Bright Spot Bookkeeping

🧾What do you think is the correct answer?

If you answered B, then nice job! If you chose A or C, then keep reading for why neither of those are correct.

Bank and credit card statements provide some information, but they aren’t a replacement for receipts and definitely won’t hold up in an audit. Statements will show where you shopped and how much you spent, but it won’t show what you actually bought. To prove your purchase was a business expense, you need to show what you bought and that information will only come from a receipt.

As far as being audited, yes the chances of it happening might be slim, but that’s definitely not a chance I’d take. If you’re a small business owner, you’re 3 times more likely to be audited and likelihood of it happening increases the more you make. You can also be audited as up to 7 years following a tax claim so that’s going to be a LOT of missing receipts!

If you haven’t been saving receipts digitally, now is the time to start! Paper receipts don’t stand the test of time, so set yourself up with a system that you can stick with. There are plenty apps ranging from free to monthly subscription or you can add receipts to a Google drive folder using your phone. If you have QuickBooks Onljne, you can add the QuickBooks app to your phone and upload your receipts there which will sync with your QBO.

Make uploading your receipts a daily or weekly habit-you’ll be happy you did if the IRS comes knocking!

1099 season is coming! Stay ahead of the game by getting a W9 from independent contractors that you worked with in 2023. Not everyonr will need a 1099 as it depends on how much they were paid and the method of payment, but you do want to have a W9 on file for that person. My suggestion is to have them give you one before you they start any work.

🙋‍♀️Need help with 1099s or getting caught up with your bookkeeping?
☎️Schedule your call at the link in my bio!

❓Did you know that S-corp owners need to receive a salary on payroll?

This is because owners of S-Corps and LLCs taxed as an S-Corp qualify as employees. You must take a “reasonable salary” and failing to do so can result in penalties. “Reasonable” is vague, so it’s best to discuss with a CPA what this number would be for you and your business.

There are definite tax savings to being taxed as an S-Corp but there are several factors to consider, with the main one being what your net income. I recommend speaking with your CPA when your net income is greater than $75K, but I’ve also seen it suggested at $50K so it doesn’t hurt to check in and get their advice.

The biggest takeaway here should be that if you are being taxed as an S-Corp, then you need to be on payroll-this is a non-negotiable. In the last month I’ve had 2 different businesses sign on for services who didn’t know that as S-Corps they should be on payroll, and both have CPAs who told them otherwise. Save yourself the headache with the IRS and if you’ve also been told this, it may time to find a new CPA!

🙋Are you ready to outsource your bookkeeping or do you have questions about how I can help? Schedule your call at the link in my bio or comment below HELP