...

Tag Archive for: online accountant

The Backbone of Growth: Why Bookkeeping is Essential for Scaling Your Business

/by

Small Business Owners are almost always forced to balance various aspects to ensure their operations run smoothly. Apart from taking care of day-to-day chores and making growth plans, business owners always have a lot on their plates.

However, one aspect worth highlighting is bookkeeping. While often overlooked and sometimes seen as routine by small business owners, it is the foundation for growth.

Bookkeeping is the backbone of growth for small businesses. This article delves into the role of bookkeeping in scaling up small businesses and the benefits of outsourcing this task to professionals like Xendoo.com.

Understanding the Importance of Bookkeeping

In reality, bookkeeping is more than just keying in transactional data; it involves financial analysis to ensure that the business remains healthy financially. Good bookkeeping will ensure that small businesses have accurate, current reporting of financial statistics on a company. It provides a platform to record revenue, control outflows, maintain up-to-date liquidity, and make well-grounded decisions for the future of the business.

Bookkeeping is essential and even more critical for small businesses attempting to grow. It lays the groundwork for the financial plan and the budget. Through these tools, one can dedicate time to expansion and areas affected by risks. There must be sufficient information for businesses to address their opportunities and overcome challenges with an enterprise account.

Challenges Faced by Small Business Owners

Although it is undeniably vital, keeping accurate bookkeeping records for small businesses can be challenging for many owners. The reality is that most small businesses face these challenges: limited time, resources, and skills are among the factors that make it difficult to have accurate and complete accounting records. An issue that small businesses also face is the intricate tax laws and regulations, which make things more complicated.

All small business owners, however, have to be wary of poor bookkeeping practices and their consequences. Only complete or reliable financial documents may result in missed chances of taking tax deductions and due date penalties, discouraging the firm from pursuing the tax deductions. Moreover, it can also cause legal problems. It can also be challenging to raise funds or find a pool of investors; thus, the business may need to improve its growth mission.

Outsourcing Bookkeeping: A Smart Solution

Handing over bookkeeping tasks to a third party can be a very effective way for a small business with bookkeeping struggles to cope. Outsourcing provides the owners with the freedom to run the business and allows experts to manage the financial records. Money is conserved, and resources are utilized efficiently because the books are always up-to-date and accurate.

Xendoo.com helps small businesses run by providing accounting services according to their specific requirements. Whether you need help with daily bookkeeping duties or catching up on your past-due debt, Xendoo.com is always available to help you. Their team of veteran professionals who are aware of the distinctive problems affecting small businesses and may even provide you with all the support that you need to grow.

Along with expanding a business comes the escalating number of bookkeeping tasks. Delegating financial reporting to Xendoo.com is a sure means of ensuring that the balance of your business’s size and efficiency remains. Xendoo.com has helped several small enterprises save time and money by outsourcing their bookkeeping to Xendoo.com. Partnership with Xendoo.com has resulted in improved operations, the allocation of fewer resources, and, ultimately, better financial outcomes for these companies.

Xendoo.com: Your Partner in Financial Success

Xendoo.com is not confined to mere bookkeeping services; it is your companion for better business dealings. Xendoo.com has a team of experienced professionals actively assisting small businesses’ success. They offer a broad range of services to streamline financial management and enhance growth. The strength of Xendoo.com lies in its capability to develop unique and personalized solutions for businesses of all sizes. Whether you’re a start-up business aimed to secure a sound financial basis or a well-established one endeavoring to go big, Xendo.com’s experts plan thoroughly with you, considering your business specificity and defining a roadmap of the firm’s goals.

The Spine of Xendoo.com’s services lies in effectiveness and reliability. At Xendoo.com, we use current technology and standard accounting procedures to provide timely and accurate financial reports that are always compliant. Besides the function saving you time, it minimizes the chance of mistakes, and you avoid penalties. From identifying cost-saving opportunities to boosting future sales, the experienced Xendo.com advisors are here and ready to offer guidance to help you grow.

Besides being just a bookkeeping company, xendoo.com also offers various services catering to all your financial requirements. Whether you need tax preparation CFO services or a catch-up service to repair your finances, Xendoo.com can help you. The website xendoo.com allows small enterprises to succeed in this challenging world through custom solutions, strategic advice, and broad services. Are you a business owner seeking profitability and success at the next level? Give Xendoo.com a try and experience the difference.

 

Conclusion: Invest in Your Business’s Future with Xendoo.com

In summary, records management is a default for scaling your business. You can get a snapshot of the financial state of your business if you invest in the art of correct bookkeeping, which will help you make the right choices regarding the future of your business. Through xendoo.com, you can only relax and be sure that there is no possible threat your records might face.

About Xendoo

We share your passion for small businesses and are inspired by your dedication to making your dreams a reality. That’s why we’re committed to providing you with the financial visibility and support you need to thrive.

More Than Just Numbers

It’s more than simply crunching numbers. It’s about building meaningful relationships with our clients and understanding their needs. Our people-first mentality ensures you receive personalized attention and expert guidance throughout your financial journey.

A One-Stop Solution

Xendoo offers a comprehensive suite of services, including:

  • Full-service bookkeeping and accounting team to free up your time and resources.
  • Hassle-free tax preparation and filing
  • Fractional CFO Services to work with you on a roadmap of future growth
  • A dashboard that provides real-time financial insights

Passionate about your success? Xendoo is, too. We provide the financial visibility and support small businesses need to thrive and scale. Let us handle the financial burden so you can focus on what matters most – running your business and achieving your goals.

Contact Xendoo today and discover how we can give you time back to grow your business.

7 Last-Minute Tax Tips: Quick Actions Small Business Owners Can Take to Meet the April 15th Deadline

/in /by
tax tips for small businesses

As the April 15th tax deadline approaches, small business owners are on a tight schedule to get their financial books in order and finalize their tax filings. Timely tax preparation ensures compliance with the Internal Revenue Service (IRS) and can maximize potential tax savings. This becomes a critical period in business, and specific strategic actions must be taken so that small businesses remain compliant, maximize returns, and minimize liabilities when filing taxes. This article provides seven actionable tax tips to help small business owners navigate the crunch time effectively.

Organizing Financial Records

Gathering Necessary Documents and Receipts

As one of the basics for filing taxes, small businesses must gather all pertinent financial documents, such as invoices, bank statements, expense receipts, and payroll details. Gathering these documents helps small businesses aggregate and systemize these records to afford a vast, complete record base for use in tax preparation and filing.

Utilizing Accounting Software for Efficient Record-Keeping

Accounting software simplifies record-keeping, facilitating easier tax preparation and real-time financial tracking. Nowadays, small business owners are privileged to have several programs dedicated to clientele and account record-keeping management. Up-to-date accounting software helps your business to integrate seamlessly with other leading accounting software platforms. It offers you direct access to ensure your business’s financial data is accurate and up to date for filing taxes. Thanks to such tools, financial data can be structured and sorted according to the classification rules in preparation for tax filing.

Creating a Checklist to Ensure Nothing Is Overlooked

For small business owners, a broad checklist will guard against the usual omissions and assure the inclusion of all required documents and information, which are requisites during the preparation to file taxes. A checklist should comprise the fields of income, deductible expenses, tax documents, and any specific information related to their unique business type. At the end of this financial review, the business owner should have a checklist covering all financial records.

Maximizing Deductions and Credits

Identifying Eligible Business Expenses

Understanding what makes up a deductible business expense helps ensure small businesses make the most of tax-saving opportunities. From home computers and vehicles to social networking-related expenditures to staff and benefits, all business owners should be careful to keep relevant documentation as this will enable them to use the deduction system to the utmost extent. Identifying eligible business expenses helps small business owners take advantage of all possible deductions.

Exploring Available Tax Deductions and Credits for Small Businesses

The tax code gives an array of deductions and credits meant to support small businesses. Alongside typical business expenses, SME proprietors must check for available pertinent deductions to their sector. For instance, the Small Business Health Care Tax Credit, the Research and Development Tax Credit, and several state and local incentives are all geared towards the same purpose: promoting small businesses. We guide you to strategically employ the most recent tax benefits to lower your taxable income and increase your tax savings. At Xendoo, we also keep up with the latest tax benefits to ensure that businesses signed with us get the most out of the benefits.

Strategizing to Maximize Tax Savings

Strategic tax planning is essential to optimizing small business outcomes. With a thorough knowledge of eligibility for deductions and credits, entrepreneurs can now employ tactics that help them minimize tax liability. This could involve reformatting certain parts of the business systems or making good use of the timing of investments and purchases by aligning them with tax compliance. Our bookkeeping services include expert professional advice on the structure of transactions and operations to maximize available benefits and opportunities by saving more on your tax bill.

Navigating Tax Law Changes

Highlighting Recent Changes in Tax Laws Affecting Small Businesses

Tax laws are constantly changing, and they significantly affect small businesses. Significant updates and modifications are made to initial tax laws as often as monthly. Business owners should consider keeping themselves updated with recent amendments that may frame their filing of return of income, which otherwise can be detrimental to the company due to delayed payments and, in some extreme cases, penalties. Let us help you stay updated with all the changes to ensure your business stays compliant and takes advantage of new opportunities the tax law updates might create.

Understanding Implications and Opportunities Presented by Tax Law Updates

Effective tax planning considers the implications and impacts of the changes in tax laws and their applicability. Each tax legislation change has pros and cons because of its diverse impacts. Both partnerships and LLCs need to be fully informed about these impacts regardless. These changes bring about essential tax savings if carefully considered. Our book-handling services provide you as a business owner with expert analysis on how changes in tax laws impact your business and alert you to opportunities that will see new provisions for tax savings.

Consulting with a Tax Professional for Personalized Guidance

Most tax law changes require interpretation. Accounting for complicated tax laws and the high rate of environmental changes leaves small companies with only one option: to reach out to experienced tax lawyers or accountants. These professional consultants can offer personalized advice and tailor it to the specific needs and circumstances of the business so that any unclaimed deductions and credits are discouraged and errors are avoided. Our people-first mentality ensures you receive personalized attention and expert guidance throughout your financial journey. We share your passion and your dedication to making your dreams a reality inspires us. That’s why we’re committed to providing you with the financial visibility and support you need to thrive. We build meaningful relationships with our clients and understand their needs.

Utilizing Technology for Efficiency

Overview of Tax Preparation Software Options

The right tax preparation software can greatly increase efficiency and accuracy during tax filing. In the digital era, small business owners have many tax preparation software applications that can facilitate filing by shortening the time to prepare the returns. Be it user-friendly tools designed specifically for small businesses or more comprehensive solutions covering complex tax scenarios, these tools make tax preparation a more straightforward job driving the sector’s development. Based on your business’s needs, we have bookkeeping and accounting solutions that best match your business model and streamline tax filing.

Streamlining Tax Filing Processes with Digital Tools

Digital tools help automate many stages of tax preparations, from calculations to final submission. This effort reduces time and creates a lower risk of human mistakes since accuracy is considered higher when filing taxes. With the help of the best technology, Xendoo.com is there to make your tax filing process a breeze, assure you that you save time, and reduce the possibility of making a mistake.

Ensuring Data Security and Accuracy When Using Technology

In digital tax preparation, prime concentration is paid toward data security and accuracy. Although technology, in some cases, may provide support in tax preparation, and there are some instances when using data digital tools is indispensable, it’s equally important to keep in mind the necessity for the security of the data and accuracy in using the digital tools. Small business owners need to use due diligence in choosing a software provider based on how the company ensures the data stored on their platforms are secure. at Xendoo.com uses advanced security measures to protect your financial data and ensure that your tax filing data is safe and accurate. Our entry systems enable small business owners to double-check their calculations and entries when inputting information to ensure the accuracy of their financial records.

Handling Contractor Forms and Other Documents

Collecting and Verifying 1099 Forms from Contractors

Proper management of the 1099 forms is crucial to accurate tax reports. Small businesses dealing with independent contractors must be cautious; they must collect and review the 1099 forms from each contractor before the year-end tax deadline. These forms provide crucial details about grants whose payments were given to private contractors, and if a mistake is made, it may result in penalties or audits. Small firms could be income earners from various origins, i.e., sales, services, investments, and properties that can be rented. Our bookkeeping services help collect, verify, and organize 1099 forms from your contractors to help achieve compliant and accurate payment reporting to the contractor.

Reporting Income Accurately from Various Sources

Accurate tax filing means accurately reporting income from different sources. It is crucial to meet all income-earning sources to avoid incurring fines and comply with tax laws. Keeping journal entries up to date and comparing individual credit memos to the financials is critical to correct income reporting. Accuracy must be maintained in reporting, thereby minimizing the chances of errors and penalties.

Tips for Addressing Discrepancies or Missing Information

Small business owners must attend immediately to the discrepancies or missing information resulting from contractor forms or other documents. This may involve contacting subcontractors for explanations, private consultation with tax specialists, or appeals to the authority of relevant government agencies to receive the correct and timely reporting. Xendoo’s bookkeeping services include the expertise you need to correct discrepancies or fill in missing information to ensure your tax filings are complete and accurate. We provide the financial visibility and support small businesses need to thrive and scale. Let us handle the financial burden so you can focus on what matters most – running your business and achieving your goals.

Avoiding Common Tax Mistakes

Identifying and Avoiding Common Errors in Tax Filing

Due to the intricacy and probability of compounding errors with this process, filing taxes has often been a difficult task for small businesses to deal with. Succinctly stated, the common pitfalls involve underestimated cost of living, forgetting to inform about income sources, neglecting required forms, and misunderstanding of tax laws. These are common mistakes that may lead you to an audit or penalty. Xendoo.com will help you avoid such pitfalls and, more so, help you be sure that your tax filing is error-proof.

Double-Checking Calculations and Entries for Accuracy

All business owners want to avoid mistakes by double-checking all calculations, entries, and documents; that is why they should check everything before filing their tax returns. One preparation step is to review the financial statements, check deductions and credits, and ensure that all incomes and expenditures are reported appropriately. Small business owners need to ensure that their business records are accurate down to the last decimal, especially when it comes to entered data and calculated entries.

Learning from Past Mistakes to Improve Future Tax Filings

Analyzing previous tax filing processes and pinpointing mistakes can be crucial steps for small business owners that will allow them to enhance their capabilities. By studying past misstatements and trying to improve the trajectory to rectify them, any future filings will be accessible, and the chance of mistakes being made will be significantly reduced. From analyzing records, we at Xendoo offer insights that would prevent past financial record-keeping mistakes from happening; this progressively improves your filing.

Exploring Extensions and Estimated Tax Payments

Understanding the Option to File for a Tax Extension

It does add some time to your tax preparation, but it can do wonders to ensure things are correct. Often, small business owners are granted an extension on their taxes when there is insufficient time to collect all the requisite information or finalize filing the tax return. This can erase the panicky situation for the last minute and not push filers to submit hurried or faulty filings, which can attract penalties and errors. However, small business owners need to ensure that the extension pushes the filing due date rather than the extent of the payment deadlines. Xendoo.com can walk with you on how to file an extension and ensure you know what it means and what it takes.

Making Estimated Tax Payments to Avoid Penalties

Small business owners who anticipate owing taxes are advised to consider making estimated tax payments to prevent cheques or interest charges. If the pre-bid meeting or communication is not done correctly, the procurement officer can be liable for heavy fines, even with the extension sought. Calculate and pay estimated tax so that penalties are withheld with the extension. We offer you advice on making those payments and remaining in a positive standing with your business.

Factors to Consider Before Opting for an Extension or Estimated Payments

It is vital to consider whether filing an extension or paying estimated payments would be better for your business. Before deciding to get an extension or making the estimated tax payments, small business people should apply critical thinking only to their particular situation. For instance, whether they have cash flow, the tax returns they file, and whether they need all the necessary documents. Seeking tax advice from professionals not only helps a taxpayer to make the right choice but also to understand various tax implications.

Navigating the tax season requires diligence, strategic planning, and support. By favorable implementation of the seven top last-minute tax strategies, small business owners will confidently navigate the intricacies of tax filing while ensuring compliance and maximizing potential savings. Taking advantage of guidance from an experienced tax advisor is a necessary process that will help reconstruct the tax code and its regulation changes. Remember, the goal is not just to meet the deadline but to do so in a way that benefits your business’s financial health and future growth prospects.

About Xendoo

We share your passion for small businesses and are inspired by your dedication to making your dreams a reality. That’s why we’re committed to providing you with the financial visibility and support you need to thrive.

More Than Just Numbers

It’s more than simply crunching numbers. It’s about building meaningful relationships with our clients and understanding their needs. Our people-first mentality ensures you receive personalized attention and expert guidance throughout your financial journey.

A One-Stop Solution

Xendoo offers a comprehensive suite of services, including:

  • Full-service bookkeeping and accounting team to free up your time and resources.
  • Hassle-free tax preparation and filing
  • Fractional CFO Services to work with you on a roadmap of future growth
  • A dashboard that provides real-time financial insights

Passionate about your success? Xendoo is, too. We provide the financial visibility and support small businesses need to thrive and scale. Let us handle the financial burden so you can focus on what matters most – running your business and achieving your goals.

Contact Xendoo today and discover how we can give you time back to grow your business.

The Top 5 Benefits of Catch Up Bookkeeping

/in , /by
Young cafe owners sitting at table, working on their catch up bookkeeping

Whether they coach chess players or sell organic puppy food online, every small business owner shares a common driving force: a passion for growing their business. Increasing sales and gaining new customers is one part of the equation. Consistent bookkeeping provides the financial insight needed to strategize for long-term success. With so many obligations resting on the business owner’s shoulders, it can feel like there are not enough hours in the day to accomplish every task, and eventually the books may fall behind. 

Even if the books are only behind a few weeks, up-to-date records are crucial for the financial well-being of every business. Catch up bookkeeping accelerates business growth by increasing financial visibility, which enables business owners to make decisions based on accurate information and remain tax-compliant throughout the year! In this blog post, we are exploring the top 5 benefits of catch up bookkeeping!   

Reliability in Your Opening Balance

The Opening Balance is the amount of money in your bank account at the beginning of a new financial period, such as the start of the month. Be aware that your bank account does not necessarily reflect the exact amount of cash that is available to spend. For example, if your Opening Balance states that you have $50,000, but $20,000 worth of checks have not cleared yet, the actual balance is $30,000. The best practice is to consult your updated accounting software or financial statements, which provide insight into your true financial position.

The financial statements report revenue, expenses, and profitability, all of which contribute to the Opening Balance. They also guide decision-making and reveal opportunities for business growth. The more up-to-date your books are, the more reliable your financial statements (and Opening Balance) will be! 

If your bookkeeping is behind, there will be little to no financial data for that time period, which means you will not know your true Opening Balance for today. For example, if your account was reconciled in January, but February was skipped, the Opening Balance would be incorrect for March. This could skew your numbers going forward, and costly choices could be made based on inaccurate data. This could also affect future bank account reconciliation, as well as the balances in your revenue, costs, and expenses. It is a vicious cycle.

Catch up bookkeeping corrects these issues and provides clarity and accuracy in your financials. Once your books are caught up, keeping them up-to-date becomes second nature.

Financial Accuracy Through Bank Account Reconciliation   

A bank account reconciliation is performed to confirm that your accounting records match the information in your bank account. It is an opportunity to identify and correct any bookkeeping errors before the financial statements are finalized, as well as detect and prevent fraudulent activity in your bank account. Bank account reconciliation also ensures that you are accurately reporting your income to the IRS. The best practice is to reconcile your bank account once a month. 

Proper bank account reconciliation can only be accomplished when the books are up-to-date. By getting your books caught up, you can ensure the reliability and accuracy of your financials each month. 

 

Cash Flow Management

Catch up bookkeeping can have a significant impact on cash flow. When your books are caught up, you can pinpoint how and when cash enters and leaves your business each month. This delivers a deeper understanding of your cash needs, so you can create a plan for cash flow management. 

For example, as your books are caught up, you may uncover past due invoices, or find that you are sending out vendor payments before you receive the cash needed to cover them. 

With this insight, you can monitor your Accounts Receivable to ensure you are paid in a timely manner going forward, and find solutions for the timing of your own payments. You can also forecast future cash needs to be confident you have what you need for continued operations.   

Click here to learn more about cash flow.  

Insight into Net Income

Keeping your books up-to-date plays a vital role in calculating your bottom line, or Net Income, which is the profit that remains after all costs and expenses are subtracted from revenue. In order to know your true Net Income, all business expenses must be accounted for through accurate and timely bookkeeping. This understanding of your Net Income provides the opportunity to increase your bottom line. 

Getting your books caught up is also essential when applying for loans. Creditors and investors examine Net Income when deciding to invest in a business, as it highlights the business’s ability to pay back loans efficiently. Catch up bookkeeping determines your bottom line, so you can understand and increase the profitability of your business, meet loan requirements, and secure funding for your next venture!     

Click here to learn more about Net Income.   

Tax Compliance

As tax season draws closer, a concern that many business owners have is under or over reporting their earnings, and missing out on deductions. They may also experience a back and forth with their Tax CPA over missing documents and gaps in their financials. Breathe a sigh of relief – catch up bookkeeping takes the headache out of tax season!

By getting (and keeping) your books caught up, you can identify the deductions you qualify for, maximize your tax return, and stay compliant all year long! 

Get Your Books Caught Up with Xendoo

Behind on your bookkeeping? You are not alone! 25% of business owners are behind on their books. Get a fresh start with catch up bookkeeping services from Xendoo, so you can take your time back and focus on the future of your business. 

Let’s chat! We would love to get to know you and your business. Click here to schedule a free consultation.

How Do I Pay Myself and My Taxes as a C-corporation?

/in , , /by
Diverse group of business owners in a C-corporation, reviewing documents together

When businesses are first created, every responsibility falls on the business owner. As they juggle increasing sales, customer service, marketing, and even bookkeeping and accounting, two questions come to mind – how do I pay myself? How do I pay my business’s taxes? 

Self-payment for small business owners is far from simple. There are certain requirements for the amount you pay yourself, and even how you receive payments. That is why the Xendoo team has created this guide to help you navigate self-payment and taxes as a C-corporation owner!

How to Pay Yourself as a C-corporation: Salary or Dividends  

The payment you receive depends on your role within the company. C-corporations are made up of the following roles:

Xendoo provides financial visibility to C-Corp owners through online bookkeeping, accounting, and tax services.

Directors, officers, and employees in a C-corporation take a salary, which is subject to payroll taxes. Shareholders can take a salary and dividends, which are allocations of stock from retained earnings, if the company chooses to distribute profits. Some shareholders opt not to take dividends, which will be discussed shortly. 

In smaller C-corporations, one person can act as the shareholder, director, officer, and employee. Shareholders can also be involved in the day-to-day operations of the company, and are referred to as shareholder-employees. 

How Do I Pay My Taxes as a C-corporation?

C-corporations are considered separate legal entities from their owners. This means that the business is taxed at the corporate level, with dividends being taxed again at the shareholder level, resulting in double taxation. Smaller companies may choose to avoid dividend payments for this reason. 

C-corporations file their taxes using Form 1120, which reports the business’s income, losses, credits, and deductions. If shareholders take dividends, they use Form 1099-DIV to report the amount that was distributed to them. 

To ensure that your C-corporation taxes are filed correctly and on time, you can partner with an online CPA. They will help you to maximize your tax savings and enjoy peace of mind during the most stressful time of the year.

Are Salaries and Dividends Tax-Deductible?

Dividends are not tax-deductible expenses, but shareholder-employee salaries are – as long as they are reasonable. Some business owners may take high salaries in order to reduce the company’s taxable income. However, if the salary is too excessive, it could be reclassified as a dividend payment, taxed at the shareholder level. The company would then lose that excess salary as a deduction. On the other hand, if the salary is too low, it can be considered an attempt to avoid employment tax liability, which could draw scrutiny from the IRS. 

Every business is different, so the salaries that business owners take will vary. To get started, you can take a look at the factors the IRS uses to determine a reasonable salary for shareholder-employees in C-corporations: 

  • What comparable businesses pay for similar services. If an employee’s salary falls in line with what similar businesses pay for that position, the salary will be considered reasonable. 
  • Character and condition of the corporation. If the company is performing exceptionally well, an above-average salary can be considered reasonable. 
  • The role of the employee within the business. The IRS considers the hours the employee works, the duties they perform, and the contributions they make to the success of the business. If the employee receives a raise, they must also receive an increase in responsibility for their salary to be considered reasonable. 
  • Internal consistencies in establishing compensation levels. Inconsistencies in the compensation of other employees can suggest that the employee’s salary is unreasonable. 
  • Conflicts of interest in setting compensation levels. Conflicts of interest occur when there is a clash between personal interests and professional obligations. For example, if a shareholder attempted to disguise dividends as a deductible salary, the IRS would deem the salary unreasonable. 

You do not have to figure your salary out on your own. Discuss your options with an online C-corporation accountant at Xendoo today! 

Start in minutes
Bookkeeping? Taxes? CFO services?
Our bookkeeping and accounting experts keep your books clean, organized, and on time, every time.

Xendoo is Here for You

Every business owner deserves an accounting team that is dedicated to their financial success. Xendoo provides online bookkeeping and accounting services to C-corporation owners, so they can make the most informed decisions for their business!

We would love to get to know your business. Click here to schedule your free consultation. 

Want to learn more about the different business entity types? Click here.

How Do I Pay Myself and My Taxes as a Partnership?

/in , , /by
Two young black business owners working on a computer

Every partnership owner faces the unique challenges of self-payment, tax filing, and maximizing their tax savings. Although they would rather focus on growing their business, taxes and payroll often take up too much of their valuable time. 

If the self-payment struggle is all too familiar to you, Xendoo is here to help. We have created this guide to help you pay yourself and maximize your savings as a partnership owner!

How to Pay Yourself as a Partnership Owner: The Owner’s Draw or Guaranteed Payments 

Partnership owners pay themselves by taking an owner’s draw or a guaranteed payment, with profits distributed to each member based on the partnership agreement. Note that partnership owners are not permitted to take a salary, as the IRS states that you cannot be both a partner and an employee. 

The Owner’s Draw

An Owner’s Draw differs from a regular salary in that you can take money from the company’s earnings as needed, rather than on a scheduled basis. Depending on how well your business is performing, you can draw more or less, allowing for flexibility in your payments.

 

If your business is profitable, subtract liabilities (any debt your company owes) from assets (items of value the company owns). The remaining amount is referred to as ownership equity, which is what you will take your draw from. This amount is reflected on the Balance Sheet, under Owner’s Equity. Once you determine the amount you want to take, it can be transferred from your business bank account to your personal account.  

 

Because the Owner’s Draw is taken from ownership equity, it reduces the funds that can be used for operating or growing the business. Partnership members must balance how much they need to support themselves and what the business needs to thrive.

 

Guaranteed Payments

What if your business is in the early stages, and not producing profit yet? The solution lies in guaranteed payments. 

 

Guaranteed payments are a minimum amount that is guaranteed to be paid to a partner regardless of business profitability. The payments must be made even if the result is a loss for the business. They provide a consistent income to partners as the business grows and becomes profitable. Note that if the business is operating at a loss and providing guaranteed payments to partners, that loss must be funded through debt or investments (equity) to ensure that the necessary expenses of the business can be paid. 

 

Discuss your options with an online partnership accountant at Xendoo. They will provide the financial insight needed to make the most informed decision regarding self-payment in your partnership! 

How Do I Pay My Taxes as a Partnership Owner?

Partnerships file their taxes using Form 1065, which determines that each partner is reporting their income correctly. Each partner must complete an accompanying Schedule K-1, which breaks down their share of the profits and losses. They also report this information on their individual tax return (Form 1040), with a Schedule E attached. The owner’s draw is not subject to payroll taxes, but it is considered personal income and is taxed accordingly. If partnership members take the owner’s draw, they must pay estimated taxes, which helps decrease their tax bill. 

 

Guaranteed payments are tax-deductible to the partnership, and are treated as self-employment income for the partnership members. They are reported on the Schedule K-1, and noted as income on the Schedule E. If the partnership members choose to take guaranteed payments, they will pay both income tax and self-employment taxes as individuals. 

What are the Tax Advantages of Filing as a Partnership? 

No Double Taxation 

The partnership itself does not pay income taxes. Partnerships are considered “pass-through entities”, meaning that profits and losses “pass through” the business to the partners, with each paying a portion of the total income tax of the business’s earnings. In this situation, profits and losses are only taxed at the personal level, which allows partnerships to avoid double taxation. 

 

Even with a significant tax advantage, taxes can still be stressful. Talk to a small business CPA at Xendoo. We provide online accounting for partnerships, as well as online bookkeeping services so you can stay tax-ready all year long.

Xendoo is Here for You

You are not alone as you navigate self-payment, tax filing, and all the financial ins and outs of your partnership. Xendoo is here to help! Our online bookkeeping and accounting team provides partnership owners with the financial insight needed to make the most informed decision regarding self-payment and partnership taxes! 

 

Are we a fit for your partnership? Get started today with a free consultation.

 

Want to learn more about the different business entity types? Click here.  

How Do I Pay Myself and My Taxes as an S-corporation?

/in , , /by
White female business owner and black male business owner using a laptiop, looking happy about business performance

When businesses are born, business owners are likely not daydreaming about taxes and payroll. Yet, they still face the unique challenge of figuring out how to pay themselves, file their taxes, and maximize their tax savings.

As their business grows, many business owners opt for S-corporation Election due to the tax advantages it presents, but they must be mindful of how much they pay themselves, in order to remain compliant in the eyes of the IRS. Unless they moonlight as an experienced accountant, self-payment and tax filing can be confusing and stressful for small business owners – understandably so!

Like most things involving taxes, it gets complicated. That is why we have created this comprehensive guide to help business owners pay themselves and maximize their savings as an S-corporation!

How to Pay Yourself as an S-corporation: Salary and Distributions

Under other business structures, you simply take a share of company profit as your payment. In an S-corporation, you have the option to pay yourself in two ways: 

  • Salary, your wages or reasonable compensation. This is considered taxable income to the payee by the IRS.
  • Distributions, the earnings that are paid as distributions to you as the owner. These are not employee wages and are not taxed as self-employment income in an S-corporation.

For example, if your business produced $100,000 in profit, you could take a reasonable salary of $40,000, and the remaining $60,000 as a distribution. It may seem strange to receive payment in two different forms, but it comes with significant tax savings, which will be discussed shortly. 

How Much Do I Pay Myself as an S-corporation? 

The short answer is, it depends.

S-corporation shareholder-employees are required to receive a reasonable salary, which is generally defined as at least what other businesses would pay someone in that role for similar services. Every business is different, so the exact amount that business owners pay themselves will vary. 

To determine your reasonable salary, you can start with the U.S. Bureau of Labor Statistics, which provides insight into compensation across different industries. This will give you an idea of what you should be paying yourself based on your field and the profit you produce. 

Some of the factors the IRS considers to determine a reasonable salary are:

  • Training and experience
  • Duties and responsibilities
  • Time and effort devoted to the business
  • Distribution history
  • Payments to non-shareholder employees
  • Timing and manner of paying bonuses to key people
  • What comparable businesses pay for similar services
  • Compensation agreements
  • Use of a formula to determine compensation

You must be careful to pay yourself a reasonable salary. Paying yourself a salary that is too low (or none at all) can draw scrutiny from the IRS, as it is considered an attempt to avoid paying self-employment taxes.

The good news is that you do not have to figure it all out on your own! The Xendoo team is more than happy to help you determine your reasonable salary. Speak to one of our online accountants to learn more.

Start in minutes
Bookkeeping? Taxes? CFO services?
Our bookkeeping and accounting experts keep your books clean, organized, and on time, every time.

How Do I Pay My Taxes as an S-corporation?

The first step is to elect to be taxed as an S-corporation. To qualify for S-corporation status, your business must meet the following requirements:

  • Your business must be incorporated in the United States.
  • Your business may only have certain types of shareholders, including individuals, and certain trusts and estates. They may not be partnerships, corporations, or non-resident alien shareholders.
  • Your business cannot have more than 100 shareholders.
  • Your business can only have one class of stock.
  • Your business cannot be an ineligible corporation (i.e. certain financial institutions, insurance companies, and domestic international sales corporations).

If your business meets all of this criteria, you can move forward by filing Form 2553, and sending it to the IRS. If your company has multiple shareholders, each of them must sign and submit this form as well. Once approved by the IRS, you will file your S-corporation taxes using Form 1120S. 

To minimize error and maximize tax savings, partner with an online Tax CPA at Xendoo. We file your taxes for you so you can focus on growing your business. 

What are the Tax Advantages of Filing as an S-corporation? 

No Double Taxation 

C-corporations are taxed twice, with the business paying corporate income taxes, and shareholders paying taxes on their share of the income. On the other hand, S-corporations are not subject to corporate income tax. Instead, shareholders file a Schedule K-1 along with Form 1120S, which reports their share of the company’s profits or losses. This allows S-corporations to avoid double taxation.

No Self-Employment Taxes (on Distributions)

Another key advantage of S-corporations Election is that the distributions owners receive are not subject to self-employment taxes! 

Every small business must pay self-employment taxes to fund social security and medicare. If your business operates as an LLC, you are required to pay self-employment taxes on your entire share of the profit, regardless of how you use the money. On top of that, you will also be taxed at your personal income tax rate. As the owner of the S-corporation, you only pay self-employment taxes on your reasonable salary. The distributions you take are exempt from self-employment tax! 

To illustrate, let’s revisit the example from earlier:

Your business makes $100,000 in profit. 

As a single-member LLC, you will pay $15,300 in self-employment taxes.

If you file the S-corporation Election, you pay yourself a reasonable salary of $40,000. The remaining $60,000 is taken as a distribution from profit. You will pay $6,120 in self-employment taxes only on your salary. The remaining $60,000 is exempt, resulting in a tax savings of $9,180 compared to the LLC!

For quick reference, take a look at the chart below:

S-corporation Election is a simple, yet effective, way to maximize your tax savings. Are you ready to take the next step? Schedule a free consultation with a Xendoo accountant today! 

Xendoo is Here for You

You are not alone as you navigate the waters of self-payment and tax filing. Xendoo Online Bookkeeping, Accounting, and Tax is here to help! We move at the speed of business, so you can make informed decisions faster – like deciding if an S-corporation Election is right for your business!

Want to learn more about the different business entity types? Click here. 

Click here to access Form 2553.

Click here to access Form 1120S.

Click here to access the Schedule K-1.

How To Find The Right Online Accountant For Your Business

/in , , /by
hiring a bookkeeper

hiring a bookkeeper

Every small business owner should have access to an accountant. A small business accountant can provide guidance at every stage of your company’s development, and they can be invaluable when it comes to tax preparation, succession planning, and more. An online accountant can also deliver these services at a price that fits the limited budget of modern business owners. 

But finding the right accountant is about more than just cost. Today, we’ll go over the best features offered by online accountants for small business owners so that you can find the right fit for your company.

What to Look for in an Online Accountant

What should you expect when you’re searching for online accountants for small business needs? 

We’ve narrowed it down to these five essential features:

Industry Experience

Online accountants are not hard to find, but the key is to find an accountant whose skill set matches the needs of your business. 

What type of business do you run? Are you a service provider, a retailer, or exclusively eCommerce? Is your business structured as a partnership, an LLC, or an S Corp?

These questions will be critical in finding the right accountant. You’ll need to partner with an online accountant who has clear experience in preparing tax returns and financial documents for companies that have a similar profile to yours. 

Ideally, you’ll want an online accountant who has worked for companies of a similar size, revenue stream, and industry, too.

But don’t limit yourself to accountants that work with companies of your size. After all, most entrepreneurs entertain dreams of growing their businesses. This will also require the assistance of an accountant who has worked for companies that are larger than your own. 

Finding an accountant who has experience in working with companies your size and larger can set you on a positive trajectory, knowing that your accounting help will scale with your business.

Access to Tools

The right accountant for small business owners might also need to have some experience in cloud-based systems, especially if your business relies on such software as part of your regular operations.

Before committing to an accountant, make sure to go over these requirements, and ask about their prior experience. This will ensure that you hire an accountant whose experience matches the evolving needs of your company.

Dedicated Support

Some business owners might feel nervous that hiring online accountants for small business needs will deprive them of the personal touch of a regular employee. This concern is perfectly understandable, but the right accounting firm can offer dedicated support in the way that you choose. 

You need an online accounting service that relies on the latest and best accounting software. You want a provider who can minimize accounting errors and ensure a greater level of accuracy. This is especially important during tax season, where errors can lead to an audit and potentially result in penalties and fines. 

Online software also means that you’ll be able to access your company’s financial information anytime, anywhere

Xendoo provides a number of ways to keep clients connected to the process. Our online bookkeeping features include regular monthly reports that will keep you up to date on your cash flow and other financial data. 

All of our dedicated professionals are available on your terms, whether that be through email, text message, or a phone call. We’ll work with you to communicate when you want and how you want, so you never feel out of touch with your online CPA.

Streamlined Processes

Modern business owners face a variety of financial needs, including:

  • Bookkeeping
  • Payroll
  • Tax planning
  • Tax preparation
  • Budgeting and planning
  • Personal tax preparation and filing

Partnering with online accountants for small business needs such as these can ensure that important processes are completed on time and with total accuracy.

Some business owners find that this is a welcome change from trying to juggle their own books. If you find yourself falling behind, some accounting firms offer catch-up accounting services, which can help you bring your books up to date. 

Xendoo, for instance, offers catch-up services to clients who have fallen months or even years behind.

By reconciling your books regularly, your small business accountant can ensure that you always have a clear picture of the financial health of your company. 

Understanding your cash flow can be invaluable when it comes to long-range planning, and it can also save you the hassle and expense of penalties from filing a late tax return.

Streamlining your financial processes can even be helpful for obtaining future business loans. Usually, lenders will expect to see a report of your company’s financial status. By having recent reports relating to your income and expenses, you’ll be able to gain access to the funds you need to grow your business.

Strong Reviews

Once you locate a few online accountants for small business owners, you’ll want to narrow down the field a bit further. What are other customers saying about this accounting service? 

While every accounting firm will boast of its strengths, the real evidence of its success is found in the testimony of its clients!

Typically, you won’t have to look far to find online reviews for an accounting firm, though the best online accountants will feature customer reviews and testimonials directly on their websites. 

These reviews provide several relevant clues about the nature of the firm. First, it communicates that other business owners have benefited from the services of an online accountant. Second, skimming through these reviews may help you locate companies that operate within your industry, which helps you to know whether an accounting firm “gets” the unique needs and challenges you face.

You might also check to see whether an accounting firm has received any third-party awards or certifications. Xendoo, for instance, is accredited by the Better Business Bureau and currently holds an “A” rating, the highest rating available.

Transparent Pricing

Finally, you want to find an accountant that offers transparent pricing. How much does an accountant cost? An accountant for small business owners will usually charge around $40 per hour, according to the Bureau of Labor Statistics, though it’s not uncommon to find accountants that charge significantly more. 

An online accountant costs less than an in-person service, though you’ll want to make sure you find an accounting firm that offers transparent pricing. 

By “transparent,” we mean that there should be no hidden fees. You don’t want to find yourself “stuck” with an online accountant who later demands additional money for their services. It’s vital that you know what to expect and how much you’ll be charged for financial services.

At Xendoo, we offer several clear plans designed to fit the needs of your business. Our most popular plan will cost only $395 per month. 

Many business owners find that partnering with online accountants for small business services can save a significant amount of money that would otherwise be spent on a full-time employee.

Xendoo: Find an Online Accountant for Small Business

Where can you find an online accountant that ticks all these boxes? Xendoo strives for excellence in all these categories, thanks to our dedicated team of professionals.  

At Xendoo, we provide a variety of accounting and bookkeeping solutions that can be tailored to the needs of your business. 

Our friendly team of experts can straighten out your books, help you prepare for tax season, or provide the data you need for long-term success. 

Want to learn more? Take us for a test drive by signing up for our free trial, and see how Xendoo can bring your business even further into the future.