Union City Business Accounting Services

Frequently Asked Questions

1. How do I choose between cash-basis and accrual accounting for my small business?

Cash-basis accounting records transactions when money physically changes hands, while accrual accounting records transactions when they occur, regardless of money exchange. Your choice depends on your business size, industry, and reporting needs.*

2. What tax deductions can I claim for my small business?

Deductions can include business expenses like rent, utilities, salaries, and supplies. Consult with an accountant to ensure you’re claiming all eligible deductions.

3. How often should I reconcile my business bank accounts?

It’s advisable to reconcile accounts monthly to catch discrepancies early and ensure accurate financial records.

4. What are the differences between an accountant and a bookkeeper? Do I need both for my small business?

A bookkeeper records daily financial transactions, while an accountant interprets, analyzes, and advises based on those records. Depending on your business complexity, you may need one or both.

5. How do I handle payroll taxes for my employees?

You’ll need to withhold payroll taxes from employee wages and submit these to the appropriate government agencies. It’s often advisable to use payroll software or engage an accountant to ensure compliance.

6. What financial reports should I regularly review to track the health of my business?

Key reports include balance sheets, income statements, and cash flow statements. Regularly reviewing these provides insights into your business’s financial performance.

7. How can I streamline invoicing and accounts receivable processes?

Utilize accounting software that automates invoicing, set clear payment terms, send reminders for overdue payments, and consider offering various payment methods to streamline the accounts receivable process.

8. What are the key steps for preparing for an audit as a small business owner?

Maintain meticulous records, have organized financial documents readily accessible, understand your financial statements, and consider hiring an auditor or accountant for guidance.

9. What are the common mistakes to avoid in small business accounting to prevent financial issues?

Avoid mixing personal and business finances, neglecting regular reconciliations, not keeping receipts or records, and overlooking tax deadlines or filings.

10. What should small business owners know about accounting?

For small business accounting, understanding three fundamental report types is crucial: balance sheets, income statements, and cash flows. Each report captures distinct values and offers valuable insights into the financial standing of small businesses.

11. Why is accounting significant for small businesses?

Accounting is vital for tracking assets, liabilities, income, and cash flow, providing critical insights for owners, managers, investors, and stakeholders. This information empowers informed decision-making, enhancing overall business performance.

12. Which holds more weight in small business operations, accounting or bookkeeping?

Differentiating between bookkeeping and accounting is key. Bookkeeping involves recording financial data, while accounting centers on interpreting that data. Effective accounting relies on accurate bookkeeping; without it, there’s no foundation for analysis or interpretation.

13. What is a BOI report for business owners?

Beneficial Ownership Information. In 2021, Congress enacted the Corporate Transparency Act. This law creates a beneficial ownership information reporting requirement as part of the U.S. government’s efforts to make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures. www.fincen.gov

Starting from January 1, 2024, lots of companies in the United States will need to provide information about the people who truly own or control the company. This information will be sent to an organization called the Financial Crimes Enforcement Network (abbreviated as FinCEN), which is a part of the U.S. Department of the Treasury. The goal is to increase transparency and help prevent financial crimes like money laundering and fraud. This requirement aims to make it clearer who is in charge of a company and who benefits from its activities.

Who has to report?

1. A corporation, a limited liability company (LLC), or was otherwise created in the United States by filing a document with a secretary of state or any similar office under the law of a state or Indian tribe ; or

2. A foreign company and was registered to do business in any U.S. state or Indian tribe by such a filing.

How do I report?

Reporting companies will have to report beneficial ownership information electronically through FinCEN’s website: www.fincen.gov/boi

• The system will provide the filer with a confirmation of receipt once a completed report is filed with FinCEN.

When do I report?

Reports will be accepted starting on January 1, 2024.

• If your company was created or registered prior to January 1, 2024, you will have until January 1, 2025, to report BOI.

• If your company was created or registered on or after January 1, 2024, and before January 1, 2025, you must report BOI within 90 calendar days after receiving actual or public notice that your company’s creation or registration is effective, whichever is earlier.

• If your company was created or registered on or after January 1, 2025, you must file BOI within 30 calendar days after receiving actual or public notice that its creation or registration is effective.

14. Can I write off business expenses if I don't have an LLC or an S-Corp?

Absolutely, even if you’re freelancer or have a side job, you can still subtract the costs of doing business from your income. It doesn’t matter if you own or not an LLC; the IRS will consider you a sole proprietor. These business expenses, as long as they’re regular and needed for your business, can lower the amount of income you’re taxed on. It’s a way to make sure you’re only paying taxes on the money you actually keep as profit after covering your business costs.

15. What expenses can I claim for my 1099 income?

Only necessary and ordinary expenses related to your industry. Examples:

Office supplies (e.g., paper, pens, stationery).
Home office expenses (such as a portion of rent or utilities).
Business travel expenses (airfare, hotels, meals).
Mileage for business-related driving.
Professional services (accounting, legal, consulting fees).
Marketing and advertising costs.
Business insurance premiums.
Bank fees related to your business accounts.
Payments to subcontractors or freelancers you hire.
Costs for business-related software or subscriptions.
Education and training expenses.
Health insurance premiums (if self-employed).
Retirement plan contributions (e.g., SEP-IRA, Solo 401(k)).
Depreciation of business assets.
Business-related utilities (phone, internet, electricity).

16. Can I hire my kids through my business?

Yes, you can indeed pay your children through your business for legitimate work, and they can earn income up to a certain limit tax-free. The specific income limit can vary from year to year, so it’s essential to check the current tax regulations and consult with a tax professional to ensure you’re following the latest guidelines. This can be a beneficial way to introduce your children to work, financial responsibility, and potentially save for their future while also receiving tax benefits.

17. At what age can I put my kids on payroll?

Payments for the services of a child are subject to income tax withholding regardless of age. Payments for the services of a child under age 18 are not subject to social security and Medicare taxes.

18. Why do I need a registered agent when I open my LLC?

In the United States, having a registered agent for your LLC is often a legal requirement. A registered agent plays a crucial role in ensuring that your LLC receives important legal and official documents, and their designated address serves as the official point of contact for your business. This requirement helps ensure that the LLC can be reached by government agencies, legal entities, and other parties when necessary. It’s an important aspect of maintaining compliance and managing legal matters for your LLC.