Tag Archive for: Online Accounting

Save on 2025 Taxes: 5 Key Strategies to Maximize Savings

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Maximize tax savings in 2025

When it comes to taxes, small business owners often think about planning in January. But waiting until the new year to act could mean missing out on critical opportunities to save on 2025 taxes. According to Louis Goldenberg, Director of Tax at xendoo, effective tax planning begins in 2024. Taking action before the year ends ensures you maximize deductions, reduce liabilities, and start 2025 on strong financial footing.

Here are five key strategies to help small business owners save on 2025 taxes while staying ahead of the game.

1. Spend Strategically Before Year-End to Save on 2025 Taxes

Tax planning can help reduce your taxable income by taking action now. Since taxes are calculated on a cash basis, any 2024 expenses can directly impact your 2024 tax return. Here’s how to save on 2025 taxes through year-end spending:

  • Prepay expenses: Pay for early 2025 costs, such as vendor invoices or office supplies, to offset 2024 income.
  • Invest in assets: Purchase equipment or machinery before December 31 to take advantage of the 60% bonus depreciation available in 2024.

For more tips on end-of-year expenses, visit our Tax Planning page.

2. Prepay Taxes to Avoid Penalties and Maximize Savings

Avoiding penalties is an essential part of tax planning. Overlooked estimated tax payments can lead to unnecessary fines. Here’s how to stay penalty-free and save:

  • Make your final 2024 payment: Submit by January 15, 2025, to avoid penalties.
  • Pay 110% of last year’s liability: This ensures coverage even if your 2024 income increases.

Managing tax payments proactively helps protect your business from late fees and interest charges.

3. Leverage Depreciation for 2025 Tax Savings

Depreciation offers a valuable opportunity to reduce your taxable income. With the 60% bonus depreciation rate available for 2024, now is the time to make strategic investments.

  • Purchase long-term assets: Buy tools or equipment to improve operations and qualify for deductions.
  • Optimize your strategy: Take full advantage of depreciation to save on 2025 taxes.

Planning asset purchases carefully allows you to maximize your savings while upgrading your business.

4. Hire Family Members for Tax-Free Benefits

Hiring family members is a creative way to reduce your taxable income while supporting your family. Louis Goldenberg suggests these steps:

  • Set up a family LLC: Pay your children under 18 for tasks like office work or organizing inventory.
  • Stay below the tax threshold: Payments within the threshold are often tax-free for your child while deductible for your business.

This strategy benefits your family and provides meaningful tax savings.

5. Optimize Inventory Management

Inventory-heavy businesses can leverage inventory purchases as a tax-saving strategy. Deducting inventory expenses for 2024 purchases can lower your taxable income:

  • Buy inventory in December: Deduct costs for supplies or stock you plan to use in early 2025.
  • Review unsold inventory: Depending on your tax strategy, consider expensing unsold 2024 inventory now or deferring it to next year.

Strategic inventory management can lead to significant savings and smoother financial planning.

Proactive Tax Planning Starts Now

Don’t wait until the new year to think about taxes. Small actions now can lead to big savings when you save on 2025 taxes. Staying organized, prepaying taxes, and leveraging deductions can help reduce liabilities and set your business up for success.

Looking for expert help? xendoo offers personalized tax strategies and real-time insights to help small business owners maximize savings. Schedule a FREE 15-minute consultation today to start planning for 2025.

Why You Should Schedule a Tax Planning Call for Your Business Now (And Not in January)

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Schedule a tax planning call

Schedule Your Tax Planning Call Now | Maximize Year-End Savings

As the year draws to a close, small business owners face countless priorities, from meeting financial goals to preparing for the new year. However, one task that shouldn’t be overlooked is tax planning. Schedule your tax planning call now to maximize year-end savings and avoid missing out on key opportunities to reduce tax liability. Proactive planning sets your business up for success when the new year begins.

January to March Is for Tax Preparation, Not Tax Planning

Tax preparation and tax planning serve very different purposes. From January to April, accountants focus on gathering financial documents, reconciling accounts, and meeting tax filing deadlines. This leaves little time for detailed planning. By acting now and scheduling your tax planning call, you can create strategies to lower your tax burden before year-end and reduce stress during tax season.

Maximize Year-End Savings by Prepaying Expenses

One of the easiest ways to maximize savings is to prepay certain business expenses before the year ends. Since taxes operate on a cash basis, spending in 2024 can lead to immediate deductions.

  • Prepay upcoming costs: Expenses like inventory, equipment, or subscriptions planned for early 2025 can be deducted in 2024.
  • Lower taxable income: This strategy keeps more money in your business.

Scheduling a tax planning call now ensures you leverage every deduction to maximize your year-end savings.

Reinvest Tax Savings Back Into Your Business

Saving on taxes means more resources for growth. Tax breaks can return 20 to 30 cents for every dollar spent, adding up significantly over time. These savings can be reinvested to:

  • Fund expansion efforts.
  • Hire new staff.
  • Upgrade essential tools and technology.

By planning now, you ensure those savings work for your business.

Schedule Your Tax Planning Call Now | Don’t Wait for January

Proactive tax planning is essential to reduce liabilities and optimize expenses. By scheduling your tax planning call now, you can access expert advice and strategies that maximize your year-end savings. Waiting until January means losing opportunities to lower your tax bill and prepare effectively for the new year.

Contact xendoo today to schedule your tax planning call and take control of your financial future.

 

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

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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.

The Simple Guide to Sales Tax for E-Commerce

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Starting and running an e-commerce business has many fun and exciting aspects, like seeing your target customer segment latch onto your newest product offering or receiving glowing reviews. One less fun aspect of e-commerce is sales tax. This blog post explains e–commerce sales tax and provides a compliance guide.

However, dealing with this administrative hassle from the beginning is crucial. Otherwise, it becomes a major hassle that bites your bottom line. But never fear. This guide will simplify what online sellers need about sales tax, minus all the complicated jargon. (We’ll have to use a little jargon, but we’ll explain it along the way.) 

What is sales tax? 

When most business owners think of tax, they think of their annual tax return due to the IRS. But the sales tax is a different animal altogether. 

Sales tax is a small percentage of a sale charged at the time of the transaction. E-commerce sellers and brick-and-mortar retailers must charge a specified sales tax rate to the customer and then turn around and remit it to state (and sometimes local) tax authorities. 

 

States and local areas, such as cities and counties, use the sales tax collected to pay for budget items like road maintenance and public schools. Because states rely on these funds, they are very invested in e-commerce sellers and meet their legal obligation to collect and remit sales tax.

 

And it’s important to note that the federal government or the IRS has nothing to do with sales tax. Instead, states make their own sales tax rules and laws. Forty-six states and Washington DC all have a sales tax. For that reason, e-commerce sellers must consider each state when recognizing where they’re required to collect sales tax.

When is an e-commerce business required to collect sales tax?

An e-commerce business is required to collect sales tax from customers when they meet two criteria:

  1. They have a sales tax nexus in a state(s)
  2. They sell items that are taxable in their nexus state(s)

 

Sales Tax Nexus

Having “sales tax nexus” in a state means your business is tied to that state. For example, you always have a sales tax nexus in the state where your business is located. 

But sometimes your business has sales tax nexus in other states as well. This can include:

  • Having a location such as a store, office, or warehouse
  • Having personnel such as employees, contractors, salespeople, or installers
  • Storing inventory in a warehouse (even if you don’t own it)
  • A drop shipping relationship with a supplier in a state
  • Having an affiliate in a state who sends you sales in exchange for a percentage commission
  • Doing temporary business, such as selling taxable items at a tradeshow or craft fair
  • Economic nexus – making over a certain sales or transactions threshold in a state 

E-commerce businesses can be complex. Something like hiring your sister in another state to perform customer service duties for you or storing inventory in a warehouse in Nevada to be near a centralized West Coast shipping hub can give your business nexus, and thus the obligation to collect sales tax, in new states.

It’s important to note that when you have nexus in a state, you’re required to collect sales tax from buyers in that state. Say you have nexus in North Carolina (where you live), Iowa (where your sister who does your customer service lives), Kentucky (where you store your goods), and New York (where you have many customers and thus economic nexus.) If you make a sale to a customer in any of those states, you are required to collect sales tax from those buyers.

Taxable Items

Most tangible items are taxable, so as an e-commerce seller, you’d be required to collect sales tax from buyers in most cases.

However, some items are frequently non-taxable. This includes groceries and medications. A handful of states exempt clothing or textbooks from sales tax, too. 

Things get more complicated when it comes to digital goods. Most states didn’t require sales tax on digital items such as e-books or downloaded songs for a while because they were intangible. But as physical media began to pass by the wayside, states realized that they were losing out on revenue and began requiring sales tax on digital products and also software. 

 

As the retailer, you determine what items are taxable in each of your nexus states. 

I have sales tax obligations. What do I do now?

Once you realize you’re required to collect sales tax, it’s time to get sales tax compliant by doing the following:

  1. Registering for a sales tax permit (or permits)
  2. Setting up sales tax collection on your online shopping carts and marketplaces

 

Registering for Sales Tax

Because sales tax is governed at the state level, you must register for a sales tax permit with each state in which you have nexus. Register with the state’s taxing authority. This is usually called the [State] Department of Revenue, but it might go by another name, such as the Texas Comptroller or the California Department of Tax and Fee Administration. 

 

Collecting Sales Tax

Once you have registered for a sales tax permit, your next step is to make sure you are collecting sales tax from your buyers in your nexus states. These days, most online shopping carts like Shopify or WooCommerce allow you to set up sales tax collection directly. 

 

Note: If you only sell on large online marketplaces such as Amazon or Walmart, you may not need to collect sales tax directly from buyers. Due to “marketplace facilitator laws,” marketplaces like Amazon, which host your goods on their site, are generally considered to be the seller of record. However, some states still require marketplace sellers to register for sales tax permits, even if the marketplace collects and remits on your behalf.

How do I remain sales tax compliant? 

Once you’ve identified your nexus states, registered for a sales tax permit, and collected sales tax, it’s time to file and remit your sales tax.

Each state will assign you a filing frequency and sales tax due dates. The filing frequency will generally be monthly, quarterly, or annually. The more sales tax you collect, the more often you must file and remit. (Some states require some megacorporations to file and remit sales tax even more often than monthly.) 

 

The due date is different depending on the state. While most states want you to file and remit sales tax by either the 20th or the last day of the month after the taxable period, others have due dates on the 15th or 23rd. Always double-check your sales tax due date, and remember that every state is different. Just because sales tax is due on the last day of the month in your home state doesn’t mean that it is the due date in any of your other nexus states.

 

The last step is to remit the sales tax you’ve collected. Sales tax isn’t part of your profits. Instead, it’s a “pass-through tax.” That means you collect it from the buyer, hold on to it for a short time, and then pass it on to the state government. When you file your sales tax return, you’ll usually be given the option to pay online. And with that, the cycle starts all over again.

Sales tax is an administrative hassle, but it’s vital to give state governments their due so that you can stay compliant and avoid fines and penalties.  Managing sales tax compliance for an online business can seem daunting, but breaking it down into clear steps makes the process more manageable. While sales tax takes effort, keeping up with your obligations will allow you to run your e-commerce business smoothly and avoid problems. With the right knowledge and preparation, you can handle this crucial aspect of selling online.

 

About the Author

Tom Spang works in sales and partnerships at Hands Off Sales Tax (HOST), which has been solving sales tax compliance for e-commerce sellers for 25 years.  If you have questions about sales tax, feel free to contact HOST for assistance.

xendoo and Hands Off Sales Tax (HOST) have joined forces to empower small and medium-sized businesses (SMBs) with invaluable growth resources. At xendoo, we share your fervor for entrepreneurship and are inspired by your commitment to realizing your dreams. Through our partnership with HOST, we are committed to providing SMBs like yours with the financial visibility and support necessary to flourish.

More Than Just Numbers:

At xendoo, we understand that success is more than just crunching numbers; it’s about fostering meaningful relationships and comprehending each client’s unique needs. With our people-first approach, you can expect personalized attention and expert guidance tailored to your financial journey.

A One-Stop Solution:

xendoo offers a holistic suite of services designed to streamline your financial operations:

  • Full-service bookkeeping and accounting support to liberate your time and resources.
  • Hassle-free tax preparation and filing services.
  • Fractional CFO Services will collaborate on a roadmap for future growth.
  • A comprehensive dashboard delivering real-time financial insights.

Are you passionate about your success? So are we. At xendoo, we’re dedicated to providing SMBs with the financial visibility and support necessary to thrive and scale. Let us alleviate the financial burdens, allowing you to concentrate on what truly matters—steering your business toward success and achieving your aspirations.

Contact xendoo today and unlock the potential for growth while reclaiming valuable time to focus on your business.

 

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

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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.

7 Common Bookkeeping Mistakes (And How to Avoid Them)

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small business woman doing bookkeeping

Running a small business means juggling lots at once, but quite possibly, the most important one is keeping meticulous financial records. Bookkeeping is an essential part of organized financial management and paves the way for the business to maneuver through the complications of financial control. However, with all these activities, the primary activity that usually goes unsung by an entrepreneur is bookkeeping. It is not just a recording of transactions but the creation of a system of openness and accountability towards finances. Without the right approach and right tools, however, of reliable accounting software such as Xero, QuickBooks, or is important and will turn cumbersome work into swift and effective procedures. These platforms help businesses with monotonous tasks,  keep a record of expenses easily, and help develop elaborative financial reports, which makes it like a roadmap for success for small businesses.

Neglecting Reliable Accounting Software

Failing to invest in sound accounting software is a regular oversight with small businesses. Buying systems such as Xero, or QuickBooks, provide benefits to different aspects of your business, ranging from mere bookkeeping activities to expense tracking. This measure translates to the software facilitating the financial process that includes invoicing, tracking expenses, and reconciling bank records by saving time and effort. Second, the provision of detailed financial reports at the touch of a button is invaluable and, in return, empowers one with the decision-making processes within the business. It only means that these kinds of software are integrated into business operations and, therefore, enable accurate records and analysis of transactions related to finance.

Failure to Establish Dedicated Business Accounts

The most common error of small businesses is mixing the finances of a business and personal finances. Without a clear separation of business accounts, finances may be mixed up, possibly leading to distorted bookkeeping and clear visibility of where your business stands. It is critical to have dedicated business accounts, where entrepreneurs streamline their finances and bolster credibility and trust within the marketplace. Clear separation of personal and business finances leads to compliance and sound tax reporting and lays a solid foundation for financial health and growth.

Irregular Reconciliation of Accounts

Consistently reconciling bank and credit card accounts would seem a rather mundane exercise in maintaining financial integrity, but it is one of the most important. Regular checks help ensure that the financial records reflect the true picture of your business’s finances, and minimizes the risk that an error or discrepancy will go unnoticed. It also considers any possible financial pitfalls in discovering irregularities or unauthorized transactions in good time.  Timely reconciliation presents a clear view of the cash flow so proactive decision-making may increase, ensuring visibility in financial matters.

Disorganized Financial Records

Good bookkeeping largely depends on the systematic organization of financial records for small businesses. A systematic approach toward invoices, receipts, bills, and other important documents is paramount for small businesses. An organized set of financial records will give business owners easy access to important information within a very short time. This measure could easily avoid the risk of negligence of critical financial data and improve the efficiency in the overall financial management process of any business

Inadequate Expense Tracking

Lack of proper expense tracking is a major issue for most small businesses, it leads to spending patterns getting obscured and potential lost opportunities to optimize finances. Inefficiencies and lack of visibility may affect business profitability without a proper expense categorization system. A good expense tracking mechanism ensures that companies know the cost areas where savings could be made, resulting in saving costs in several areas and budgeting accordingly to allow businesses to make informed decisions.  

Ignoring Cash Flow Monitoring

Monitoring cash flow regularly is necessary to maintain the financial stability of small businesses. Cash flow influences almost every activity in an organization, from day-to-day expenses to long-term investments. Lack of cash flow visibility in this area means that the business may be asleep at the switch when unforeseen opportunities strike or financial crises.  This technique paves the way for making proactive decisions and making strategic plans once the financial health of the business is highlighted.

Invoicing Best Practices

Efficient invoicing is more than sending out bills and is really about ensuring smooth sailing processes so that all payables are made on time, leading to good client relationships. Invoice automation through online software allows for organization and ease of the invoicing process, streamlining the workflow and removing any friction that billing may have. Automated processes can then follow up on the status of overdue invoices, allowing faster collections and lessening the risk of a gap in cash flow.

With robust strategies and modern services like xendoo, businesses will avoid complexities in managing finances. With xendoo, you have access to a dedicated team of financial experts ready to assist you with your bookkeeping and accounting needs. Our innovative solutions ensure the accuracy and organization of your books, reducing errors and discrepancies. From monthly bank reconciliation to the meticulous tracking of expenses, xendoo offers services that relieve the time and stress involved in managing finances for your company, leaving you more time to work on growth for your business. Schedule a free consultation today to find out how xendoo can free up your time so you can do what you love and grow your business. 

Bookkeeping in the Digital Age: 10 Modern Solutions for Business Owners

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small business owners doing accounting and bookkeeping

In today’s fast-evolving business world, digitizing financial processes has become imperative for competitiveness and managing financial health. All the tools and approaches with modern technology presented for keeping books enable an owner of a business to make decisions well-informed. Here are ten tips and tactics for innovative digital bookkeeping strategies and insights on how xendoo will address your financial needs.

1. Embrace Cloud-Based Accounting Software

The benefits of migrating to cloud-based accounting software for small businesses are tremendous. Some platforms, such as Xero and QuickBooks Online, allow real-time access to financial data from practically any device that can get online. Intuitive user interfaces and automation features handle routine tasks like invoicing, expense tracking, and financial reporting. They may also integrate smoothly with other business applications to improve efficiency and productivity.

2. Utilize Digital Receipt Management

 Digital receipt management solutions revolutionize the way businesses handle expenses. Receipts captured through a smartphone camera in apps such as Receipt Bank and Expensify ensure that they are automatically extracted with all the needed details to categorize and reconcile expenses. Going digital with receipts would ensure that paper clutter is eradicated, manual data entry errors are reduced, and processes on reimbursing employee expenses are made smoother and more manageable.

3. Implement Automated Bank Feeds

Automated bank feeds make reconciling transactions from the bank and credit card statements with the accounting software much easier. One would be able to sync financial data from bank accounts directly and, in this regard, do away with manual data entry with reduced errors and ensure records are exact. Feeding the information into the accounting software by the automated bank feeds would prompt the accurate and real-time retrieval of all information regarding transactions from the bank. Reconciliations are facilitated, saving the company time and effort on behalf of the business owners and accounting staff.

4. Explore AI-Powered Bookkeeping Solutions

AI bookkeeping-powered solutions operate via machine learning algorithms to do repetitious work and provide insightful data about financial performance. They help classify transactions, detect anomalies, and even customize reports, making bookkeeping more efficient. Leverage the power of AI to do away with manual intervention, reduce errors, and make some strategic decisions.

5. Adopt Digital Payment Solutions

Digital payment solutions like PayPal, Stripe, and Square offer numerous business advantages, including faster payment reception, less paperwork, and better cash flow management. Accepting payments speeds up the process of invoicing and quickens receivables when done digitally, increasing liquidity for the business. Moreover, these digital payment solutions are easily connected with accounting software and impact transaction reconciliation, providing a clearer real-time picture of the financial position.

6. Leverage Blockchain Technology for Transparency

Blockchain technology offers a decentralized and transparent ledger system that can change financial record-keeping. Applying blockchain-based platforms will help increase the security level of financial transactions and bring out transparency and immutability. Blockchain technology can increase tamper-proof record-keeping, decrease fraud risk, and ensure the integrity of all available data. More importantly, the ability of blockchain solutions to offer real-time visibility into transactions makes it possible to track assets, simplifies auditing procedures, and creates trust among the relevant parties.

7. Implement Multi-factor Authentication for Security

Multi-factor authentication is one of the core security measures in the wake of growing cybersecurity threats. This security measure has to be implemented since it requires so many levels of identification of one’s self by a person before access to an account or system is granted. MFA reduces the risk of unauthorized access, data compromise, and financial fraud. Apart from the increased compliance with the regulatory bodies, MFA also increases the confidence of the customers and stakeholders.

8. Stay Abreast of Regulatory Changes

Regulatory compliance remains a moving terrain for businesses in the digital era, which they must keep a keen eye on, whether it concerns tax laws, accounting standards, data privacy, or the delivery of goods and services. Being updated on regulation changes really is a long way to helping businesses make sure they are legally compliant, take minimal risks, and do not attract penalties, which could be very costly. This notion means ensuring the proper up-to-date information is received from government agencies, industry associations, and legal experts and seeking professional guidance occasionally.

9. Leverage Data Analytics for Insights

Data analytics helps businesses get insights into financial performance, identify trends or patterns, and identify key performance indicators. In return, the analysis of financial data equips one with the basis that they can make well-informed decisions, optimize processes, and boost growth. Using advanced features of data analytics tools like predictive modeling, trend analysis, and scenario planning will help businesses anticipate changes in the market and build new opportunities out of them. Further, data-driven decision-making would instill innovation and agility. Hence, businesses remain fitter for the long haul in the digital economy.

10.  Invest in Continuous Learning and Development

As technology continues to evolve, investments in the continuous learning and development of business managers should be made to keep in line with the developments. This measure involves going to workshops, webinars, and online courses that expand one’s knowledge and skills in the digital way of keeping books. In addition, businesses have to support employees in certification, areas of personal development, and training related to the industry. Investments in continuous learning and development kindle the culture of innovation, adaptability, and excellence that makes the business relevant to the dynamic digital space.

Embracing modern bookkeeping solutions can transform how you manage your business finances. Equipped with such few tools, which include dependable accounting software, dedicated business accounts, and proactive financial practices, your business will be well set, ready, and positioned for success in this era of the digital age. From expert bookkeeping to financial management, xendoo is with you every step of the way. It involves staff dedicated to handling your business books, accountants, and CPAs with a complete package for you. From preparing and reconciling monthly statements to detailed expense management and tax preparation,   xendoo has you covered with professional, expert oversight. Schedule a call with xendoo today and take the first step toward ensuring a brighter financial future for your business.

 

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.

8 Benefits of Online Bookkeeping

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An Amazon sellersets up her accounting reports on her computer

You’ve put your heart and soul into your business. So why does it feel like you’re spinning your wheels, trying to keep up with your core business and your administrative overhead at the same time? 

When you first started your company, it might have made sense to try to handle your own bookkeeping and accounting needs. After all, it kept costs down. But it may not have taken long to realize that you could use some help.

 Why not rely on an online accounting service to take these tasks off your plate so you can focus on your business? 

Today, we’ll take a closer look at the business benefits of online bookkeeping and see how these services can help you to get your head out of the books and back in the game.

Business Benefits of Online Bookkeeping

Traditionally, businesses would hire a staff member to handle their books. They might even consider hiring a full-scale accounting department, depending on the size of their company. 

But these days, more and more companies are going digital, opting to use online accounting and bookkeeping services to handle their needs. This is happening for good reasons, as online bookkeeping offers a host of benefits. We’ll explore some of these benefits in depth below.

1. Specialized Experience

Today’s businesses require specialists, not generalists. Increased regulation and the unique needs of individual businesses often demand a specialized set of skills. It’s rare that a staff accountant has experience in the kinds of niche areas that your business needs.

Conversely, an online accounting firm can often provide experience in such areas as:

  • Personal financial planning and assistance
  • Forensic Accounting
  • Managerial Accounting
  • IT auditing
  • Non-profits
  • Tax Preparation

Some of these tasks tend to be cyclical, such as your annual tax preparation. It makes sense to consult with an online accounting firm that can provide the services you need when you need them without the overhead of hiring a full-time CPA.

2. Accurate Books and Low Cost

One of the greatest business benefits of online bookkeeping is a reduction in cost. 

According to the Journal of Accountancy, the average salary for a full-time CPA is over $100,000 per year. The cost of a full-time bookkeeper is cheaper, but your business may still be looking at paying over $40,000 per year for their services, according to the U.S. Department of Labor Statistics.

Don’t forget that these salaries are only a starting point. Hiring a full-time employee also demands that you provide employment benefits. You may even have to make adjustments to your facilities in order to provide an office or similar workspace.

Time is another factor to consider. Who will be in charge of hiring and managing your employees? Unless you have a human resources department, these responsibilities might fall on your shoulders as the business owner. Sure, hiring a CPA means you won’t be handling the books, but instead, you’ll have the task of hiring an additional employee. 

Why swap one responsibility for another, when you can simply outsource your needs to an accounting firm?

Online bookkeeping services can be surprisingly affordable, eliminating the overhead associated with hiring a regular employee. 

By relying on an online solution for your financial needs, you won’t have to worry about diverting valuable space to set up an office or workstation,, allowing you to cut costs in every imaginable capacity.

3. On-time Reporting

Staying on top of the details is a full-time job in and of itself. But the more information you have about your business, the better. As a business owner, you want access to trends like:

  • Losses
  • Profits
  • Tax information
  • Personnel and payroll data
  • Insurance payments
  • Procurement

Online bookkeeping ensures that you have access to the latest information, with reports available with unparalleled speed. This data is useful for highlighting areas of your business that could stand to be improved, which is why you need access to these reports in a timely manner. Since these reports are generated online, you’ll also save on paperwork.

In addition to internal reporting, online bookkeeping services can speed up your invoicing process. By streamlining your entire financial department, you’ll be in a better position to send invoices to clients and maintain your overall cash flow. 

Faster reporting can accelerate this process even further by monitoring your income and alerting you to clients that have outstanding payments that need to be collected.

In addition, virtual accounting services can help you to manage your inventory. xendoo, for example, can help you integrate your platforms and inventory with software like Xero, which has a number of basic inventory management features, as well as other third-party platforms that can help you optimize your ability to keep track of your inventory. These tools can be a great help when it comes to keeping your shelves stocked and your orders flowing.

This increased efficiency doesn’t just save you a headache; it can help grow your business, too. Having access to the latest data increases the rate at which you can invoice clients and receive payments. 

The data you receive from an online bookkeeper can even help you plan for the future, which can be helpful when it comes to tasks like managing your inventory and looking for ways to expand your business.

4. Accurate Books

While CPAs typically have an advanced degree in addition to their certification, there are no advanced professional standards when it comes to bookkeeping. 

That’s not meant to be a slam against bookkeepers, as many of them do an excellent job. But if you try to cut corners by hiring a junior accountant or a financial novice, you could end up with errors creeping into your books. That’s also true if you try and handle the books yourself, especially since it’s unlikely you’ll be able to give your books your full, undivided attention.

Why is accuracy so important? For starters, accurate books can eliminate accounting errors. Maintaining accurate books can be essential for the efficient management of your business. 

But when it comes to tax preparation or other financial audits, accuracy is indispensable. Make an error in your tax forms, for example, and your business could be looking at penalties and additional fees that could otherwise be avoided.

Accuracy is one of the top business benefits of online bookkeeping. Accounting firms rely on the best bookkeepers in the industry, which ensures that businesses receive the benefit of meticulous, detail-oriented professionals to handle their books. In turn, this can ensure a smooth process when it comes time to prepare and pay your taxes.

If you’re concerned about the accuracy of your current books, an online accounting firm can perform an audit and troubleshoot your financials, ensuring you’re back on track for an error-free future.

xendoo offers “catch-up bookkeeping” services that you can rely on to update your books so that you can keep things accurate. This can be particularly helpful for business owners who have been multitasking or ones who need a helping hand to stay current on their financial records. 

Ultimately, assigning your bookkeeping needs to an online firm can prevent errors from recurring in the future.

5. Expert Team

Virtual bookkeeping companies rely on the best and brightest bookkeepers that the industry has to offer. But the benefits of this go beyond accuracy and attention to detail. Having an expert team behind you can provide the confidence that your business can grow and that you’ll enjoy the dedicated support you need for any financial change.

 An expert team can be counted on to understand the best practices for modern bookkeeping. They will also be familiar with the latest financial software. With these tools, they can provide you with consistent, efficient reporting and expert financial analysis.

These expert-level skills would typically be out of reach for small business owners, as many lack the funds to invest in bookkeepers of this caliber. However online firms can provide you with top-tier care and insight at a mere fraction of the cost of hiring an employee, helping you balance quality and affordability with your financial needs.

6. Consistent Communication

Information is only as helpful as it is available. When you rely on a staff accountant, you’ll typically have access to financial data during normal business hours, which limits you to Monday through Friday from 9 to 5. But what if you need a piece of information when your staff accountant is “off the clock”?

Today’s business world doesn’t operate within the traditional 40-hour workweek. A global economy and a shift toward 24-hour customer service have placed new demands on business owners. You need a solution that matches these needs. 

Online accounting firms can fill this need by being available when you need their services the most, offering you consistent, regular communication through email, phone, and other channels.

 This kind of streamlined communication may be particularly helpful for business owners who have to travel often. Digital communication solutions can ensure that your accounting staff is right in your pocket, even when you’re out of the office—or even out of the country.

 In other words, a virtual financial team never clocks out and never takes a sick day. You can rely on online firms to provide you with the data you need when you need it most, so your business never has to slow down.

7. 24/7 Technology Platform

You’re probably already familiar with software like QuickBooks, but this is just the tip of a larger digital iceberg. Virtual accounting firms have access to the latest digital tools and software packages to help their clients optimize their business.

At xendoo, we can sync your accounts and optimize your books using the following platforms:

  • Amazon
  • TaxJar
  • Gusto
  • Stripe
  • Shopify
  • Expensify
  • Bill.com

Of course, this list is always subject to change, which is one of the best business benefits of online bookkeeping. 

Virtual accounting firms can take advantage of the latest online bookkeeping features offered in these and other software platforms. Virtual firms also have the resources to keep up with changes in technology. 

By adapting and innovating, online accountants can ensure your business can continue to thrive and compete in an increasingly digital climate.

8. Personalized Support

Finally, there is simply no substitute for the personalized, custom support that you receive when you partner with an online bookkeeping service. The days of hiring a one-size-fits-all accountant are over. Modern businesses require the agility and personalization that come from a virtual firm.

An online accounting firm can adjust its areas of specialty to the needs of your business, providing solutions for the usual bookkeeping services as well as solutions for eCommerce, business software integration, and more. 

But perhaps most importantly, a virtual financial firm offers an array of services that can be tapped into as your business evolves and grows, so you can have the confidence that you’ll always have access to industry-leading services that are tailored to the needs of your business.

What Can xendoo Do for You?

Are you ready to experience the business benefits of online bookkeeping for yourself? Why not consider what xendoo can do for you and your business? Join high-profile businesses like Starbucks and Century 21 in trusting an industry leader to handle your books, prepare your taxes, generate reports, and perform a host of other financial services that are tailored to the unique demands of your business.

xendoo offers flexible pricing based on the size of your business. We even provide scalable solutions to help your business to grow. Each plan includes standard bookkeeping services, as well as reporting on profits and loss and other data. 

Select plans include provisions for tax returns and consulting, which can be invaluable for businesses of any size.

Sign up for our bookkeeping services, and you’ll see how our advanced services can help your business. It’s time to stop handling your own books. Let us handle the details so that you can keep your focus on what matters:  Growing the business you love and connecting with the customers you’ve come to rely on.  

 

What happens if you get audited and don’t have receipts?

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what happens if you get audited and don't have receipts

Most small businesses are unlikely to go through an IRS audit, but it’s possible. 

What happens if you get audited and don’t have receipts to back your expenses? It’s a common question and concern for many business owners. 

The best way to avoid headaches during an IRS audit is to keep accurate business records and bookkeeping year-round, including tracking receipts. 

Receipts are a paper trail for your business transactions and taxes. Without them, it’s harder to prove your tax deductions and other records are accurate. However, forgetting or misplacing receipts happens, especially when you’re busy running a business.

The IRS regularly deals with missing receipts, so there are guidelines for what businesses can do if they don’t have receipts. 

xendoo’s bookkeepers and CPAs have years of experience managing business records. Below, learn everything you need to know about IRS audits and receipts. 

Table of contents

Why do businesses need receipts?

Receipts are records and proof of payment for the income and expenses your small business claims on tax returns. Without receipts, you may not be able to prove that a business transaction took place.

Businesses should keep receipts for record-keeping, but also to claim tax deductions and credits. 

For example, if you’re traveling away from home for a business trip, you could deduct travel expenses, which would save you money on taxes.

However, you’ll need to prove that the travel was for business purposes and keep receipts for items like: 

  • Airfare
  • Hotels
  • Parking fees
  • Car rental or ride-share
  • Other travel expenses 

Receipts businesses should keep

Receipts aren’t the only records businesses should keep; they help you track your income and expenses. 

Companies track a lot of receipts. Some examples of costs that you’ll need receipts for include: 

  • Office supplies and equipment 
  • Inventory purchases
  • Advertising and professional services
  • Company training and employee education
  • Travel expenses

Since this isn’t an exhaustive list, it’s best to track all your business receipts and update your records regularly. To make the process simpler, many small business owners use business expense tracking and receipt apps. 

A bookkeeping service can also advise you on which records and receipts to track (and in some cases, do it for you). 

What happens if you get audited and don’t have receipts

You have several options if you’re audited and don’t have receipts. Because the IRS regularly deals with missing receipts, there are standard steps businesses can follow.

In most cases, you can track down receipts or provide other documents, which we’ll outline later, to prove an expense. The worst-case scenario is that the IRS may remove some business tax credits and deductions you claim. 

Audits aren’t as big a deal as movies and the media make them out to be, especially if you keep organized business records. There are many reasons the IRS might audit a business, but most happen due to random selection or tax errors.

If the IRS audits you, you’ll receive a notification letter. From there, you’ll communicate with your auditor and provide the documents they ask for.

The IRS doesn’t always share what triggered an audit, but these are some red flags: 

  • Over or under-reported income 
  • Suspiciously high tax credit and deduction claims
  • Rounded numbers ($2,000) for expenses instead of exact amounts ($1,930) 
  • Other mistakes or inaccurate data

Although tax professionals and CPAs are familiar with tax laws and can help you navigate an audit, they focus on avoiding audits first. Business tax services prepare and file taxes for you, so they’ll catch inaccuracies and mistakes before you send tax returns to the IRS.

What to do when you don’t have receipts

If you don’t have receipts and you’re worried about an IRS audit, you have two options.

  1. Hire a catch up bookkeeping service that also has tax CPAs. They’ll get your records caught up, file your taxes accurately, and help you avoid an audit in the future. 
  2. Gather all the receipts and tax documents yourself. You’ll need the time to dig through and organize your business records.

If you don’t do either of the above options, you’ll likely take the loss of deductions or credits. Depending on your situation, you may need to pay IRS fees.

Let’s look at the steps you can take when you don’t have receipts. 

1. The Cohan rule

Missing receipts are so common that since the 1930s, a legal rule has outlined options for taxpayers who don’t have them. It’s called the Cohan rule, and in some cases, you can use it to claim deductions if you’re missing receipts. 

In a nutshell, the Cohan rule says that:

  • You can claim business expenses without receipts if they’re reasonable and credible.
  • The IRS may not allow you to claim the full amount. Instead, they’ll calculate the minimum standard amount for expenses.

The Cohan rule has helped many small business owners prove their expenses when missing receipts. However, the IRS can reject your deductions even if you follow the Cohan rule. 

For example, you can’t claim the Cohan rule if your deductions include certain expenses like entertainment. You’ll also need to explain and document the:

  • Exact purchase amount for products or services
  • Reason for the purchase
  • Dates and locations when you purchased it
  • Other relevant transaction details

2. See if vendors will provide invoices and receipts

To provide the IRS with documentation, you can reach out to vendors to request duplicate receipts.

Since most vendors use online invoicing and billing systems, they’ll have copies of your records.

Keep in mind that some vendors might charge a fee for their time to retrieve past invoices, receipts, and other statements.

3. Find checks, credit card, or bank account statements

If you’re unsure where you made a purchase or can’t contact them to provide copies, search through old checks and bank and credit card statements.

Going through these documents can tell you:

  • How much you spent
  • When you made a purchase
  • What company is the transaction from

You can use this information to reach out to vendors and ask them for receipts or use it to prove your expense is legitimate. Getting copies of the receipts is ideal though, since it will show exactly what you spent money on to count as a tax-deductible expense. 

4. Review your calendar and emails

Reviewing your calendar and email will help you narrow your search for receipts.

When you make a purchase, companies often send payment confirmation and a copy of your receipt to your email. If you know the company’s name, purchase date, or other details, you may find it by quickly searching your inbox. 

If you don’t, looking through your calendar could reveal where you were on certain days. It’s especially helpful to find when you travel for business so you can claim those travel expenses. 

Although this method helps you find transaction details, the IRS doesn’t accept calendars or emails as proof of business expenses.

5. Look at location data and maps on your phone

A similar method for searching for transaction details is to use location data on your phone. Your phone stores a lot of information about your activities throughout the day. 

You can search through your Google search or social media history to find the names of vendors and locations you visited. 

Again, it will help you find where you purchased so you can track down receipts. However, the IRS doesn’t accept location data as proof of your deduction eligibility.

How far back can the IRS go to audit previous tax returns?

During audits, the IRS generally reviews income tax returns for up to three years. However, in certain cases, the IRS may extend this period to six years if they deem it necessary to investigate any issues in your past tax returns. It is crucial to note that such a six-year audit extension is uncommon and is typically reserved for more serious or complex situations.

How bookkeeping and tax services help

Although keeping records and receipts is best, you can claim reasonable business expenses without receipts. If you don’t have receipts, you may not be able to claim the full amount of deductions unless you can prove your claims are legitimate. Missing receipts could mean you have inaccurate records and tax returns, which could trigger an audit. 

Businesses can avoid audits with accurate and organized bookkeeping year-round. However, there are many records that businesses need to keep, including receipts, financial statements, payroll, and much more. It’s understandable if you lose a few receipts or fall behind—many businesses do. 

Professional tax services like xendoo make bookkeeping easy for businesses. If your business needs catch-up bookkeeping, accounting, tax services, or a combination, chat with a xendoo accountant. We’ll get to know your business and its bookkeeping and accounting needs during the chat. If you aren’t sure which services you need yet, we’ll help you figure that out.  

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

Year-End Bookkeeping and Accounting Checklist for Small Business Owners

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Smiling young Asian business owner working on computer and drinking coffee during the holidays

The end of the year is a hectic time for small business owners. Between catching your breath after tax season and managing holiday sales, year-end bookkeeping and accounting tasks understandably fall to the bottom of the to-do list. 

xendoo is here to help you avoid the year-end scramble. Check out our year-end bookkeeping checklist to organize your finances and successfully wrap up the year. 

1. Get Your Books Caught Up

The first step is to make sure that your books are up-to-date. You can do this by: 

  • Accounting for all bills and invoices, even if they haven’t been paid yet. 
  • Reviewing bank and credit card statements to confirm that they match. 
  • Recording any expenses that you paid for with personal funds. 

Accurate records ensure reliable financial statements. If your books are behind a few months, or even years, you are not alone—25% of business owners are behind on their books. 

xendoo’s online bookkeepers provide catch up bookkeeping services, so you can focus on the future. 

2. Collect the Necessary Forms

Once January arrives, your accountant will request certain forms to close your books and file your small business taxes. Be sure to collect them as soon as possible to ensure a smooth start to the new year. 

Here are common forms and their deadlines. 

Form W-2

Business owners use form W-2 to report salary information for their employees. It also helps businesses report the taxes they withhold from paychecks. Employees need this information to file their personal tax returns. 

Business owners are responsible for sending this form to the IRS. Employers must provide the form to their employees no later than January 31st so that employees have enough time to file their taxes.

Form W-9

If you worked with an independent contractor or vendor and paid them $600 or more, you will report those payments to the IRS using Form 1099-NEC. 

The information you need to complete this form is on Form W-9, which you can collect from your contractors.

If any W-9s are missing, reach out to your independent contractors and have them complete the form before the end of the year.

Schedule K-1

CPAs provide the Schedule K-1 or Form 1065. The Schedule K-1 must be sent to shareholders and partners by March 15th. 

S-Corporation shareholders and partnership members use it to report their share of the business’s profits and losses. They’ll also include the form with your personal tax return.

Form 1099-K

The 1099-K tracks the payments received through third-party payment networks, like eBay, Stripe, Shopify, PayPal, and others. You should receive one 1099-K from each of the Online Payment Networks you use by January 31st. You are required to complete each one. 

Your gross receipts must be at least as high as the amount that you report on your 1009-K.

The 1099-K shows gross sales, which is the amount before fees are deducted. What appears in your bank account is the Net Amount, the amount after fees are deducted from the Gross Amount. The sales from each vendor must be reported as the Gross Amount, which is what appears on the 1099-K.

If you use freelancer platforms like Upwork or Fiverr to hire independent contractors, they may also send 1099-Ks to your freelancers instead of 1099-NECs. Since they are considered Online Payment Networks, these platforms typically send 1099-Ks to freelancers that make over $20,000 a year and have at least 200 transactions. 

However, if you paid freelancers more than $600 outside of their platforms, then you will need to send out a 1099-NEC. 

Click here to download our Tax Documentation Checklist.

3. Follow Up on Past-Due Invoices

Review past-due invoices to see what you are owed. If there are any outstanding payments, reach out to your customers before the end of the year to successfully close your books. 

4. Account for Inventory

If your business stores inventory, perform an end-of-year inventory count to make sure your totals match your Balance Sheet and your books. This review will provide insight into waste and loss management, as well as reduce inaccuracies in inventory counts and receivings.

Consider utilizing inventory management software to streamline inventory creation and order fulfillment.   

5. Review Your Financial Statements

Once you or your bookkeeper completes your bookkeeping, review your financial statements to confirm your numbers are correct.

You can also take that time to review how your business grew over the course of the year. Was there a steady increase in profits? Can you identify connections between your costs and sales? The financial statements provide visibility to confirm that you are on track to meet your goals, make projections, and prepare for the future.

Click here to learn more about the key financial statements. 

6. Reach Out for Help

Everyone deserves a supportive team of people who care. If you feel overwhelmed with year-end bookkeeping, reach out to an online bookkeeping service. 

xendoo’s bookkeeping and accounting team provides monthly bookkeeping and accurate financial reports. We’ll give you financial visibility throughout the year and deliver insights to make strategic business decisions. 

Ring In Success

Juggling the holidays with running a business can be hectic. Although this year-end bookkeeping and accounting checklist can help you prepare for tax time, you don’t have to do it alone. xendoo has a range of plans with flat monthly fees. You can get certified, professional online bookkeeping, accounting, tax, or CFO services to help you manage your finances and grow your business. 

Schedule a call with one of our online accountants to get started.