Business Record Keeping Basics (4th of 4 Messages)

Here is our fourth and final message in a series designed to help you handle the basics of sound business record keeping.  Our previous messages addressed checking accounts, logs and receipts & records retention.

You may hate the ‘records keeping’ part of the tax system, but it’s critical to your tax health. It’s also important the health of your business. Good records help you monitor and improve your business. Do not depend on the IRS for mercy when it comes to your tax records. You will never find the word “mercy” in the same sentence with the IRS. It does not exist in the code or the regulations.  I have yet to meet a “merciful” IRS agent. Where there is no mercy, you have no choice but to play defense and keep your records correctly.

Here we will address Accounting Software, Payroll Preparation and then wrap things up for you.

Accounting Software 

We are huge proponents of using accounting software to get your record keeping automated and we are big fans of the QuickBooks product line.  Intuit’s QuickBooks accounting program has revolutionized bookkeeping for small business.  It’s easy to learn, it handles virtually every aspect of small business accounting and it’s inexpensive.

Keep in mind that having your records automated doesn’t mean you don’t have to follow the basics delineated in our previous messages.  You may still have to produce receipts to back up your deductions and QuickBooks can make that process more efficient. QuickBooks also helps you track your business as it continues to progress towards attaining your goals.

Payroll Preparation and Compliance

Because of the continuous changes in payroll reporting & compliance, we recommend that you utilize a reputable payroll processing firm like ADP.  The cost is minimal when compared to the penalties that can accrue from incorrect payroll submission and the time savings are measurable.  In addition, there is the peace of mind in knowing that your payroll calculations and tax filings are being handled correctly.  Finally, it’s also reassuring to know that you have the support of the professionals at ADP if there are ever any questions or tax notices.

Thoughts That Make Keeping Records More Pleasant

Think of your business records in the way you think of tracking your investment portfolio, golf handicap or bowling averages. The records tell you what you need to do to continue improving. The fact that the tax law requires the records is another incentive to keep them. But really, if no tax law existed, as a businessperson you would want records that show you where you have been and where you might go.

We hope this series has been helpful to you!  If you have any comments or feedback, please share them with us.  

2014 Tax Developments (sort of)

The US Senate is on track to hold a vote next week to restore nearly all of the key tax provisions that expired at the end of 2013 (details below).  Meanwhile, over at the US House of Representatives, the process is moving along but at a slower pace.

The House did approve legislation to permanently extend the Research & Development tax credits and will take up additional tax legislation on a bill-by-bill basis.  Accordingly, final reconciliation most likely won't occur until late in the year (read that as AFTER THE MID-TERM ELECTIONS).  You heard it here first, folks (OK, maybe not first but you did hear it here).

Here is a listing of the tax provisions that expired in 2013 and that we believe will be re-instated retroactively to January 1, 2014:

• The $500,000 cap on expensing business assets under Code Sec 179 (it was $500,000 for 2013 but dropped to $25,000 for 2014 with the 2013 expirations);
• The election for folks 70 1/2 and older to transfer up to $100,000 from their IRAs directly to Charity;
• The $2 million exclusion for debt forgiven on a primary residence; and
• The election to write off state sales taxes in lieu of state income taxes.

There are other provisions that are on the table and we'll keep you updated as news becomes available.  We do not believe that any of the generous "Bonus Depreciation" provisions for businesses will be re-instated.

Finally, for 2014 the estate and gift exemption amount is set at $5.34 million and it will rise annually with inflation.  The Obama Administration wants to raise the Estate & Gift tax rate by 5% (to about 45%) and cut the exemption amount to $3.5 million but the House Republicans have balked and we don't believe there is any reason to think that the Administration will get their way on this.

Enjoy your Spring! We'll be writing more in a few weeks.