Tag Archives: Recordkeeping

IRS tips to help Beauty and Barber Shops Start, Grow and Succeed

May 6, 2015

In honor of Small Business Week May 4 – 8, 2015, the IRS is highlighting some of its most popular educational products, videos and webinars to help your business thrive. If you own a beauty or barber shop, or are self-employed, following the tax rules for your industry is crucial. Knowing the tax rules can help your business start, grow and succeed. A great way to learn the rules is by reading IRS Publication 4902, Tips for the Cosmetology and Barber Industry. Here are some of the topics included in this booklet or detailed on IRS.gov:

  • Business Structure.  One of the first things you need to decide is the type of structure for your business. The most common types are sole proprietor, partnership or corporation. The type of business you choose will determine which tax forms you will file. You may have employees or rent space to someone who is self-employed. Visit IRS.gov for tips on starting and operating your business.
  • Report Tip Income.  All tips you receive are taxable income. If you have employees who receive $20 or more in cash tips in any one month, they must report them to you. You must withhold federal income, Social Security and Medicare taxes on the reported tips. Learn more about these rules in the IRS video “Reporting Tips.”
  • Business Expenses.  You can deduct ordinary and necessary expenses that you pay to run your business. An ordinary expense is a common and accepted cost for that type of business. A necessary expense is a cost that is proper for that business. For example, cosmetologists are often required to get a license or pay for a permit or certification. You can deduct these costs as business expenses in most cases. See Publication 535, Business Expenses for more on this topic.
  • Estimated Tax.  If you are self-employed you may need to make estimated tax payments. In most cases you pay this tax in four installments each year. If you do not pay enough tax during the year, you may owe a penalty. Use Form 1040-ES, Estimated Tax for Individuals to figure the tax. Direct Pay, available on IRS.gov, now offers you the fastest and easiest way to make these payments.
  • Depreciation of Assets. You can deduct the cost of some assets over a number of years. For example, if you buy equipment and furniture, you should depreciate the cost of those items since you will normally use them for more than one year. Check out the IRS webinar “Depreciation Basics” to learn more.
  • Filing Your Taxes.  If you have employees, the IRS offers electronic filing options for your federal payroll tax returns. IRS e-file is fast, safe and accurate. You’ll also receive an electronic acknowledgment when the IRS accepts your e-filed return. You can use EFTPS to make any federal tax payments.
  • Keeping Records.  Everyone in business must keep records. You need good records to prepare your tax returns. You must have records to support the income, expenses, and credits that you report. Good records can help you keep track of your business. They can also increase the likelihood of business success. Watch the IRS video “Good Recordkeeping Helps Avoid Headaches at Tax Time” to find out some of the best practices.

Additional IRS References:

IRS YouTube Videos:

IRS Podcasts:

Give Tax Records a Mid-Year Tune-up this Summer

During the summer, you may not think about doing your taxes, but maybe you should. Some of the expenses you’ve paid over the past few months might qualify for money-saving tax credits or deductions come tax time. If you organize your tax records now, you’ll make tax filing easier and faster when you do them next year. It also helps reduce the chance that you’ll lose a receipt or statement that you need.

Here are some tips from the IRS on tax record keeping.

• You should keep copies of your filed tax returns as part of your tax records. They can help you prepare future tax returns. You’ll also need them if you need to file an amended return.
• You must keep records to support items reported on your tax return. You should keep basic records that relate to your federal tax return for at least three years. Basic records are documents that prove your income and expenses. This includes income information such as Forms W-2 and 1099. It also includes information that supports tax credits or deductions you claimed. This might include sales slips, credit card receipts and other proofs of payment, invoices, cancelled checks, bank statements and mileage logs.
• If you own a home or investment property, you should keep records of your purchases and other records related to those items. You should typically keep these records, including home improvements, at least three years after you have sold or disposed of the property.
• If you own a business, you should keep records that show total receipts, proof of purchases of business expenses and assets. These may include cash register tapes, bank deposit slips, receipt books, purchase and sales invoices. Also include credit card receipts, sales slips, canceled checks, account statements and petty cash slips. Electronic records can include databases, saved files, emails, instant messages, faxes and voice messages.
• If you own a business with employees, you should generally keep all employment-related tax records for at least four years after the tax is due, or after the tax is paid, whichever is later.
• The IRS doesn’t require any special method to keep records, but it’s a good idea to keep them organized and in one place. This will make it easier for you to prepare and file a complete and accurate return. You’ll also be better able to respond if there are questions about your tax return after you file.

Please let us know if you need assistance with your record keeping by contacting Tax On Wheels LLC at 803 732-4288.

Prepare for Hurricanes, Natural Disasters by Safeguarding Tax Records

WASHINGTON — With the start of this year’s hurricane season, the Internal Revenue Service encourages individuals and businesses to safeguard themselves against natural disasters by taking a few simple steps.

Create a Backup Set of Records Electronically

Taxpayers should keep a set of backup records in a safe place. The backup should be stored away from the original set.

Keeping a backup set of records –– including, for example, bank statements, tax returns, insurance policies, etc. –– is easier now that many financial institutions provide statements and documents electronically, and much financial information is available on the Internet. Even if the original records are provided only on paper, they can be scanned into an electronic format. With documents in electronic form, taxpayers can download them to a backup storage device, like an external hard drive, or burn them to a CD or DVD.

Document Valuables

Another step a taxpayer can take to prepare for disaster is to photograph or videotape the contents of his or her home, especially items of higher value. The IRS has a disaster loss workbook, Publication 584, which can help taxpayers compile a room-by-room list of belongings.

A photographic record can help an individual prove the market value of items for insurance and casualty loss claims. Photos should be stored with a friend or family member who lives outside the area.

Update Emergency Plans

Emergency plans should be reviewed annually. Personal and business situations change over time as do preparedness needs. When employers hire new employees or when a company or organization changes functions, plans should be updated accordingly and employees should be informed of the changes.

Check on Fiduciary Bonds

Employers who use payroll service providers should ask the provider if it has a fiduciary bond in place. The bond could protect the employer in the event of default by the payroll service provider.

IRS Ready to Help

If disaster strikes, an affected taxpayer can call 1-866-562-5227 to speak with an IRS specialist trained to handle disaster-related issues.

Back copies of previously-filed tax returns and all attachments, including Forms W-2, can be requested by filing Form 4506, Request for Copy of Tax Return. Alternatively, transcripts showing most line items on these returns can be ordered on-line, by calling 1-800-908-9946 or by using Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript or Form 4506-T, Request for Transcript of Tax Return.

Tax On Wheels, LLC is available to assist you with disaster planning for your tax records, simply give us a call at 803 732-4288.

Click here to listen to a podcast on Safeguarding your records

 

Managing your tax records after you have filed

There are many reasons to keep household records, including keeping track of your expenses,maintaining records for insurance purposes or getting a loan. You should have the same approach to managing your tax records.

You should keep all documents that may have an impact on your federal tax return. Records you should keep include bills, credit card and other receipts; invoices; mileage logs; canceled, imaged or substitute checks; proof of payments;  and any other records to support deductions or credits you claim on your return.

Normally, you should keep these tax records for three years. It’s a good idea to keep some documents longer, such as  records relating to a home purchase or sale, stock transactions, IRA and business or rental property documentation. Keeping accurate records after you file your taxes will help you with documentation and substantiation if your tax return is selected for an audit.

You should also keep copies of your tax returns as part of your tax records. They can help you prepare future tax returns, and you will need them if you file an amended return. Copies of your returns and records can be helpful to your survivor or the executor, or administrator, of your estate. You may also need tax returns from previous years for loan applications, to estimate tax withholding or because records were destroyed in a natural disaster or fire. If your original tax returns were lost or destroyed, you can obtain copies or transcripts.  There are three options for obtaining your federal tax return information –online, by phone or by mail.

Keeping good records will help you explain any item come tax time and arrive at the correct amount of tax with a minimum amount of effort. If you don’t have records, you may have to spend time getting statements and receipts from various sources. If you cannot produce the correct documents, you may have to pay additional tax and be subject to interest and penalties.

For more information on what kinds of records to keep, see IRS Publication 552, Recordkeeping for Individuals on IRS.gov or feel free to contact Tax On Wheels, LLC at 803 732-4288.