Proper Handling of Independent Contractors – BookKeeping Tip

May Bookkeeping Tip

Proper Handling of Independent Contractors

Business owners must have accurate, signed independent contractor agreements and signed W-9 Forms on file from the beginning of the company relationship with that individual, LLC, partnership or attorney. As a general rule, all individuals and companies who are NOT incorporated must be issued 1099 forms by your company by January 31 of the following year, if your company paid them more than $600 in the calendar year. Copies must be filed with the IRS by February 28 or March 31 if filed electronically.

Improper recording of transactions for independent contractors in the accounting system, such as identifying contractors as employees or vice versa, can have severe negative consequences and costs to the business owner. If you are uncertain whether someone providing services for your company is an employee or an independent contractor, refer to the IRS guidelines or ask your accounting or tax professional for assistance in making this determination.

Cara Lee

Communicate With Your Bookkeeper

Keep your bookkeeper informed about your finances.

If you get a loan, provide the documentation.  If you take money from the petty  cash box to go out to lunch, provide the receipt with details.  When you receive your monthly or quarterly detailed report, make sure to review the report carefully, communicate corrections and answer questions.

No one knows your business like you do, so timely communication is essential to accurate reports.  A bookkeeper needs to know where the money goes in order to record the information correctly, keep your accounts reconciled and prevent the loss of valuable business deductions.

Cara Lee

Bookkeeping Tip by FAST LLC (Cara Lee)

HAVE AN ORGANIZED, USER-FRIENDLY FILING SYSTEM This is quite possibly the one thing in the lives of many small business owners that could be improved to efficiently save money and time. Establish, and use, an efficient filing system for all paperwork. Ensure that it makes sense for anyone looking for any receipt or document, and where necessary, keep it under lock and key. Make sure that only key personnel have access, and keep rarely used important documents such as passports, asset documentation and other sensitive material in a fire proof safe or safety deposit box. Establish a daily or weekly filing schedule to make sure this system is not neglected, and make sure both business and personal organization is maintained. Like many things in life, establishing a maintenance routine now can prevent huge problems later.
There’s an old joke that being organized is for people who are too lazy to spend time looking for things!
Cara Lee
602 510 6465

March Tax Tip By Febe Gemlich

Military spousal residency relief act of 2009
Have you ever been confused about what your legal residence really is? Domicile (legal residence) is the place you consider home and where you have been physically present (generally this means lived) and formed the intent to remain for the indefinite future and return when temporarily absent.
For service members and their spouses the rules are similar. A service member does not pay State taxes on pay and allowances earned in the State where he or she is assigned (assuming, of course that the State of assignment and domicile are not the same.) In the past, if the spouse had earned income in the state of assignment, the spouse’s income was taxable to that state.
Effective for tax year 2009 and going forward, the Military Spouses Residency Relief Act (MSRRA) changes the basic rules of taxation with respect to military spouses who earn income from services performed in a State in which the spouse is present with the Service Member (SM) in compliance with military orders when that State is not the spouse’s domicile (legal residence.) Under these conditions, the spouse generally will not have to pay income taxes to the current State where income is earned. The spouse, however, would be required to pay income tax to the domiciliary State (assuming that Sate taxes wages.)
While the MSRRA does not allow a spouse to pick or chose a domicile in any State. Domicile is established, not arbitrarily chosen. The spouse must have actually been present in the State established as his or her domicile, and maintained it as such by forming and maintaining the necessary contracts. Similarly, the MSRRA does not allow a spout to “inherit” or assume the military member’s domicile upon marriage.
The law is complicated and fact specific, and because its effect will depend on the interpretations of each State, SMs and their spouses are encouraged to seek free, confidential advice from a military legal assistance office. Legal assistance offices can be found at .

March Tax Tip By Febe Gemlich.
Arizona Coastal Consultants
Phone 602-670-4268
Fax 888-371-3156

Spring Cleaning Your Business Expenses by SWVCC Member Cara Lee

Spring Cleaning Your Business Expenses

Now that we are well into a new year and nearing tax time, this may be the best time to be assessing how efficiently your business expenses are working for you to maximize profits and growth.

Have you kept up with monthly budgets and financials, or are you scrambling to assemble your records for 2015 because you spent last year flying by the seat of your pants and not keeping track of where your money was going? Maybe now is the time to change direction and be intentional with your budget.

The first task of a financial spring cleaning is to compile and organize your information and make sure that you have the right professional assistance where your available time and skills may fall short. Perhaps for you, this means starting with a professional organizer to streamline the flow of paperwork in your office.

Are your files organized such that you or your office personnel can easily access business receipts or other financial information instantly? Do you have your bank accounts, credit card accounts, invoices and payroll information updated into a software program that can give you an expense report, job costing, profit and loss or other financial reports that can accurately keep you informed of how well your business costs are controlled? Is all of your information secure and do you have regular backup procedures in place to protect you against destruction or theft of data?

Now that you have your organized system and software in place to track and protect your data, it’s time to print and analyze a detailed expense report. As you read through each line item, question the value of each expense using the following criteria:

*Did this item produce any new customers, leads or revenue within the past month, quarter or year?

*Is this item necessary to keep my business running?

*Is this expense necessary to service my clients?

As you check off the items that are deemed absolutely necessary and/or productive to your business, take a hard look at some items that may no longer be efficient or continued in the budget more out of habit than necessity.

Now go forward into 2016 with a leaner, more organized and efficient budget and make your business work for you!
Cara Lee

Four Reasons to Hire a Bookkeeper

Four Reasons to Hire a Bookkeeper:

  1. You are an expert in your field, not in accounting.

Which is exactly how it should be, and why you should spend more time doing what YOU do best and outsourcing the rest.

  1.  You spend too much time trying to reconcile your accounts.

The time and money a bookkeeper can save you is crucial. If you don’t know how to properly allocate a customer advance in liabilities, why a credit card is not an expense in your Chart of Accounts or the difference between Cash and Accrual reporting, you need a professional bookkeeper.

  1. You need to send your customers monthly invoices or statements, but you don’t know how.

This is essential to your communications with your customers and your cash flow.

  1.  You have seemingly simple to use QuickBooks software, but you have no idea how it works.

As a QuickBooks Pro Advisor with 38 years of accounting experience, I know how to use accounting software. I can enter your data so it makes sense – and so will your financial reports.

Here are ten bookkeeping tips to help avoid problems if you are doing all or part of your own:

  1. Don’t procrastinate.

There’s always going to be something that’s more fun to do than your bookkeeping. But if you don’t keep your books up to date, you’ll miss important details such as who hasn’t paid you and when your taxes are due.

It’s a good idea to schedule a regular amount of time to your bookkeeping. Use the time to send invoices, track costs and monitor your cash. This will save time and headaches later.

  1. Separate business and personal entities and records.

Keep personal and business finances separate to make sure you pay the right amount of tax on what your business earns, as well as offering legal protections in the event your business suffers losses or is sued. Form a separate entity for your business and keep separate bank accounts and accounting records.

  1. Track everything you pay for personally.

Even with a separate bank account for your business, there will still be times when you pay for a business cost personally. For example, if you travel to visit a client and purchase airfare using your personal credit card, this still counts as a business cost even though the business didn’t pay for it initially. Use an expense report with attached receipts for reimbursement and accounting.

  1. Keep your paperwork organized.

You may need to quickly find a particular document in your records, such as a receipt or bank statement. Whether you’re keeping your business records electronically or keeping physical pieces of paper, make sure you organize, sort and file documents so they are easy to find.

Keep a small notebook in the car or use a mileage tracking application on your smartphone to track auto expenses. Keep another notebook or application for tracking petty cash withdrawals.

  1. Avoid using cash for business expenses.

If cash is used, it is hard to keep track of spending. By using a debit or credit card you can keep track of amount spent, where it was spent and when it was spent. This makes tracking your expenses much, much easier.

  1. If you’re not sure, ask for help promptly.

When keeping your books, it’s a good idea to stay organized and assign different business costs to different categories. However, you may find you don’t know which category a cost belongs in. For example, should a meal in the next town while visiting a client be classified under travel or meals & entertainment? The difference could determine whether it’s a 50% business deduction or 100% deduction at tax time.

Similarly, you may find you don’t know whether a particular cost counts as a business cost or not, or how to treat something for sales tax.

If you aren’t sure, seek professional help. The issue will not resolve itself and the longer you leave it, the more likely it will be lost, forgotten, or penalized later.

Keeping accurate financial records that you update regularly is a vital part of running a small business. Make sure you don’t put yourself at a disadvantage by neglecting those books.

  1. Review Financials Monthly

At the end of each month, print reports to get an overview of month. You should have a detailed Profit & Loss statement and a Balance Sheet that makes sense and all bank, credit card and loan accounts reconciled. If you have receivables and payables, reports should be run and reviewed.

  1. Update W-9s on file with independent contractor agreements.

Have signed W-9 documents on file for each independent contractor before you pay them, along with a signed independent contractor agreement. You are required to report all non-incorporated companies and individuals who receive more than $600 in a calendar year on a 1099 form filed with the IRS by Feb 28th. Contractor copies should be sent out by Jan. 31st for the previous year.

  1. Keep updated W-4s on file

If you have employees, you must have signed and dated W-4s on file with current information for your W-2 reporting. The same deadlines apply for employee filings as for 1099s.

  1. Have appropriate onsite and offsite data backups

If your computer crashed NOW, how much data would you lose? If this idea makes you break out into a cold sweat, you don’t have a good system in place.


F.A.S.T., LLC Cara-2011-2


Cara Lee