September 2022


Reasons Why Bookkeeping is Important for Your Business

When you have a business, bookkeeping is important for some reasons. It can help you monitor your expenses, keep track of your income, and ensure that you comply with tax laws.

Bookkeeping can also help you make informed decisions about your business. For example, if you are considering expanding your business, bookkeeping can help determine whether you can afford to do so.

Many software programs and online services can help you with bookkeeping. However, if you have a small business, you may not need all of these programs’ features. In this case, it may be more cost-effective to hire a bookkeeper or accountant to do your bookkeeping for you.

There are some reasons why bookkeeping Toronto is important for businesses:

1- It helps track expenses

Expenses are one of the most important aspects of bookkeeping. By tracking your business expenses, you can clearly see where your money is going. This information can be helpful in many ways. For example, if you are spending a lot of money on office supplies, you may want to look for ways to cut costs.

2- It helps track income

Income is another important aspect of bookkeeping. By tracking your income, you can clearly see how much money your business is bringing in. This information can be helpful in several ways. For example, if your income is not keeping up with your expenses, you may need to find ways to increase your income.

3- It helps you comply with tax laws

Tax laws are constantly changing, and keeping up with them cannot be easy. Bookkeeping can help you ensure that you are complying with all of the relevant tax laws. This can save you a lot of money in penalties and interest charges.

4- It can help you make informed decisions about your business

Bookkeeping can provide you with a wealth of information about your business. This information can be helpful in some ways. For example, if you are considering expanding your business, bookkeeping can help determine whether you can afford to do so.

5- It can help you manage your cash flow

Bookkeeping can help you manage your cash flow by tracking your income and expenses. This is important because it can help ensure you have enough money to pay your bills and make a profit.

6- It can help you track inventory

If you have a business that sells products, bookkeeping can help you track your inventory. This information can be helpful in many ways. For example, if you are running low on a particular product, you may want to order more.

7- It can help you track customers

If you have a business that deals with customers, bookkeeping can help you track their contact information. This information can be helpful in a number of ways. For example, if you need to contact a customer about an outstanding invoice, you will have their contact information on hand.

8- It can help you track employee hours

If you have employees, bookkeeping can help you track their hours. This information can be helpful in a number of ways. For example, if an employee is not working their scheduled hours, you may want to talk to them about it.

Bookkeeping is important for businesses for many reasons. If you are looking for ways to improve your bookkeeping, consider hiring a bookkeeper or accountant.

read more

How to Pay Yourself From an S-Corp the Right Way

New entrepreneurs frequently question how to pay themselves from an S-Corp. So, how to pay yourself from an S-Corp the right way? As a Shareholder-employee of an S-Corp, you must be paid a reasonable salary. However, even if your business is losing money, you can still distribute the excess funds to yourself as shareholder distributions, free of payroll taxes. In this article, we’ll review the basics of this complex process.

Shareholder-Employees Must Receive a Reasonable Salary

There are many differences between shareholder-employees and their tax advisers when calculating a reasonable salary for an S-Corp’s SEs. Shareholder employees tend to limit their compensation and prefer distributions to keep payroll taxes low. Tax advisers, however, must follow IRS guidelines. In other words, they cannot allow us to forgo a reasonable salary. Unfortunately, there is little guidance for tax advisers, who may not know what a good salary is for their company.

The IRS has issued a ruling on the matter, stating that S-Corps shareholders are considered employees under the tax law. Under IRS rules, a reasonable salary must be more than the value of services provided by an employee in the same industry. Therefore, if a shareholder offers more than money to a company, they are employees and should be paid a comparable wage.

The 60/40 rule Determines Employee Salaries

If you consider forming an S corporation, you may have heard about the 60/40 rule, which divides revenue between salary and profit distribution. The 60/40 rule may help you determine the proper salary structure, but it may not pass the IRS muster. Additionally, you may end up paying more taxes than necessary and leaving unused funds in the company. In other words, you should carefully consider the 60/40 rule before establishing the salary of an S corporation’s SE.

However, it is crucial to pay yourself a reasonable salary. If you spend less than a similar position, you risk getting into trouble with the IRS. The 60/40 rule ensures that you pay yourself a salary commensurate with another employee’s wages. Likewise, the 60/40 rule helps protect your business from penalties imposed by the IRS if you fail to pay your compensation.

Form 941 is Used to File Federal Payroll Taxes

There are several things to remember when filing federal payroll taxes from an S-Corp. The first thing to remember is that the first line on Form 941 only applies to the first box. It is not required to fill out lines two and three. You should make your payments online, using a credit card or PayPal. Enter your EIN, payment amount, and business name and address.

Most businesses with employees must file IRS Form 941 every quarter. Other states have analogs for this form. You do not need to file Form 941 if you employ household employees or only a few seasonal workers. The deadline for filing is the last day of the month after the quarter ends. You can extend this deadline by ten days if you make payroll tax deposits on time throughout the quarter.

Fees are Paid Through the Federal Unemployment Tax Act

Some states require specific types of S corporations to file a Federal Unemployment Tax Return. To qualify, the corporation must pay at least $1,500 in wages each quarter and have at least ten employees working some part of each day during 20 different weeks. Other states require farm businesses to hire workers for a minimum of twenty hours per week. While this is not necessary for small businesses, the cost of filing a Federal Unemployment Tax Return is a 6 percent tax on wages. Employers can opt to pay less by contributing to state unemployment funds.

The fees associated with an S corporation must be reported to the IRS. If the corporation has employees, the officers and members of the LLC are treated as employees. S-Corps, LLCs, and partnerships are subject to unemployment tax laws. Generally, they must file Form 1120S for federal tax purposes and to pay FICA and unemployment taxes for their employees. In addition to filing federal tax returns, S-Corps and LLCs must file quarterly reports reporting the payroll taxes withheld from their employees’ pay. In some states, shareholder-employees may be required to file a Form 1040-ES (estimated tax) to report additional income.

read more