The Balance Sheet, Inc.

Bookkeeping Company | Tax Service

Accountants In West Palm Beach

(561) 842-1304

5725 Corporate Way, Suite 205
West Palm Beach, FL 33407

You are here: Home / Archives for accounting services

5 Tax Accounting Tips To Prepare Your Business for Success

By

Did you just start your own business? Are you wondering what the essentials are to prepare it for success? A large part of ensuring that your business thrives, is making sure that your business funds are properly tracked. This is also known as “tax accounting”, and constitutes the backbone of businesses of any size.

Here are five tax accounting tips to prepare your business:

1.Understand your business entity

As a business owner, you’re liable for a certain amount of tax, depending on your business structure. While you may not have to understand the ins and outs of your particular tax situation, you should have a basic understanding of it.

For instance, you may qualify for substantial tax savings as an S corporation. However, it may be harder to operate than a single member LLC, for example. As an LLC, you may have the option to change the way your business is taxed. Options like being taxed as a regular corporation or an S-corp. Knowing your business entity and the different tax breaks each can provide, has the potential to save you money. Always consult with a tax professional, which leads to our next item.

 2.Consider hiring a professional

 Preparing your business for taxes is a complex task. Consider hiring a professional to help you through this process. The point is not just to get your taxes filed or checking every deduction box.  You want to maximize your tax benefits for your type of business.

A tax professional can help you structure your business for the best tax advantages. He/she can also help you understand the specific IRS requirements for your type of business, so as to better manage your prospective tax liability. While a bookkeeper can help you set up a good record-keeping system, an accountant can handle your year-end tax planning.

3.Get familiar with the various methods of accounting

As a business owner, you must select the accounting method best suited to your type of business. The two methods that are generally used and accepted consist of accrual accounting and cash accounting.

While the accrual method depicts your current, real-time financial situation, the cash method reflects the actual money inflows and outflows occurring in your business. Be mindful of these as you set your business, and consider letting a professional help you determine the best choice.

Cash and accrual are your basic methods of accounting. There are other accounting methods depending on your industry.

 4. Understand what’s deductible in your business

It’s important to understand what is deductible and what is not in your business. This knowledge will help you substantially save on your tax liability.

You can deduct a number of other costs and expenses in your business, including startup costs, education expenses, auto deductions. Equipment, entertainment, travel, and software expenses are also deductible.

5. Track your expenses accurately

Having a complete and accurate record of your expenses is crucial in order to take advantage of any tax deductions. This also means keeping a detailed record of your business transactions, including your mileage log as well as expense receipts. You’ll also need to carefully separate your personal from your business expenses.

It is best to get good bookkeeping software and enlist a professional to set it up for you. That way, using it is user-friendly and built around your needs.

Are you wondering how to apply these bookkeeping tips to your business?

Contact us for a free consultation at (561) 842-1304.

 Sources:

  1. Anon, (2017). [online] Available at: http://www.jelfsmallbusiness.co.uk/media/178275/Tax-Guides-for-Small-Businesses-V04.pdf [Accessed 10 Aug. 2017].
  2. Anon, (2017). [online] Available at: https://www.irs.gov/pub/irs-pdf/p334.pdf [Accessed 10 Aug. 2017].
  3. Staff, I. (2017). Tax Accounting. [online] Investopedia. Available at: http://www.investopedia.com/terms/t/tax-accounting.asp [Accessed 10 Aug. 2017].
  4. co.uk. (2017). Small business tax and accounting guides. [online] Available at: http://www.bytestart.co.uk/section/tax [Accessed 10 Aug. 2017].
  5. Google Books. (2017). K. Lasser’s Small Business Taxes 2017. [online] Available at: https://books.google.com.ph/books?id=o3kxDQAAQBAJ&printsec=frontcover&source=gbs_at b#v=onepage&q&f=false [Accessed 10 Aug. 2017].

Differences Between Bookkeepers, Accountants, Certified Public Accountant (CPAs), and Enrolled Agents (EA)

By

taxaccounting, bookkeeping, tax services

 

You may have heard about the terms bookkeeper, accountant and Certified Public Accountant (CPA), but you may not have heard about Enrolled Agents (EAs). You may also have noticed that these terms often get used interchangeably. Yet, there are some significant differences between them.

1. Bookkeepers

Traditional bookkeepers don’t need to have a college degree. Their main tasks revolve around day-to-day recording of business transactions and monthly accounting cycles. Their duties consist in entering transactions into bookkeeping journals and preparing monthly reports.

In some cases, bookkeepers are also responsible for Accounts Payable or Accounts Receivable. Some of their other responsibilities may include payroll, collection activities and bank deposits.

More experienced or certified bookkeepers grow in their careers to become accountants. In many instances, bookkeepers may work closely with accountants. In terms of salaries, bookkeepers may be less costly to a business than accountants or Certified Public Accountant (CPA).

The Enrolled Agent (EA) will make use of the bookkeepers records to prepare the business’ taxes.

2. Accountants

Unlike bookkeepers, most accountants have college degrees in accounting or 120 to 150 college credits. Their duties generally involve more complex transactions, and adjustments to a company’s books. These include computing the allowance for accounts receivable or depreciation. They are also more likely to work for larger companies.

Bookkeepers record financial transactions. Accountants interpret and classify financial data.

They may also prepare financial statements and perform tax planning activities.

3. Certified Public Accountants (CPA)

Besides a college degree, CPAs also have an extra 30 hours of college coursework. They take a standardized exam to earn their state licenses.

CPAs can handle a variety of complex tasks for businesses and individuals. They perform activities such as tax preparation, financial planning, and investment planning. They may also be in charge of preparing and maintaining financial statements. They can also be involved in audits.

Many careers are available to CPAs in public or corporate accounting. Many CPAs get promoted to high-level executive positions as controllers, for instance. They also give advice in areas like internal and external auditing and forensic accounting.

4. Enrolled Agents (EA)

Enrolled Agent a federally authorized tax professional, who has technical expertise in the field of taxation and is empowered by the US Department of the Treasury to represent taxpayers before all administrative levels — examination, collection and appeals — of the IRS.

Like the CPA they must pass a 3-part exam, all based on tax and tax laws. EAs must complete 72 hours of continuing education every 3 years. They also adhere to strict ethical standards.

When Should Bookkeepers, Accountants, CPAs and/or EAs be hired?

Bookkeepers perform technical transactions requiring less proficiency and training than accountants. The more complex the operations or the organization is, the more important it is to hire an accountant with more expertise.

Accountants or CPAs may perform more technical accounting tasks requiring more expertise. Companies also hire them to provide managerial advice.

Enrolled Agents (EAs) are used for their tax expertise and their ability to represent clients before the IRS.

Are you wondering about the differences between bookkeepers, accountants, CPAs, and EAs? Contact us for a free consultation at (561) 842-1304.

 

Sources:

“The Differences Between Bookkeepers Vs. Accountants Vs. CPAs.” The Finance Base. Accessed August 26, 2017. http://thefinancebase.com/differences-between-bookkeepers-vs-accountants-vs-cpas-4980.html.

Staff, Investopedia. “Certified Public Accountant – CPA.” Investopedia. November 19, 2003. Accessed August 26, 2017. http://www.investopedia.com/terms/c/cpa.asp.

CPA VS Accountant. Accessed August 26, 2017. http://www.accountingedu.org/cpa-vs-accountant.html.

“What’s the Difference Between a Bookkeeper and an Accountant?” QuickBooks. May 19, 2017. Accessed August 26, 2017. https://quickbooks.intuit.com/r/bookkeeping/whats-the-difference-between-a-bookkeeper-and-an-accountant/.