashflow problems.

Our team at Easier Accounting is here to guide your financial decisions and help you avoid some of the problems that we’ve seen over the years. Here are some of the most common cash pitfalls that we’ve encountered:

  • DIY Accounting: When a business owner chooses a DIY approach for accounting and bookkeeping, they are usually motivated to save the money that would have been spent on accounting services. The truth is that taking on these financial responsibilities might be one of the costliest mistakes you can make as a business owner. Not only are important financial details often overlooked with DIY accounting, but you don’t have the experience to dig into the financial statements and see what is coming in the future. You need clear insights for your expenses and income so you can optimize your business practices, which in turn will help to boost your profit margins.
  • Using the Right Tools: Excel can be a great tool for many projects within your company, but you are making a huge mistake if you are still using a spreadsheet to track your income and expenses. It is important that you have a robust accounting software that can generate reports and help you see a clear picture of your business profits and losses. The right accounting software will help you avoid mistakes that often come when the numbers are calculated manually.
  • Training and Application of Accounting Software: Not only do you need to be using the right accounting software to match the needs of your company, but it is also important to be sure that your team is trained on the most effective strategies for the use of this software. The simplest way to be sure that you are leveraging the full power of a financial software is to hire an experienced accounting team to assist with the setup and ongoing maintenance of your system.
  • Overlooking Accounts Receivables: Having unpaid invoices for current sales can inflate your numbers, but don’t count on the income until you have money in the bank. Too often, small business owners have a gap in their accounts receivables system. Make sure you have a strategy in place to follow-up on outstanding invoices. Late or unpaid invoices can have a major impact on your cashflow.
  • No Rainy-Day Account: Don’t make the mistake of spending every penny that comes into your business bank account. There are always opportunities to spend money on marketing and business development. While these expenses are good investments, it can be harmful to your company if you don’t have money set aside for a rainy day. It is common for small businesses to have slow seasons, which means that you need to have enough cash on hand to cover the costs when sales are trickling through. Set up a savings account designed for emergencies only. Ideally, this fund should have a minimum of three months of expenses.
  • Too Much Spending: It doesn’t matter how much money you are bringing in, you won’t be able to make a profit if you are spending more you are collecting. Often, businesses get bogged down with unnecessary subscriptions and services that eat into the cash flow and profitability each month. Take time to discuss your expenses with a financial pro, such as an experienced accountant. Find line-items where you can cut costs to protect your cash flow. Remember that a little bit can add up… saving $100 per month results in $1,200 in savings each year.
  • Excess Inventory: It is important to be sure that you have product on hand when the customers are ready to buy. But holding onto too much inventory can tie up your cash and make it difficult to keep up with ongoing expenses. If you have a warehouse stocked with products, then you need to dial in the sales trends and fine-tune your ordering. The goal is to have stock on hand for the shortest amount of time before it is sold. Your inventory can be managed by evaluating sales volumes, forecasts, supplier turnaround time, and available cash on hand. Have a system that takes care of ongoing inventory monitoring so you can reorder when needed, helping you avoid the loss of clients if something is out of stock.
  • Realistic Future Forecasting: While you are working to create opportunities for business growth, don’t bank on the money until the sales have actually occurred. One of the common cash pitfalls that we see is when business owners spend money now, assuming that they will have the necessary income needed in the future. You shouldn’t count on a sudden boom in your business in the future. The best solution is to evaluate your business records and data so you can see the trends that are normal for your industry.
  • Large Debt Burdens: Too much business debt can eat away at your profit margins because of the cash flow that is tied up in interest costs. Look for ways that you can manage your cash flow to pay off debt. Lowering these balances can reduce the amount of money that you are paying for late fees, overdraft costs, and interest expenses.

The Simplest Way to Avoid Cash Flow Problems

We’ve found that the most common reason business owners encounter cash flow problems is because they don’t have effective systems in place. It is important that you know the current cash position of your company, as well as upcoming expenses that will need to be paid. If you are just going with the flow and hoping that the money will be there at the right time, then it is likely that you will encounter big problems in the future!

As a business owner, you don’t need to take accounting classes or spend hours on YouTube watching accounting tutorials. The fastest and most effective solution to ensure that you are managing your financial reports and cash flow is to tap into the services offered by an experienced accounting team.

At Easier Accounting, our goal is to reduce your stress by creating a financial system that helps your business succeed. We offer years of experience in the industry. You can tap into our expertise and insights to find the right solutions that will support your long-term financial needs. We want to help your business with financial strategy, and we have proven experience that can be used to optimize your financial systems.

If you are interested in more information about business accounting systems, then we invite you to contact our team right away. Easier Accounting is here to answer your questions and help you find the right solutions to meet the unique needs of your business. We’ll explain the available services so you can see the benefits available for your company: (888) 620-0770.

How to Design the Best Accounting and Bookkeeping Systems for a New Startup

New startup entrepreneurs often experience the same things in the beginning stages of their business efforts: a to-do list that is miles long, and unending tasks to get the business off the ground. Accounting and bookkeeping systems should be a priority, but these tasks often fall to the backburner as efforts are focused on other business-building efforts.

It isn’t easy to start a business, especially when you are carrying the responsibility of managing the finances, product development, customer acquisition, and more. Most small business owners don’t have formal training in accounting and bookkeeping, which is why it can be valuable to enlist the services of an expert team. Accounting services aren’t only needed for tax preparation and filing, but these services can be invaluable to help you track profit margins, expenses, and more.

The right financial reports for your business will empower you in making the decisions that will propel your company forward in the future.

Good Systems Help to Grow Your Business

Your ultimate goal is to help your company grow, which is why it makes sense to spend your time on activities such as product development and marketing. These efforts will bring in the cash flow that will keep the business running. But you need to make sure that you are looking at historical trends and evaluating the possibilities for the future. Accounting and bookkeeping systems are integral to this process.

Tracking financial activity ensures that you aren’t overlooking potential tax write-offs and deductions. At the same time, you can implement systems that support budgeting goals and control spending. Too often, profit margins slip through the cracks, which is why a business financial system is essential for your success.

The Difference Between Bookkeeping and Accounting Systems

People often use the terms “bookkeeping” and “accounting” as synonyms. But there are distinct differences between the scope of work and services available. Bookkeeping and accounting work hand-in-hand, but it is important that you understand the ways they differ. Here’s a quick overview of the differences:

  • Bookkeeping: A person or team offering bookkeeping services might have a certification and/or on the job training experience, but it isn’t required to have a degree in the industry. Bookkeepers are responsible for managing the day and day out transactions of the business. Usually, bookkeeping services do not include audits or tax return filing.
  • Accounting: On the other hand, accounting services are focused more on the strategic side of financial management. An accountant steps in to help with financial supervision, which may include tasks such as bank statement reconciliation, tax strategy, tax preparation, and more. An accountant uses the information provided by the bookkeeping team to be strategic in the financial growth and overall financial health of the company.

It is important to consider both account and bookkeeping systems. Bookkeeping entails the ongoing recordkeeping activities for your company. Good bookkeeping software can be used to track and categorize the day-to-day transactions. At the same time, accounting taps more into the strategic side of running a business, helping you see the best strategies to manage tax burden and help your company grow.

Steps for Setting Up and Implementing Financial Systems

Are you trying to decide where to start with the implementation of a financial system? Here are a few steps that should be followed to help you get started on the right foot:

  1. Choose and Setup Accounting Software: A good software program is key to reduce busywork and improve overall results of your financial system. Not only do you need to select the software you would like to use, but you also need to have systems in place for the ongoing management of the transactions that are moving through your account. Business bank accounts are connected, but accounting and bookkeeping services are still needed for data entry, reconciliation, and more. Accounting programs are designed with checks and balances in place that help to reduce errors and automate the processes as much as possible.
  2. Open a Business Bank Account: All of your personal and business transactions need to be kept separate, which is why it is smart to open a new bank account dedicated to your business. Not only do you need checking and savings accounts, but it can also be helpful to have a business line of credit and a business credit card. Make sure all business transactions are moving through these accounts without getting mixed up in your personal spending.
  3. Hire a Financial Pro: It can also be helpful to hire professional services for accounting and bookkeeping. You are already juggling many responsibilities for your startup. Adding more busywork to your schedule only increases your stress levels and makes it harder to keep up with everything. If you find it challenging to be consistent with these ongoing bookkeeping tasks, consider the benefits of bringing in an expert team to oversee the details.
  4. Stay Consistent with Financial Tracking: Keep in mind that setting up the financial system is just the first step. It won’t help you to have a bookkeeping or accounting system if you aren’t using the available tools. Even though automation is implemented to track the money moving through your account, you need to be consistent about reconciliations and reviewing the details. Your decisions can be based on the financial health of your company, but this information is only accurate if you are consistent about ensuring the accuracy of the recorded transactions.
  5. Look to the Future: It can be beneficial to evaluate upcoming costs and potential areas of growth in your business. When you are proactive with maintaining good accounting and bookkeeping systems, then you can turn your attention to the strategic element of helping your company grow. You can rest assured, knowing that financial reports are accurate. At the same time, you can anticipate expenses that are coming up to help you manage the way your money is being used.

The Benefits of Bookkeeping and Accounting Services

As you learn more about the available benefits for your company, it’s easy to see how accounting and bookkeeping services can be valuable to boost your success and set you up for future growth. A good system helps you with the separation of personal and business finances. It is important to have a clear distinction by using different accounts and financial systems.

Also, bookkeeping and accounting services help you avoid common financial errors. Not only are you tracking the way the money flows through your accounts, but the reconciliation processes help to catch potential mistakes and fraud in the early stages. Identifying these problems right away is essential so that you can implement steps to stop the issue before things progress.

The most important benefit that you will find that is that accounting and bookkeeping systems are effective in streamlining your tax strategies, helping you maximize tax deductions. It feels good knowing that you are prepared for the upcoming tax deadlines, with enough money set aside to pay the bills. There is no reason for you to spend your valuable time crunching the numbers. Your accounting team can handle these details and provide the reports that break down your tax burden each year.

DIY Accounting and Bookkeeping Mistakes

The most important thing that you should keep in mind is the potential for mistakes and errors when you attempt a DIY approach for setting up these systems. Too often, startups are looking for ways to save money, so they implement a DIY accounting system. The problem is that errors are occurring and the system isn’t structured correctly.

Even though it seems like a savings in the beginning, the long-term costs can add up and make it more expensive in the long run. When the accounting and bookkeeping systems have been set up incorrectly, it can be expensive when an experienced accounting team needs to step in to redo the work.

The most effective and efficient solution is to get started with an experienced accounting team from the beginning. The money spent on these services is truly an investment that will help your company avoid common mistakes. By side-stepping these common issues, you can save yourself both time and money in the future.

Instead of cutting corners by trying to save money on accounting and bookkeeping services, look for other areas where you can reduce your business expenses. In fact, a good accounting and bookkeeping team can help with your budgeting strategy. Often, business owners find that the tax savings and financial streamlining is well worth the investment that was paid for services from a professional accounting team.

Talk to the Accounting and Bookkeeping Pros

What questions do you have about setting up accounting and bookkeeping systems for your small business? If you are evaluating your options, then we invite you to contact our experienced team for assistance. At Easier Accounting, we specialize in small business solutions. We’d love to have a conversation to help you identify the way our services can support your startup and boost your long-term profitability: (888) 620-0770.

What to Look for When Hiring Outsourced Accounting Services

It’s no surprise to hear that good financial tracking will have an impact on the success of your company. Managing the way the money is flowing in and out of your business will affect cash flow and other important aspects of running a company. Too often, entrepreneurs don’t have the necessary professional training, which is why they turn to outsourced accounting services for assistance.

How You Will Benefit from Outsourced Accounting Services

Is it the right choice for you to hire an outsourced accounting team? Most business owners don’t take this decision lightly. Not only will you be spending money on the services, but you are handing over sensitive financial information to the accounting team.

Even though it takes trust to bring in an accounting team for help, you won’t regret this decision. Here are some of the benefits you can expect when you find the right outsourced accountant to help with your financial tracking and strategy:

  • Expert Advice: You didn’t spend years in college studying accounting and bookkeeping, and it isn’t likely that you have years of hands-on experience in the industry. One of the greatest benefits of an outsourced accounting team is that they bring industry experience to the table. You can team up with the financial pros to leverage this experience in a way that helps your company grow. Outsourced accountants know the right way to set up your systems. They can implement effective processes to improve the efficiency of your financial reporting. Also, an expert outsourced accounting team will tailor your services to meet your needs, helping you create a system that is scalable to help with future growth.
  • Compliance, Regulations, and Laws: Most people are bored out of their minds when digging into details about tax laws and financial regulations. In addition to the Federal requirements for tax filing, you also need to pay attention to local regulations for the city and state where your business is located. These laws change each year, which can make it a challenge to stay current. The easiest and most effective way to ensure that your business is in compliance is by hiring outsourced accounting services for assistance. Your accounting team is immersed in these laws and regulations each day, and they understand the ins-and-outs of implementation for your company.
  • Manage Cashflow: One of the biggest challenges you will face is managing cash flow to ensure there is enough money in the bank to cover upcoming expenses. Even though money is coming in through sales and transactions, there can sometimes be a gap between the time when the money is received and when your expenses need to be paid. You can be bringing in a significant amount of money and still feel the financial stress if you are leveraged to the point where you don’t have the cash flow available for expenses. Outsourced accounting services can be beneficial to help you with the implementation of an effective strategy to anticipate upcoming expenses and ensure that you have cash in the bank account for those needs.
  • Boost Productivity: How many hours per week are you spending on bookkeeping and accounting tasks? Taking a DIY approach for your business accounting means that you are burning precious hours that could be spent on other responsibilities. For example, if you are spending 10 hours per week on bookkeeping, then it means that you are missing out on 10 hours per week that could be dedicated to business development, customer acquisition, and more. Pass off the accounting and bookkeeping responsibilities to an experienced team so that you can focus your efforts on other important tasks.
  • Reducing Business Expenses: Tracking your transactions is one of the first (and most important) steps in managing your budget. When you can see where the money is being spent, it is easier to adjust your spending habits so that you can be in control of your business finances. Every penny spent on business expenses cuts into your profit margins. An outsourced accounting team can help you with the tracking and budgeting implementation to support your long-term goals.
  • Minimize Overhead: Also, consider the way outsourced accounting services can be used to minimize your overhead costs. When you can see that accounting skills are needed in your company, it is easy to mistakenly think that you need to bring in another employee to help. But adding another employee to payroll can be a heavy financial burden, especially for small businesses and startups. Instead of taking on the fully burdened cost of a salary and benefits, you can invest a smaller amount in outsourced accounting. These services give you access to the full range of skills that are needed, at a much lower cost.

As you look through this list, are you seeing why it is worth the cost to invest in accounting services? Now it’s time to make the investment in an accounting team that can help with your business goals.

Tips for Hiring Outsourced Accounting Services

Instead of hiring the first accounting team that you can find, it is beneficial to be strategic in the way you choose outsourced accounting services. Here are a few things that you should be looking for when you are comparing service providers in the accounting and bookkeeping industry:

  • Licensing and Certifications: Does the team that you are hiring hold the right certifications and licensing? Holding an accounting degree means that your accountant is a true professional. Many people can say they are experienced in financial strategy, but the certifications show the years of training and education that went into the accountant’s development.
  • Reputation: You are entrusting your financial information to the accounting team, so it is important that you can trust the company. Investigate the reputation of the company to be sure that you are bringing in a team that holds the highest levels of accountability when it comes to protecting your information. Reputation is a non-negotiable when hiring an accountant because the provider will have access to your financial information and sensitive details about your business.
  • Scope of Services: What services are needed for your company? You need to have clarity about the financial services that will support your goals, to ensure that you are hiring a team that provides the skills that are needed. You might have a handle on the ongoing bookkeeping tasks, so you just need an accounting team to fill in the gaps with tax strategy, tax preparation, and filing services. Or, you might be looking for full-service solutions that include payroll processing, bookkeeping, account reconciliations, financial strategy, and more. Find a team that fits your individual needs.
  • Experience and Specialties: For example, it can be beneficial to choose an outsourced accounting team that specializes in small business services if you are an entrepreneur or a startup company. Experience with larger corporate entities differs from the services needed for a small business.
  • Accounting Tools and Technology: Be cautious if an accounting team wants to implement a system that relies on manual calculations. We live in a modern business world with many online tools to support automation. A good accounting team will implement a proven software program that streamlines your transactions as much as possible, paired with professional services for bank account reconciliation, strategy, and more.
  • Pricing: Also, consider the amount of money that you will be spending on the services. Not only do you need to look at the price tag, but it is important that you consider the value and services provided for that cost. Remember that outsourced accounting services are an investment for your business. While it is important to be careful about the amount of money spent on the services, you also need to identify the way these services will boost profitability and help you save money.
  • Customer Focus: It is important that you can get someone on the phone if you have questions about your business finances. When you are hiring an outsourced accountant, ask about questions and ongoing support through the year. One of the biggest mistakes you can make is only talking to your accountant once a year… at tax time. You will gain the most value through working with an accounting team that provides communication, support, and strategy implementation all year long.

Is the Timing Right to Hire an Outsourced Accountant?

How do you know when you should make the investment in an outsourced accountant? Timing is important, so you should always consider the needs of your company.

The truth is that it is never too early to invest in accounting services. Even if you are in the earliest stages of launching your new startup, an accounting team can be invaluable to help you get started on the right foot.

Our team at Easier Accounting specializes in small business accounting services. We’d love to talk to you about the way our services can be used to support your business needs. If you are considering the option to hire an outsourced accounting team, then we invite you to contact us to learn more. Call right away: (888) 620-0770.

5 Tips to Improve Business Financial Systems

Financial management is key if you want to set your company up for success in the future. Are you using business financial systems that are current in the industry and relevant to your business needs? If your accounting and bookkeeping system is outdated or under-performing, then it might be time for you to invest in an upgrade for your company. Not only can you streamline your financial tracking and reporting, but it gives you peace of mind to know that everything is up-to-date when looking at financial reports.

Modern Solutions to Improve Your Business Results

Too often, business owners are overburdened with many responsibilities, causing them to overlook some of the most basic steps that need to be implemented for financial tracking. One of the biggest problems is that business owners are missing the right financial system to handle the transactions that are moving through. For example, if you are using any systems that require manual entry, then it is a sign that you are missing out on the benefits of automation in the bookkeeping and accounting systems.

Don’t waste your time doing manual calculations or combing through financial reports. Several effective solutions can be used to improve your business financial systems. Today, we are sharing a few of these tips to help with the improvements that are needed to maximize your financial systems.

Tip #1: Automate Whenever Possible

One of the greatest advantages of technology is that it opens up possibilities for automation. Implementing the right accounting and bookkeeping system will allow you to automate transactions as they move through your account. These solutions help to reduce the time that you are spending on accounting tasks throughout the week. What would you do with the extra time if you were able to let go of manual calculations and eliminate stress about the tracking of transactions?

Additionally, automation helps to reduce the risk of error or mistakes. Even if your team is trained to use the system correctly, there is always a risk that a typo or mistake could throw off your financial report. One wrong number can have a domino effect that results in inaccurate reporting and false information. These human errors can be avoided by using an automated system. At the same time, you will have peace of mind knowing that the automation helps to decrease the risk of fraud.

A variety of accounting and bookkeeping software programs can be used for your business. If you are looking for the right program to meet your needs, then our team at Easier Accounting is here to answer your questions. Call us any time to learn about the automated solutions that can improve your financial system.

Tip #2: Choose Effective Software Features

As you start to learn more about the software programs available for business financial systems, you must understand your business goals to identify the right solutions for your company. These are some of the tools, features, and functions that are often included in the best accounting and bookkeeping systems:

  • Report Generation: You need to be able to run financial reports on-demand, which is why it is important to have built-in reporting systems.
  • Data Fetching: Automation is available when the business financial systems have built-in features that fetch data from your bank account. These transactions can be added into your accounting system automatically, without the need for manual data entry.
  • Invoicing: Most accounting systems offer the feature of invoice creation and management. You can view the invoices that are unpaid to know where you need to follow-up to collect payment. It is a huge benefit to automate invoicing so that you can reduce stress and mistakes related to payments and collections.
  • Payroll Processing: It doesn’t matter if you have 2 employees or 200 employees… payroll processing is an essential task that needs to be handled regularly. An automated accounting system makes it easy to track payroll information, including tax withholding, benefits, and more.
  • Expense Management: Set up checks and balances in the system that require management review when certain transactions come through. This process can be valuable to ensure that you are avoiding redundancies or unnecessary costs that are cutting into your profit margins.
  • Tax Forms: When tax season rolls around every year, you are required to provide the right tax forms for your employees and contractors. If you are using the right business financial systems, then it means that these tax forms can be generated automatically.

Tip #3: Avoid Paperwork

While business paperwork is sometimes unavoidable, there are ways that you can improve your systems to reduce the number of pages that are coming across your desk. The problem with physical paperwork is that you not only have to review the information, but it also needs to be filed and managed after you are done with those pages.

Good business financial systems are designed to minimize the dependence on printed paperwork. If you need to look at a report on paper, then you have the option to print out the pages that are needed. But most of the time, the information is stored in the cloud, helping to reduce the clutter and stacks on your desk. It feels good to get out from under the piles of paperwork that tend to stack up in an office. All paperwork can be stored and managed in a digital format: contracts, invoices, receipts, and more.

Decreasing the paperwork that is used is essential if you are looking for ways to improve productivity among employees and managers. There’s no reason to have people sorting through loose pages when everything can be categorized and accessed quickly online. Filing cabinets can be burdensome and frustrating to work with, which is why many businesses are moving away from paper filing and using cloud-based accounting systems instead. Plus, you will be glad to know that you are doing your part to protect the environment.

What are your options for paperless financial tracking? Talk to our accounting team about cloud-based financial systems that can be used for your small business. These solutions give you access to the reporting and all of the accounting numbers with the touch of a button. For example, you don’t need to print invoices or reports when you can access all of the information through a smartphone or laptop computer.

Tip #4: Make a Plan and Stick to It

You need to have a clear picture of where your business is in the current moment, and where you are heading in the future. The right business financial systems will allow you to use the insights and data to create an actionable plan that will be beneficial for moving your company forward.

As you are setting goals, you should have clarity about your intentions for expansion, business development, inventory management, and more. Focus on your financial goals, then be sure that your systems are designed to move you towards those goals.

Planning can be done on both macro and micro levels. For example, not only do you need to think about the annual goals, but you also need to have plans in place regarding quarterly and monthly budgets. Implementing this level of planning will help you make meaningful progress forward because you will have the resources that can be reinvested into marketing and business development.

Tip #5: Hire Outsourced Accounting Services

Finally, don’t overlook one of the most effective ways to improve business financial systems: hire an outsourced accounting team. These professional services can be used to leverage your financial results and improve your business finances in many ways. Hiring an outsourced accountant or bookkeeper means that you can hand off the responsibility to a team that understands the most effective way to track financial information.

It is incredible to see the productivity improvements that can come by letting the pros take care of these financial services. For example, your accounting team can handle a variety of services, such as payroll processing, tax strategy, account reconciliation, and more. As you are looking for options to improve business financial systems, talk to our team about the personalized services that can be used based on the needs of your company.

Hiring a trusted team to oversee your business finances can be one of the most effective ways to amp up your results. You must have a clear picture of the financial health of your company at all times. We can help with the implementation of the right bookkeeping and accounting system. Then, our team will offer ongoing support to ensure that you are keeping up as things change throughout the year.

Are you looking for support with your business financial systems? Our team is here to help! At Easier Accounting, we provide a variety of small business accounting solutions designed to support your goals. We invite you to contact us for information about the available services. Call our experienced team any time to find answers to your questions and proven solutions that are the right fit for your business needs: (888) 620-0770.

Modern Accounting: How to Ensure Your Business is Staying Current

Technology has improved the way business is done, making it possible to connect with customers and business contacts through the internet. If you want to maximize the success of your business, then you need to be sure that you are using modern accounting tools to support your financial tracking. What resources are used in your business systems? It’s a great time to talk to an outsourced accounting team to learn more about the processes that can be used to improve your business systems.

Whether you are looking for options to improve your tax strategy or you need to systematize payment collection from your customers, a few good accounting tools can go a long way to improve your results. Investing in the right accounting and bookkeeping software will help you tap into the resources that can be used to amp up your financial systems.

What is Modern Accounting?

Before the invention of computers and the internet, business owners tracked their transactions by hand. These accounting ledgers were used to record money/products that moved in and out of the business account, and most of the transactions were paid in cash. If you go back thousands of years in history, it is possible to find ancient records that show accounting and business tracking in the most basic forms.

Now, the business world has changed. Technology is a foundational aspect of supporting the needs of a company. If you don’t accept digital payments, then it means that your customers are likely going to head to your competitors. Not only do you need to integrate technology into your business systems, but you need to be sure that you are using the tools that are the right fit for your industry and individual needs.

Modern accounting means that you are using technology and accounting software programs to systematize your financial tracking. Every transaction that moves in and out of your account needs to be recorded. There’s no need to write these things down by hand. Instead, you can leverage the automation of modern accounting software programs that take care of the tracking for you.

Even the accounting systems that use the most advanced technology available in the accounting industry are designed with double-entry bookkeeping systems. This approach means that there are always two entries for every transaction: debits and credits. Double-entry accounting dates as far back as 1494, but it’s only been in recent years that these systems have been automated through software programs.

Accounting is the Language of Business

The best way to communicate detailed information about your business is to have the option to run financial reports regarding the profitability of the company. These financial details are required if you are looking for investment money or partnering with other businesses. At the same time, these modern accounting reports can also be used to assess the current snapshot, giving you information that will support decisions that are made regarding cash flow, spending, and hiring.

As the accounting industry continues to evolve through technology, it is impossible to know how these business practices will change in the future. We can’t even imagine the possibilities that lie in the future! The most important thing that can be done is to ensure that you are keeping up with current accounting trends so that you are on track with the way systems are changing with time.

Using a modern accounting approach for your business doesn’t mean that you are on the cutting-edge of all payment technologies. Sometimes, being the first to implement new technology might not be the best investment if others aren’t using the new systems yet. So, the best thing you can do is work with an experienced accounting team and payment processing service to ensure that you have the right balance between staying current without leading out too far in the industry.

Digital Accounting: Key to Business Tracking

When the term “digital accounting” is used, it refers to the electronic format of the formation, data, and transmission of financial information for your business. The math is always the same: money coming in will increase your account balance, and payables decrease your account balance. But you don’t need to balance the checkbook in the way that was done 30 years ago. Now these modern accounting systems automate the math and calculations.

This automation is key to free up your time. There’s no reason to spend hours of your day doing manual calculations. Instead, you can lean on the support that comes through the right accounting software. These programs are beneficial for improving accuracy and optimizing productivity for your team. When digital transactions are moving through your account, you can rest assured to know that everything is recorded because you are using a digital accounting system to record the information.

In addition to the basic bookkeeping and tracking required for every business, digital accounting also offers powerful solutions for data analysis. Collecting financial information doesn’t mean anything unless you have reports that showcase the financial health of the company. These digital, modern accounting systems have enhanced the reporting options. For example, the technology can report and interpret data more quickly than ever before. Plus, the information is more effective and efficient, giving you hands-on application that can have a dynamic impact on your business decisions.

Taking it to the Cloud

When digital accounting first started, there were still manual aspects required for calculations. For example, using a 10-key calculator allowed faster computing, but the numbers were still limited because of the possibility of typos or human error.

Then, the digital tracking moved to computers. Software programs could be installed on computer systems, giving business owners the option to enter transactions and track results. This step upgraded the digital accounting industry because the history could be stored digitally. The main weakness was that the accounting system was limited to a single computer, or an elaborate networking system needed to be implemented to share information on multiple devices. If the local hardware malfunctioned, then the accounting information would be lost.

One of the greatest benefits of our current, modern accounting systems is that information can be stored in the cloud. When transactions move through the accounting software, the data can be viewed on your computer. At the same time, all information is stored securely on an off-site computer. This cloud-based accounting solution minimizes the risk of losing all of the accounting data due to a system malfunction.

Another benefit of modern accounting is that multiple devices can access the financial reports from any location. Storing the data and systems in the cloud means that the information can be reviewed from any location, as long as the person has permissions and access to look at the reporting. For example, a business owner can see the business transactions in real-time, even when located in another part of the country or on the other side of the world. The internet allows the information to be shared and distributed, giving full access to anyone on your team. You can decide who is collaborating in the accounting and bookkeeping systems.

One Hub for All Financial Needs

A modern accounting system makes it easier than ever to keep up with financial responsibilities. Since your business records and financial information are stored in one location that is easy to access, you can view your accounts with the touch of a button. You can be on the road for a business meeting, and keep up with invoicing and payments from any location.

Additionally, digital accounting opens up opportunities for you to hire outsourced bookkeeping and accounting teams. There’s no need to have an accountant in your office when an outsourced accounting team can access your business financial information from their own office. Many businesses are moving to outsourced accounting solutions to save money and improve overall results, without the need to have a full-time accountant on the payroll.

As you can see, the internet has opened up many options that can improve your business systems. If you haven’t implemented modern accounting in your business, then it’s time to take action so that you can upgrade your financial tracking and improve overall results for the company.

Talk to Our Team About Modern Accounting Solutions

Are you exploring options to improve your business accounting systems? Our experienced team is here to answer your questions and assist with anything that you need. Working with an experienced, outsourced accounting team means that you can hand over the financial tasks that need to be addressed. Outsourcing bookkeeping and accounting can be an effective way to free up your time so that you can focus on other business responsibilities. There is no reason for you to spend your time on busy work when you can let the pros take responsibility for accounting support instead.

At Easier Accounting, we offer high-quality, personalized business accounting services. Our team specializes in small business solutions. We invite you to call at your convenience to learn more about the support that is available for your company: (888) 620-0770.

Did You Know that Outsourced Accounting Can Boost Business Revenue?

When starting a business, outsourced accounting often falls to the backburner because most entrepreneurs are focused on the logistics of getting the company off the ground: product development, customer service, storefront design, payment processing, and more. It can be easy to get caught up in these logistics, causing you to overlook some of the most important paperwork and financial systems that need to be implemented to ensure your business starts with a strong foundation.

Whether you have big goals for the future or you are starting the business to bring in a little extra cash on the side, bookkeeping and accounting should never be pushed to the bottom of the priority list. In fact, there is a strong argument that outsourced accounting and bookkeeping might be the most important factor that will affect your success in the future. Without a good financial system, you can’t keep track of cash flow, profit margins, annual trends, and other data that will influence the decisions you are making each day.

Accounting Doesn’t Need to Be a Burden

One of the reasons why many business owners don’t prioritize accounting and bookkeeping is because it feels like a burden to keep up with the transactions. If you are focused on business development, then it seems like a hassle to set aside a few hours each week to categorize transactions and reconcile the accounts. Too often, business owners let these tasks fall to the back burner and then eventually face bigger issues in the future when a financial mess occurs.

If you don’t have the time or desire or skills to work on the bookkeeping and accounting tasks for your business, then it is smart to let the pros take over. There is no reason for you to spend your limited time on tasks that aren’t within your specialized skill set. Just like you should schedule an appointment with a dentist when you have a problem with your tooth, it is smart to enlist the services of an accountant when you want to improve your financial systems.

The key is to take action as soon as possible. Don’t wait for a problem to occur before you call an outsourced accounting expert. Instead, you can be proactive in designing the right financial system that will support your bigger goals. Hiring accounting and bookkeeping experts will give you the information and skill set needed to oversee your spending and income, helping to maximize profit margins as much as possible.

Outsourced Accounting Can Boost Revenue

When most small business owners think about hiring an outsourced accountant, they only see the cost of paying for these services. Yes, you will have an expense to get the help that is needed. But instead of this cost being a liability to your company, the money spent is actually a great investment that can help to improve your results.

These are some of the financial benefits you can expect if you choose to hire an outsourced accounting team:

  • Team of Experts: Most small business owners don’t have formal training or experience with bookkeeping or accounting. As a result, a DIY attempt often results in problems and mistakes. Even a few small errors in your financial system can add up to significant problems in the future. Don’t let these issues hinder your success or progress. Hiring an experienced accounting team means that you can bring in the skillset that you need, without spending hours with your head in an accounting textbook.
  • Outsourcing is Affordable: Once you see that accounting skills are needed for your business; you might think about hiring another employee with an accounting background. There are some situations where it makes sense to bring on another full-time employee because of the massive need for skills and support needed in your company. But, more often than not, small business owners don’t require 40+ hours per week of accounting services. Instead, a few hours of outsourced accounting services will be sufficient for financial reporting and tracking. Compare the costs of hiring an outsourced accounting team vs. bringing on another employee, and you will see that it is much more affordable to skip the full-time salary and benefits.
  • Cash Flow Management: Problems with cash flow can bring a company down more quickly than you can imagine. Even if you have consistent income flowing into the bank account, you can still run into problems if there isn’t enough cash to cover the bills and expenses. Additionally, you need to think about the timing of the payments to make sure the money is available when your bills are due. An accounting team can help you in designing the right system for cash flow management. As you track, budget, and control the flow of money, you can reduce overall costs and increase profit margins at the same time.
  • Cutting Unneeded Expenses: One aspect of cash flow management is looking at the unnecessary expenses that might be cutting into your profit margins. How often do you have small (or large) bills moving through the account that aren’t worth the cost that you are paying? An accounting expert can help you evaluate your spending to identify any areas where you could potentially save money. At the same time, look at the activities and tasks that bring in the most money. Then find ways that you can expand your efforts with the things that are working best to increase revenues for your business.
  • Tax Strategy: Taxes can be a pain point for many business owners, especially when they don’t have the right strategies in place to set aside the right amount for the IRS. It can be a stressful time when tax deadlines approach, and you don’t have enough money in the bank. Not only will an outsourced accounting team help you create a system so that you have the taxes set aside in an account. But you can also create a safe, yet aggressive, tax strategy to leverage all of the write-offs and deductions that are available for your business. This strategy can be beneficial to minimize your tax burden and save you money each year.
  • Business Growth Opportunities: If you are currently spending time on bookkeeping and accounting tasks, what is the opportunity cost of those hours? Consider the way you could be using that time to boost your business efforts and increase revenue. Handing off the bookkeeping responsibilities to an accounting expert means that you can dedicate more of your week to business development, marketing, and client relationships. It’s hard to put an exact value on the potential growth that can come from these activities. But you will see how much these activities can add up over time.
  • Compliance and Regulations: Also consider the money that is saved due to compliance and legal regulations. For example, if you attempt a DIY approach for tax preparation and a mistake is made on the tax filing, then you could be facing a very expensive bill if the IRS finds the mistake. Not only do you have the pay the difference, but you will likely need to hand over the cash for late fees, interest costs, fines, and more. These unnecessary costs can easily be avoided by hiring an expert team to oversee tax preparation and anything else that might affect your company due to financial compliance, laws, and regulations.
  • Financial Reporting Accuracy: When you need to make significant decisions for your company, financial reports can be helpful so that you can see the trends, profit margins, and cash flow. For example, it is hard to know how much money can be put into business development if you don’t have a clear picture of the amount of money that is available. An outsourced accounting team will ensure that your financial reports are accurate. As a result, you can pull these reports on demand to get real-time information about the current financial health of your company. This information will improve your decisions and help with the overall management of spending, employees, and more.
  • Fraud Reduction: An in-house financial management system increases the risk of fraud, especially when you don’t have the right checks-and-balances in place. Even if you think that you can trust your team, there is always a risk that someone will try to skim a little off the top. Whether the employee tries to steal money, or they are taking some of the inventory home, it can hurt your profit margins. Hiring an outsourced accounting and bookkeeping team will give you peace of mind in knowing that you have good financial systems in place to catch fraud before it turns into a big problem.

At Easier Accounting, we offer the skills and services you need to build a solid financial system for your small business. If you are considering outsourced accounting services, then we invite you to contact our team right away to learn more about the available services. Call us at your convenience to see how these accounting and bookkeeping solutions can help to boost your business revenue: (888) 620-0770.

Business Mileage Tracking: Creating a System that Works

One of the benefits of being a business owner is the opportunity to manage your tax burden by leveraging write-offs and deductions that are available. Not only can you write off office supplies and business services, but mileage tracking can be another powerful way to maximize the deductions that are available.

These mileage deductions can be worth a lot since the write-off calculation is based on the number of miles driven in the year. The problem is that many business owners use the vehicle for both personal and business purposes, making it challenging to determine the number of miles that were used for business activities.

Two Options for Mileage Deductions

Working with an experienced small business accountant is the best solution to identify the right method for calculating your tax deductions. Every business is unique, which is why it is always smart to consult with an experienced professional who can offer personalized recommendations.

You’ll find that two methods can be used for mileage deductions:

  1. Standard Mileage Deduction: The IRS sets a certain amount each year that can be used for every mile you drive for business activities. This number changes with time; increasing to accommodate the rising costs of vehicles and maintenance. The calculation is simple because you need to multiply the number of miles driven by the standard rate for the year. You can find the published annual rate on the IRS website.
  2. Actual Expense Method: On the other hand, you can deduct the cost of repairs, gas, insurance, and all other transportation-related costs when you choose the actual expense method. This calculation can be burdensome and time-consuming because of all of the calculations that are required. Not only do you need to focus on business mileage tracking, but you also need to keep track of all applicable expenses.

Recording Business Driving

The IRS requires that your mileage is tracked by recording every mile you drive throughout the year, using a diary or logbook. Every time you get in the car, the trip needs to be recorded. Then, the business miles are pulled out and calculated to determine the write-off for the year. You must record the starting mileage on the odometer, the ending mileage on the odometer, and the reason for the trip.

The problem is that this method can be burdensome and easy to forget when you are working. Most people don’t want to take the time to record the information every time they get behind the wheel! One option is to use the sampling method. This strategy requires that you are consistent about keeping track of your business mileage for a portion of the year. Then, these figures are used to determine the mileage for the whole year by extrapolating the numbers that were calculated when you were recording the business mileage. The sample period needs to be a minimum of 90 days, or you can choose to sample one week per month.

With the sampling method, the assumption is that you are driving about the same amount for business all year long. Even though you aren’t tracking your mileage all the time, you will still need to maintain an appointment book showing the consistency of appointments throughout the year.

IRS Requirements for Business Mileage Tracking

What needs to be included if you choose business mileage tracking to leverage the available deduction? This write-off is offered to 1099 workers, such as small business owners, self-employed people, and freelancers.

W2 workers cannot deduct mileage for tax write-offs. But if a person is working a W2 job and has a business on the side, mileage can be tracked and used as a deduction when driving for the side business.

Qualifying trips include anything related to business activities. For example, you should record your mileage when driving to the bank, picking up office supplies, meeting clients, or driving between offices. Your commute can’t be deducted, but you can track your mileage if you are in the car to run business errands or attend meetings.

The IRS requires that your mileage log includes the following information:

  • Mileage details – the number of miles driven
  • Date of the trip
  • Places you drove
  • The purpose of the trip

At the end of the year, you will need to calculate the total number of miles driven, broken down into three categories: business, commuting, and personal trips. The most effective way to keep these records is by recording the information daily.

Paper or Digital Business Mileage Tracking?

You can keep a dedicated notebook and pen handy and write down the details every time you get in the car. This manual method of tracking is legitimate, but it can be a bit tedious… especially when you need to pull all the numbers together at the end of the year.

Another option is to use a mileage app. A variety of smartphone apps provide the information that the IRS needs, giving you an automated way to log, track, and calculate the mileage details for each trip. The IRS will accept either paper or digital tracking logs, as long as all of the required information (listed above) is included.

One benefit of choosing a digital tracking system is that you can keep a back-up of your records. A physical mileage book could be easily lost or damaged, resulting in problems later on if you need to show the documentation. On the other hand, a digital business mileage log can be saved to the cloud and backed up. The right digital filing system is a powerful way to ensure that your information is never lost along the way.

Tracking your mileage for a business write off is different than a gas logbook to calculate mileage efficiency. If you are keeping a gas logbook, it is still necessary to have a separate tracker for business mileage tracking.

Features of Mileage Tracking Apps

The technology and app access changes so quickly that it can be hard to stay current with the latest recommendations. If you are looking for an app that tracks your mileage, then the best solution is to ask your small business accountant for current recommendations. An online search can also be a great resource to help you compare features and options.

These are some of the features that should be considered when choosing a mileage tracking app:

  • Automated tracking using GPS to detect when and where you are driving
  • Organization of business and personal trips to calculate mileage for the year
  • Minimal drain on your phone battery
  • Documentation for all IRS requirements
  • Option to add a manual trip as needed
  • Easy data exporting to provide information to your accountant

Here are a few mileage tracking apps that you might consider, you can search for them in the app store on your cell phone (such as iTunes or Google Play):

  • MileIQ
  • Everlance
  • Hurdlr
  • Mile Expense Log
  • Stride Drive
  • TripLog

You’ll see that most of these apps are either free or require a minimal monthly fee. It’s worth a few bucks a month to have the right tool that simplifies your life by helping with mileage tracking!

Documentation for Business Deductions

Even though it is important to keep track of mileage logs and other documentation for business deductions, these documents don’t need to be provided to the IRS when it is time to file your taxes. Your business accountant can help with tax preparation and filing based on the records that were kept throughout the year. Keeping accurate and detailed records ensures that you can maximize the potential write-offs, helping to decrease the tax burden you will be carrying.

After the tax return is filed, you still need to hold onto this information in case the IRS requests documentation in the future. If you are selected for an audit, then you will need to provide full information to back up the deductions that were claimed on your tax returns. You may need this information for up to seven years after the taxes are filed.

Leveraging Deductions for Your Small Business

It is easy to let the deductions fall through the cracks when it seems like all of the expenses are small. But a few dollars here and there can add up over the year, resulting in significant tax savings. Why pay more for your taxes when you have the option to write off some of your spending?

Small business tax deductions vary depending on your business model. An experienced, outsourced accountant can offer recommendations and advice about the best ways to leverage your spending and use the deductions to your advantage. Any time you are driving your car or spending money related to business efforts and activities, it is smart to record the details so that you can use them for your taxes.

If you are looking for help with your tax preparation and deductions, then Easier Accounting is at your service. Call our team to learn more about the small business accounting services that are available: (888) 620-0770.

The Small Business Owner’s Guide to Self-Employment Taxes

Self-employment taxes are a necessary and unavoidable part of being a business owner. Building the business feels fun and glamorous, but many entrepreneurs agree that taxes can be both stressful and burdensome. The key is to plan ahead for the tax burden you will be carrying, so the costs and paperwork don’t catch you off-guard. The right financial plan can make it easy to keep up with your self-employment taxes, ensuring that you have money set aside when it is time to make the payments.

Do You Fall in the “Self-Employment” Category?

It is important to understand the IRS’s definition of self-employment to see if these taxes apply to your situation. Knowing the federal regulations and guidelines means that you won’t skip past the tax obligations by mistake.

If you have the goal of bringing in money through work that you do for yourself, then you are considered self-employed. The work that you complete falls in the category of self-employment when you are not a shareholder or an employee.

Keep in mind that your business doesn’t need to actually be profitable for you to be considered self-employed. When you have the goal of earning a profit, and you are putting in regular work towards that goal, then the IRS views your efforts as self-employment. Even if you work as an employee for another company (either full-time or part-time), you still fall under the category of self-employment if you do work outside of your regular job to earn money on the side.

It’s one thing to be paid for a one-off day of work helping a friend with manual labor. A one-time opportunity to earn a bit of extra cash isn’t regular enough to fall in the category of self-employment. But, if you are consistently putting in the effort to engage in activities that bring in a profit, then you are self-employed.

Overview of Self-Employment Taxes

The tax rates can change from one year to the next, which is why it is best to work with a financial professional who will ensure that you are paying the correct rates. Self-employment taxes are calculated by combining your requirements for both Medicare and Social Security taxes.

Both self-employed workers and employees need to pay Social Security and Medicare. When you are working as an employee, your employer pays 50% of the tax burden, and the other half is deducted from your paycheck. On the other hand, self-employed workers need to pay the full 100%.

These self-employment taxes are calculated based on the profits of your business efforts. This is the calculation that is used:

  • Gross (total) revenue – qualifying tax deductions = profit that can be taxed

Since the taxable amount is calculated without the deductions, many business owners look for ways to leverage the deductions as much as possible. It is important to stay within the legal guidelines, and your small business accountant can offer guidelines and recommendations that apply to your situation.

Classifications: When Self-Employment Taxes are Required

You tax classification plays a role in whether you are obligated to pay self-employment tax. If one or more of these classifications apply to your tax filing, then it is smart to talk to a tax accountant for information about self-employment taxes:

  • Independent contractor (freelancer)
  • Sole proprietor
  • Member of a partnership
  • Member or partner of an LLC (single, or multi-member organization) and you haven’t changed your default tax classification

Income Tax vs. Self-Employment Taxes

Don’t mistakenly think that income taxes and self-employment taxes are the same time. Even though there is a difference in the way self-employment taxes are calculated, income tax works the same for everyone.

This income tax rate is also based on the taxable profits, using the calculation listed above. Once the taxable income is determined, then tax credits and personal deductions are calculated in to determine the amount that needs to be paid.

50% of your self-employment tax can be used as a deduction, which helps to reduce the total taxable income for the income tax calculations.

The filing status and tax rates vary, depending on the tax bracket in which you fall. These federal brackets can change each year. In 2019, the progressive range of income tax rates falls between 10 – 37%.

Why You Shouldn’t Kick Taxes to the Backburner

W-2 employees don’t have much to worry about regarding ongoing tax calculations and payments, because these amounts are automatically deducted from their paychecks by their employers. On the other hand, self-employed individuals don’t have the convenience of automatic tax calculations and deductions. It’s your responsibility to ensure that you are keeping track of what you owe and staying current with paying these amounts on time.

You already have a lot to worry about with business-building efforts, marketing, employee management, and more. It might be tempting to push self-employment taxes to the back-burner. But don’t be fooled into thinking that you can deal with taxes at a later date. If you want to avoid a stressful and costly audit by the IRS, then you need to be sure that Uncle Sam is getting his share of your profitable income.

Also, consider the consequences of incorrect tax filings. If you don’t have experience with tax calculations and paperwork, there is a high risk that you might make a mistake. In the case where that mistake is discovered by the IRS in the future, it means that you could be facing expensive fines, interest costs, and penalties. Save yourself time, money, and stress by ensuring that your taxes are calculated, filed, and paid correctly the first time around.

How Often Do Self-Employment Taxes Need to Be Paid?

Most people only think about taxes once a year: in April when the tax filing deadline happens each year. But, if you owe more than $1,000 on the tax return filing, then you will be required to make quarterly tax payments. So, you need to be prepared to pay taxes four times per year.

These payments are calculated by looking at your previous year’s taxable income, then calculating the amount that will need to be paid each quarter. Of course, you can’t predict the exact amount you will earn in a given year, which is why these quarterly payments are called estimated tax payments.

This is the payment schedule for estimated tax payments. You will need to send the payment before or by the end of the day on:

  • Jan 15th
  • April 15th
  • June 15th
  • Sept 15th

Sometimes, these calendar dates fall on a weekend or federal holiday. In that situation, the due date for estimated taxes is pushed to the next day that is not a weekend or holiday. Small business accounting services makes it easy to keep up with these tax deadlines because you will receive estimated tax payment vouchers that list the specific dates for each calendar year.

Other Taxes for Business Owners, Entrepreneurs, and Start-ups

Keep in mind that the IRS only oversees the enforcement of federal taxes. It is possible that you will need to pay state and/or income tax depending on where you live. A few of the states don’t charge personal income tax, so you might consider moving your business efforts to those locations if you have the flexibility of an online income.

Other tax burdens need to be considered as well. For example, if you have employees, then you will need to pay and manage the paperwork for employer payroll taxes. Also, sales tax might need to be calculated on the products and services that are sold, depending on your location.

Be Prepared for Future Payments

With self-employment, it’s easy to make the mistake of confusing take-home pay with the gross revenue. Even though the money is coming into your bank account, it doesn’t mean that it is all yours to pocket. Too often, self-employed business owners spend the cash, then face big cash flow issues in the future when it is time to pay the IRS.

Never make the mistake of making big business decisions based on the money sitting in your bank account, without considering upcoming tax obligations. A good small business accounting software can help you stay current with financial reports and upcoming costs. Use this information to gain a clear picture of the true profits of your business efforts, helping you avoid the pitfalls of not having enough to pay the bills when tax time rolls around.

One of the best things that you can do is set aside a percentage of your money for future tax bills. Since self-employment income is often variable, you can create a system that automatically saves your tax money in a separate account.

Find an Outsourced Accounting Team to Help

Not only is it stressful to keep up with the deadlines for tax payments, but the government forms can be intimidating. Most self-employed business owners choose to hire the help of a local accountant or outsourced accounting services through a reputable provider. Our experienced team at Easier Accounting is always here to assist. If you need help designing the right financial system to keep up with your self-employment taxes and business reports, then we invite you to contact us right away: (888) 620-0770.