Tag Archives: Accounting

03.13 2021

Why Bookkeeping is important?

Bookkeeping is important for helping maintain accurate financial records and the overall health of your business. Yet, many businesses fail to implement this integral process.

Whether you’re doing your own bookkeeping or having outsiders handle it for you, here are several benefits of prioritizing up-to date bookkeeping.

1. Budget
It‘s challenging for businesses to forecast for future expenses and income without any prior year data. Bookkeeping can help organize incomes and expenses properly as well as it makes it easier to review financial health and resources for future planning.

2. Tax preparation
Tax preparation is another complex task that businesses must get done every year. In most cases, its frustrating to find or gather all necessary support documents for filing a tax return. A great bookkeeping function can help businesses be more efficient for tax filing process by simply recording information and being ready for tax time.

3. Financial and Business analysis
By keeping accurate records, business owners get a snapshot of their company health and standing from financial statements. Financial statements, or reports, allow business owners to know exactly where outgoing money is being spent. They can also help find an opportunity or trend to grow their business.

4. Organization
Achieving financial organization is the most helpful and beneficial outcome of bookkeeping for business owners. Thanks to technological development, businesses can increase accessibility to data, conveniently and securely store and share financials and other data, and easily communicate with clients and accountants. A shift from traditional accounting to accounting software encourages businesses to organize and manage their financial information in an efficient manner.

5. Better cash flow
Bookkeeping improves cash flow. Implementing the routine recording of business transactions will allow business to track when their customer and vendor invoices are paid. For business owners, ensuring payment and being paid on time are essential for maintaining profitability. Avoiding outstanding balances in Accounts Payable and Accounts Receivable also helps keep financial reports clean.

Now you know why bookkeeping is important. There are more benefit businesses will gain from bookkeeping. In general, it can save businesses time, money, and stress! If businesses need to implement this integral process, consider hiring a professional or contact us. We are here to help train business owners to encourage business growth together.

02.28 2021

What is the Standard Deduction vs. Itemized Deduction?

Taxpayers have two deduction options: a Standard Deduction or Itemized Deduction. They can either claim the standard deduction or itemized deduction to lower their taxable income. *Taxpayers can do both. Many them might have a question which is better to take for their tax return. Let’s start understanding the difference between Standard Deduction and Itemized Deduction.

Standard Deduction

The standard deductions is a fixed amount that lower the income individuals taxed on. Congress sets the amount of the standard deduction each year. In 2020 standard deduction is:

FIling Status	2020 Tax Year	2021 Tax Year
Single	$12,400	$12,550
Married, filing Separately	$12,400	$12,550
Married, filing jointly	$24,800	$24,800
Head of Household	$18,650	$18,800

*Standard Deduction increases if taxpayer is age 65 or older, or blind.

Claiming the standard deduction makes the taxpayer’s process much easier and quicker, which is one of reason that most taxpayers claim the standard deduction instead of itemized deduction.

Itemized Deduction

On the other hand, Itemized deductions have a list of eligible expenses and taxpayer can take for various expenses they incurred during the tax year. It sometimes exceed the standard deduction, which means that itemizing allows taxpayers to reduce their taxable income. Most common itemizing expenses:

Medical expenses
Charitable contributions
Mortgage interest
Property Taxes
Student loan interest
Child and dependent care tax credit
American Opportunity tax credit
State and local taxes
Gambling losses
IRA contributions
401 (k) contribution
Educator expenses

And, more deductions available.

Which to take?

If your standard deduction is less than itemized deduction, you should itemized to reduce your taxable income.

More information available at IRS-Itemized Deduction and IRS-Standard Deduction

01.18 2021

Second PPP Loan

New COVID relief bill, Paycheck Protection Program passed congress on December 22. A second PPP Loan will be available. Here is a guidance you need to know.

Who is eligible for a second PPP loan?

Similar to the initial PPP loan, eligible small businesses may include:

Small businesses, Non-profit organizations, Sole proprietors, self-employed individuals or independent contractors

Addition to this, applicants must also meet the following

Businesses were in operation prior to February 15, 2020.
Businesses has a loss in revenue in 2020, which must be proved a 25 % or more reduction in gross receipts from any quarter in 2020 relative to the same quarter in 2019.
Businesses may not have more than 300 employees.
Businesses have used up or will use the full amount of their first PPP loan

SBA will provide further guidance such as application processes and required documentations. For the time being, let’s talk learn about any changes made and how those changes could affect you.

PPP Eligible expense list are added

Operational expenses

Payments for software, cloud computing, accounting needs and other human resources

Supplier costs

Expenditures any purchase order, or order for goods made prior to getting a PPP Loan essential to operate

Property damage costs

Property damage costs due to public disturbances that occurred during 2020, which are not covered by insurance

Worker protection expenses

Any personal protection equipment or property improvements and adaptive investments to help a borrower comply with COVID-19 related safety guidance during the period from March 1, 2020 onwards.

PPP expenses are tax deductible

Any expenses covered by a PPP loan can be claimed as tax deductible. The forgiven amount of PPP loans will not be included in taxable income.

12.29 2020

Form 1099-MISC

What is Form 1099-MISC?

Form 1099-MISC is to report payments made in course of a trade or business to non-employee. Although the 1099–MISC is still in use, contractor payments made in 2020 and beyond will be reported on the new form 1099-NEC.

Form 1099-Misc and Instructions

Rents (Box 1)

Enter amounts of $600 or more for all types of rents

Other Income (Box 3)

Enter other income of $600 or more required to be reported on Form 1099-MISC that is not reportable in one of the other boxes on the for

Gross Proceeds Paid to an Attorney (Box 10)

Enter gross proceeds of $600 or more paid to an attorney in connection with legal services (regardless of whether the services are performed for the payer)

Fishing Boat Proceeds (Box 5)

Enter the individual’s share of all proceeds from the sale of a catch or the FMV of a distribution in kind to each crew member of fishing boats with normally fewer than 10 crew members. A fishing boat has normally fewer than 10 crew members if the average size of the operating crew was fewer than 10

Medical Payments (Box 6)

Enter payments of $600 or more made in the course of your trade or business to each physician or other vendor or provider of medical or health care services. Include payments made by medical and health care insurers under health, accident, and sickness insurance programs. If payment is made to a corporation, list the corporation as the recipient rather than the individual providing the services. Payments to persons providing health care services often include charges for injections, drugs, dentures, and similar items. In these cases, the entire payment is subject to information reporting. You are not required to report payments to pharmacies for prescription drugs

Direct Sales (Box 7)

Enter an “X” in the checkbox for sales by you of $5,000 or more of consumer products to a person on a buy-sell, deposit-commission, or other commission basis for resale (by the buyer or any other person) anywhere other than in a permanent retail establishment. Do not enter a dollar amount in this box. The report you must give to the recipient for these direct sales need not be made on the official form. It may be in the form of a letter showing this information along with commissions, prizes, awards, etc.

Substitute Payments in lieu of dividends or interest (Box 8)

Enter aggregate payments of at least $10 of substitute payments received by a broker for a customer in lieu of dividends or tax-exempt interest as a result of a loan of a customer’s securities. Substitute payment means a payment in lieu of (a) a dividend, or (b) tax-exempt interest to the extent that interest (including original issue discount) has accrued while the securities were on loan. For this purpose, a customer includes an individual, trust, estate, partnership, association, company, or corporation.

Crop Insurance Proceeds (Box 9)

Enter crop insurance proceeds of $600 or more paid to farmers by insurance companies unless the farmer has informed the insurance company that expenses have been capitalized under section 278, 263A, or 447 of Instructions for Forms 1099-MISC and 1099-NEC.

Excess Golden Parachute (Box 13)

Enter any excess golden parachute payments. An excess parachute payment is the amount over the base amount (the average annual compensation for services includible in the individual’s gross income over the most recent 5 tax years). Find additional detail on page 11 of the Instructions for Forms 1099-MISC and 1099-NEC.

Federal tax withheld (Box 4)

Enter backup withholding. For example, persons who have not furnished their TINs to you are subject to withholding on payments required to be reported in box 1. For more information on backup withholding, including the rate, see Instructions for Forms 1099-MISC and 1099-NEC