Welcome to Small Businesses Tips

IRS-Business Use of Home

Can you deduct your phone bill if you use your phone for business? Can you deduct part of your utility bills if you have a home office? Find out the answers to these questions and more by ordering the free IRS publication #587 "Business Use of Your Home".

IRS-Direct Sellers

Direct sales companies (MLM, Network Marketing, Party Plans) have many different ways of filing taxes. To find out how to handle your direct sales tax issues, order the free IRS publication #911 "Tax Information for Direct Sellers."

Up To Date

Rather than stuffing all of your business records (invoices,
receipts, statements) in a file to be sorted through at the
end of the year, be proactive. Balance your business accounts
at least monthly. Keep a ledger or log of your sales, purchases,
and misc expenditures. The more often you do it, the easier
it will get. By the end of the year, you´ll be all set to
file your taxes without encountering a huge mountain of paperwork.

Unnecessary Purchases

When purchasing something for your business, especially when you´re first getting started, think first--is this item/investment going to make me money? Will it promote or in any way advance my business? If not, think twice again before spending the money.

IRS-Tax Guide for Small Business

Need general Small Business tax filing information? Send for the IRS free publication #334 "Tax Guide for Small Businesses".

Think Twice

Before buying that latest and greatest organizer, or that
really cute pencil caddy, think twice. Will this purchase
increase my income or promote my business better? Get a
handle on frivolous business expenditures and you´ll see
a larger bottom line!

Balancing Your Bank Statement

Begin with:
Ending Balance from Bank Statement

Add: Deposits in Transit (deposits you´ve made that are not yet recorded at the bank)
Subtract: Outstanding Checks (checks you´ve written that have not yet cleared the bank)

Computed Book Balance

Balance per Your Books (account balance per your checkbook)

Difference (should be zero)

Taming Receipts

Does tax time make you shudder? Can´t remember how much you spent or what you spent it on? Here are a few simple tips for keeping track of those business expense receipts:

*put receipts into envelopes (one envelope per month) as you receive them.
*put receipts into envelopes (one envelope per type of expense, ie: supplies, advertising)
*have a checking account or credit card just for your business and put ALL of your business transactions through it.

You will receive monthly (and sometimes annual) statements showing just who you paid and for what.
You´ll have a much easier time sorting through it all at the end of the year (as well as being able to see
where you might adjust your spending).

IRS-Self-Employment Tax

Not sure how to handle your Self-Employment Tax? Not sure what Self-Employment Tax is? Order your free IRS publication #533 "Self-Employment Tax".

Financial Management

The first step in developing a financial management system is the creation of financial statements. To manage proactively, you should plan to generate financial statements on a monthly basis. Your financial statements should include an income statement, a balance sheet and a cash flow statement.

A good automated accounting software package will create the monthly financial statements for you. If your bookkeeping system is manual, you still can use an internal or external bookkeeper to provide you with monthly financial statements.

Small Business Budgeting Simplified

Budgeting in it's simplest form is evaluating:

Revenue minus cost of goods sold, minus expenses equals profit.

Projecting for each category monthly will help you to
- keep sales revenue goals high enough to cover cost and expenses
- keep expenses down – say ‘no' to unnecessary expenditures
- realistically view your pricing to see if there is adequate profit built in to cover the running of your business.
If you don't have a budget…it could be hurting your business!

Tax Education

Free* Tax Education for small business owners is offered by the IRS.

Small business owners and other self-employed individuals can learn about business taxes through a unique partnership between the IRS and local organizations. Through workshops or in-depth tax courses, instructors provide training on starting a business, recordkeeping, preparing business tax returns, self-employment tax issues, and employment taxes.
For more information about this program, call your local IRS office Monday through Friday during regular business hours and ask for your Taxpayer Education Coordinator.
You can also call 1-800-829-1040.

*Some courses are offered free as a community service. Courses given by an educational facility may include costs for materials and tuition. Other courses may have a nominal fee to offset administrative costs of sponsoring organizations.

General Records Retention Guideline

Audit Reports: Forever
Bank Deposit Slips: 6 Years
Bank Statements: 6 Years
Canceled Checks: 3 Years
Current Contracts and Leases: Life of Contract, plus 3 Years
Housing Records: As long as you own the home, plus 3 Years. (Includes home improvements, additions, expenses involved in selling/buying home)
Insurance Records: Forever
Investment Records: 6 Years after sale of investment. Discard monthly statements once you receive annual summary that reflects yearly activity.
IRA Contributions: Forever
Legal Correspondence: (Marriage Certificates, Death Certificates, Divorce Papers, etc.): Forever
Real Estate Records: Forever
Receipts for Appliances, Computer Equipment, etc: Life of Asset, plus 3 Years
Tax Returns and Supporting Documentation: Forever
Warranties/Guaranties: Life of the Product

Do you know how much is in your bank account?

Bank reconciliations must be done every month! If you do not accurately account for deposits made and checks written then you will inevitably end up bouncing checks because of lack of funds. You could literally waste hundreds of dollars a month in check charges to your bank by not knowing exactly how much money is in your bank account at all times.

Don´t just sit there - Go reconcile that bank statement!

Bulk Mail

Did you know that with as few as 200 pieces of mail you
can take advantage of Bulk Mail prices at your Post Office?
Check your local Post Office for details, but here´s an
example of one use (amounts are approximate):

*Annual Catalog Mailing = 300 pieces @ $1.50 each = $450

*With Bulk Mailing: minimum of 200 identical pieces, must be
sorted and bound by zip code (sort labels by zip code
before printing!), annual Bulk Mail License fee $85/yr,
per piece cost about $.50 each, for a total annual cost of
$235--a savings of about $215 per year!

How Do I Pay My Taxes?

The best place to find out how your business handles taxes is to go to the source - the IRS. The IRS has a very informative website where you can download just about any publication or form you may ever need--and instructions to go along with them! If you feel you must talk to a human being about these matters then you may also call your local IRS office (numbers found in your local phone book or online). But be prepared to wait--on hold while waiting for your call to be answered and by your mailbox while waiting for your info to be mailed.

IRS-Sale of Assets

When disposing of business assets, be sure to check out free IRS publication #544 "Sales and Other Disposition of Assets".