How to Do Accounting for Your Construction Business in New Jersey

Construction accounting is very different from those other types of businesses. You must keep track of the accounts receivable, accounts payable, and payroll transactions. Along with that, construction companies need to monitor job costs, change orders, retention, customer deposits, and progress billing. All of these components can make construction accounting a challenging task. Here are a few tips that you need to know about construction accounting.

 

Record All Financial Transactions

The double-entry methods are the best techniques for recording financial transactions in the construction industry. With this, there must be two entries on the ledger for every single transaction. Some companies track these transactions with the help of accounting software or an outsourced bookkeeper.

 

Keep a General Ledger and Chart of Accounts

A chart of accounts lists all of your general ledger accounts to categorize those transactions. You have the names and a brief description of every account in the list.

Some of these account types could include:

  • Current assets
  • Current liabilities
  • Equity
  • Cost of goods sold
  • Indirect expenses
  • Administrative expenses

 

Know the Common Cost Types of Construction Accounting

There are several types of cost types associated with construction accounting.

They include the following:

  • Job costing: Construction accounting keeps track of the costs of the job. You need to know the project costs as they relate to specific jobs. All of the expenses must be tracked throughout the project’s life. The actual costs and projected estimates are compared during several points of the project. With that information, you can see whether the project is on or over budget. Job costs affect the income of the construction company. In some situations, companies can receive financial incentives for delivering a job under the projected budget.
  • Work in progress: Any active or under contract job is known as a work in progress. Construction companies need to track these jobs since it can help to indicate the income and cash flow. Some companies use this cost type to determine the current project’s progress, recognize any revenue, and list other costs coming from the job.
  • Cost of goods sold: These costs refer to the expenses incurred for those projects in progress. These costs include labor, equipment rentals, material, and other costs tied directly to the project.

 

Recognize Your Revenue

In the construction industry, there are several ways to recognize revenue. Those methods can change depending on the type and duration of a project. For example, some companies recognize their revenue through cash or accrual accounting. Income and costs are recognized when cash changes hands with cash basis accounting. With that, the payables are not recognized until the bill is paid, and there is no record of the payment until the money is in the company’s account. This type of reporting allows the construction company to represent its cash flow. Unfortunately, it does not accurately recognize all costs and revenue.

Accrual accounting is much more accurate. The income and costs are recognized when received from the vendor, and the client is billed. Many companies use accrual accounting over the cash accounting method.

 

Completed Contract vs. Percent Completed Income Recognition

You can track income in two ways: completed contract or percent completed. With percent completed, the revenue is recognized on the percentage of costs for the project. When revenue comes in from the project, it is tracked. A completed contract only records revenue once the project is considered completed. Many companies track their revenue with the percent completed method for better accuracy.

 

Construction Accounting Common Reports

If you want to know the financial health of your construction business, you should know these common reports.

 

Accounts Receivable Aging

Within your accounts receivable (AR), you can track all of those outstanding payments that have been billed but not paid. The accounts receivable aging report shows which companies need to pay their bills by indicating the age of the invoices. With that, you can know which accounts are heading to collections by splitting them into categories for 30, 60, and 90 days past due. You will have healthier accounts receivable reports when there is a shorter time between billing and collection. Keep in mind that the construction industry has some of the longest payment delays out of any sector.

Accounts Receivable Aging

Accounts Payable Aging

On the other side is the accounts payable aging report. This report keeps track of the money you owe to other contractors or vendors. Like the accounts receivable, this report shows when those invoices were created. You can prioritize vendor payments with these accounts payable aging reports.

 

Profit and Loss/Income Statements

As you may have guessed, a profit and loss report shows the amount of expenses and income accrued during a specific period. You can also view the net loss and profit for any period of time.

 

Balance Sheet

This report shows your liabilities, assets, and equity holdings in the company. You can use these numbers to determine your financial position to lend or borrow money.

 

Job Cost Report

During a specific project period, you can get a breakdown of the costs. These reports are helpful to show the progress of the project and inform the customer of billing amounts.

 

Job Profitability Report

You need a job profitability report to analyze the difference between the actual and estimated costs. These reports show you whether the project is profiting or losing money in the process.

These tips are some of the basics of construction accounting. It can be complicated for anyone to figure out, especially if you don’t have experience with accounting or bookkeeping. These duties should be left in the hands of a professional. For that reason, there are small business accounting services for the task. These accountants understand your company’s needs, and they can help you reduce the headaches associated with managing your finances.

 

Finding an Accountant for My Small Business

At TMD Accounting, our company has over 40 years of experience. We will help you manage your finances with various services, including payroll help, financial management, and tax assistance. Schedule a consultation by calling 1-856-228-2205.

Smart Accounting Practices for Independent Contractors In New Jersey

Under the law, an independent contractor is classified as a business. As a result, you are responsible for paying taxes and maintaining those financial records. You might have become an independent contractor to get away from those mundane tasks, but it is vital to keep up with accounting and bookkeeping for your business. Here are a few ways to track your finances as an independent contractor.

 

Differences Between an Independent Contractor and an Employee

Those who work for a company are classified as employees. The business will withhold and report a portion of the individual’s wages to the IRS. Unemployment, Social Security, Medicare, and tax liabilities are all deducted from those paychecks. All taxable income is listed on a W-2 form and filed with the IRS.

If you are an independent contractor, you are not an employee of a business. You get paid for projects, file taxes by yourself, and work when you want to work. In this role, you have more freedom than a regular employee. However, with the title comes plenty of responsibilities.

With that freedom, you are responsible for paying your own health insurance, unemployment taxes, and payroll taxes. For that reason, you need to keep accurate bookkeeping records of your finances. Any mistakes can lead to tax penalties and other problems down the road. While being an independent contractor has many benefits, all business responsibilities are in your own hands.

As an independent contractor, you are responsible for tax payments and other financial matters. While it might sound intimidating, there are a few steps that you can take to make it a less challenging process. Don’t think that this is an impossible task. You can use these smart accounting practices to keep accurate records and manage your finances as an independent contractor.

 

Becoming Financially Savvy With Your Accounting

There are many reasons why an individual chooses to become an independent contractor. Some people don’t like the 9 to 5 grind, while others want more freedom with their days. No matter the reasons, everyone wants to be successful in their careers. While it takes many skills to run your own business, you must pay attention to your finances.

Tax time can be challenging for anyone. If you don’t have the proper records and statements, it can become a headache. Use these smart accounting skills to get a better hold of your financial health. Not only will it help with your tax liabilities, but you can make better-informed decisions for your business.

Becoming Financially Savvy

Become Your Own Business

Make sure to request your own EIN or Employer ID Number from the IRS. With that, you will be classified as your own business rather than a “contractor for hire.” Becoming your own business provides you with the opportunity to receive tax breaks.

 

Separate Personal and Business Expenses

Along with an EIN, you should think about opening a separate bank account for your business. This process is a smart accounting move because it helps to separate finances. Along with that, if you happen to be audited, it can make the process a bit easier for you. A separate business account gives you the records to show that expenses are tied to your business. With one single account, you might have to justify whether the expenses were personal or business-related.

 

Track All of Your Expenses

Whether your business is large or small, you must record all of your expenses. With that information, you can take advantage of tax deductions. However, you need to back up your records with invoices and receipts. You always want to be prepared in case of an audit.

 

Always Pay Your Estimated Taxes

Those accurate financial records are the best ways to track your tax liability. If you fail to file your expenses and profits, you could be audited by the IRS. Unfortunately, all of your wages will be heavily scrutinized as an independent contractor. For that reason, you want to have accurate records of your estimated tax payments so that you are not hit with a large tax liability.

Estimated Taxes

Plan for the Future

As a business owner, make sure to plan for the future. Even if your business is flourishing right now, things can change instantly. You should have a plan in place for times when business is slow. Think about what you would do to cover those financial humps. From getting sick to natural disasters, anything can impact your work and the demand for your services. Enjoy your current success, but always plan for the unexpected. With that, consider a few financial plans that can help during those tough times. If you are worried about your financial health, small business accounting services can provide some guidance to ease the stress of uncertainty with your work.

 

Learn About Tax Benefits

Take some time to learn about the advantages of business ownership and tax planning. You might be able to use some tax-saving benefits, such as retirement savings, family planning, and medical expenses.

 

Don’t Be Afraid To Ask for Help

If you are an independent contractor, you already know the benefits of outsourcing some parts of your business. When you focus on your projects, it can become a burden to record your own finances and handle those tasks for tax season.

When you work with a professional bookkeeper and accountant, you can eliminate some of that stress. In addition to that, you can stay on track financially and make better decisions for your business. Well-organized books even place you in a better position if you need to apply for a business loan.

 

Choose an Accountant Who Understands Independent Contractors

Need an accountant for my small business? Make sure to reach out to TMD Accounting. For over 40 years, small businesses and individuals have trusted Thomas M. Ditullio Accounting. Mr. Ditullio and his staff provide only the highest quality accounting services to the residents and businesses in the Gloucester County area. We understand that an independent contractor has specialized tax and financial needs. For that reason, you can count on us to get the job done for you. Schedule a consultation by calling 1-856-228-2205.

Accounting and Bookkeeping Best Practices for Law Firms in New Jersey

As an attorney, you are already well-versed in the law. However, if you own a law firm, you also need to consider accounting and bookkeeping responsibilities. Proper bookkeeping allows you to monitor the success of your law firm and make the best-informed decisions for the future. You are already juggling plenty of responsibility for your law firm, but you still need to keep up on those books. When you fall behind, it can be a mess to untangle. Let’s look at the best law firm accounting and bookkeeping practices in New Jersey.

 

The Difference Between Law Firm Accounting and Bookkeeping

You might think that accounting and bookkeeping are the same, but they occur at different stages. Bookkeeping is the first step to help you track your cash. You can record every financial transaction, run payroll for your employees, and create invoices with bookkeeping. It is important to be diligent and accurate when recording this information.

On the other hand, accounting is a bit more subjective. You can use accounting practices to uncover business trends, plan for your taxes, and forecast your financial future. Accounting can also help capture those expenditures that were not recorded initially. Plus, accounting is a way to prepare financial statements and other reports.

Without the proper bookkeeping, you cannot get an accurate accounting outlook. You might want to hire someone to handle this task. Many small business accounting services are ready to help with those bookkeeping and accounting duties.

Now that you know the difference between accounting and bookkeeping, here are some tips for implementing these practices at your New Jersey law firm.

 

Keep a Chart of Accounts

There is one way to keep accurate records, and that is by maintaining a chart of accounts. This process provides you with the framework to organize your data into categories, such as expenses, revenues, client expenses, and trust accounts. Think of these charts as an index of your firm’s financial accounts.

Typically, the chart of accounts includes five categories: revenue, owner’s equity, assets, liabilities, and expenses. The chart of accounts helps ensure that your financial information is recorded correctly.

Chart of Accounts

Make Sure To Separate Personal and Business Expenses

Always keep those business and personal expenses separate to avoid any financial headaches. Intermingling your finances is not only frowned upon by the IRS, but it can make it impossible for you to claim expenses at tax time. Along with that, you will have a hard time tracking the financial health of your business when you don’t separate those expenses. Always keep separate accounts for business and personal finances. If you spot a mistake, like depositing a personal check in your law firm’s account, make sure to correct it in your books.

 

Don’t Lose Track of Business Expenses

Unfortunately, many attorneys often lose track of their expenses. It is always a good idea to record those expenses daily. There is less chance to misplace or lose an invoice or receipt with that schedule. Don’t forget to go into detail about the expenses. For example, if you had a meal with a client, write down all of the pertinent information, such as the client’s name and reason for the meeting. If you happen to be audited, you can easily prove that the expenses were related to your business.

 

Ask for Professional Help

Many people believe that they can handle the tasks of bookkeeping and accounting. However, it can be so easy to fall behind on tracking expenses and other financial information. Running a law firm is challenging, especially if you have a small firm. You can take some of the responsibilities off your shoulders by hiring a professional bookkeeper or accountant for these duties. With a little experienced help, you can ensure that nothing falls through the cracks.

 

Never Procrastinate

If you wait until tax time to track your finances, you will run into many problems. Track these finances on a weekly schedule. Put it on your calendar and stick to the schedule. It is vital to keep on top of those expenses and other financial matters. When you let these bookkeeping duties slip, you will have to spend hours at tax time trying to reconcile your books. When that happens, there is an increased chance of making a mistake.

 

Double Check Your Entries

It can be easy to make a simple mistake in your books. However, one small mistake can cause pandemonium for your records. Take your time when making entries. You always want to double-check your information to ensure that everything is accurate.

Double Check Your Entries

Always Track Transactions

Get an accurate picture of your law firm’s current financial standing with proper bookkeeping. Any missing transactions can create inaccuracies that lead to financial problems. Losing track of those critical transactions often cause issues with your taxes. You can avoid these problems by hiring an accountant or bookkeeper. If you want to track transactions by yourself, use accounting software to help automate the process.

 

Don’t Mix Up Owner’s Draws and Pay

When you take money out of your business account for personal use, that is known as a draw. An owner’s pay is paying a salary for yourself from the business. These transactions are often confused with one another, leading to inaccuracies in the books. Whether you are paying or drawing, make a record in your accounts to ensure there are no tax mistakes.

As you can tell, there are plenty of things to consider if you want accurate financial records for your law firm. In most situations, you want to find an experienced accountant who can handle these records for precise bookkeeping.

 

Find the Right Accountant for My Small Business

Accounting and bookkeeping can be challenging to maintain, especially when operating a busy law firm. If you want professional assistance, make sure to speak to TMD Accounting. With over 40 years of experience, our Thomas M. Ditullio Accounting team provides financial management, tax assistance, and payroll services to businesses and individuals throughout the Gloucester County area. You can schedule a consultation by calling 1-856-228-2205.

Restaurant Bookkeeping 101: A Guide to Accounting Basics

Even the most experienced restaurants have trouble trying to decipher the language of bookkeeping. It can be intimidating with its moving pieces and complex practices. With tight profit margins, you never want to let your bookkeeping go by the wayside. If you don’t watch those financials, it could be too late to fix problems or straighten out your records. If you need help with your restaurant bookkeeping, take note of these accounting basics.

 

Good Accounting Starts With You

As a business owner, you need to handle your finances. Whether you outsource your accounting or manage finances by yourself, staying on top of those day-to-day chores is vital. With well-managed bookkeeping, you can stay ahead of those other restaurants and turn a profit with your business.

There are several ways to manage your bookkeeping. Whether you use small business accounting services or monitor them by yourself, here are a few tips to keep in mind.

 

Use POS To Record Daily Sales

The first basic step of bookkeeping is to record your sales. You can find many types of accounting software for your restaurant. These systems record the daily sales for each day. You can see when the cash and credit card sales hit your bank account with this information. Remember that it can be a few days before those credit card sales reach your bank. Once you analyze the timing of those funds, you can set up your bookkeeping system to mirror that schedule.

After you have the daily sales, set up a sales report. A daily sales summary is automatically built into many POS systems. However, you can always customize the report to meet your specific bookkeeping goals.

 

Handle Accounts Payable

Setting up your accounts payable is another vital task. You always want to pay those vendors on time so that they continue to supply your restaurant with food and other goods. Enter all of the invoices throughout the week and pay them on time. After entering the bills into the system, some software programs will automatically schedule payments for your vendors.

Setting Up Accounts Payable

Set Up Payroll

A successful restaurant needs great employees, and if you want to keep those employees, you need to pay them. Payroll can be a complicated process for anyone. You also have to think about taxes and other financial considerations. If you happen to file payroll taxes late, you could end up with high interest or penalties. There is a lot of liability on the line when you decide to handle payroll for yourself. You might want to outsource this task to an experienced accounting service that understands the needs of small businesses. With that, you can ensure a consistent and reliable flow of paychecks for your employees.

 

Reconciliation

Reconciliation might be the most crucial step in bookkeeping. You must reconcile credit cards,

lines of credit, loans, bank accounts, and payroll liabilities. All of those accounts with a beginning and ending balance should be reconciled. This step provides you with the most accurate look at your financial records.

 

Financial Reporting

If you don’t have a financial report for your restaurant, you cannot get a complete picture of your financial health. Within your financial report, you will be able to monitor your profit margins. Look at those costs of goods sold versus the sales ratios. Labor ratios are another critical factor to watch. You want to keep the cost of food, labor, and beverage around 60 percent of your total sales.

 

Calculate Your Costs

Calculate Your Costs

Good bookkeeping tracks your profits and expenses. Some of these costs for your restaurants can include:

 

  • Cost of Goods Sold

Any product you use to create your meals, drinks, or other specialties is known as the cost of goods sold. In other words, these items are the ingredients used to round out your menu. In many cases, restaurants want to keep the cost of food around 33 percent of their sales. Beverages are another expense that can be tracked with the costs of goods sold.

  • Cost of Labor

Labor expenses can be high for many businesses. Tracking these costs can be challenging. Many of these employees work for tips or have various pay scales. Not only do you have to pay for the wait staff, but you must also figure out those costs for the hosts, kitchen staff, valets, cleaners, and other personnel. Don’t forget about paying unemployment taxes. Whether you have seasonal or full-time employees, you need to figure out your labor costs to determine how they affect your bottom line.

  • Cost of Equipment and Occupancy

Infrastructure costs are another concern for restaurants. Many businesses don’t own their restaurant equipment. For that reason, they need to track those costs. Mortgage, rent, and property taxes are also part of these costs. You might even want to add utilities, insurance, maintenance costs, and signage to your list of expenses.

  • Cost of Administration and Marketing

You might have a great business, but no one will know without the right marketing. Billboards, newspaper ads, and even social media advertising can all add up. You might need to offer coupons and promotions to keep those customers coming through the door. Don’t forget to include these expenses in your overall costs of operating a restaurant.

 

Think About Outsourcing Your Restaurant Bookkeeping

You need to leverage your strengths and outsource those weaknesses in the restaurant business. In many situations, outsourcing bookkeeping duties is a wise choice. It might be tempting to take on the role of bookkeeper, but there is too much on the line with those responsibilities. Hiring someone can help you focus on growing your business. There are many steps to managing restaurant bookkeeping. While you may want to manage those books by yourself, it might be time to talk to a professional.

 

Choose the Right Accountant for My Small Business

If you want an accurate overview of your restaurant’s profits and losses, consider hiring TMD Accounting for your business. With over 40 years of experience, Thomas M. Ditullio Accounting offers many services, including tax assistance, financial management, and payroll help. You can schedule a consultation by calling 1-856-228-2205.

How To Implement A Restaurant Accounting System

Many restaurant owners have a passion for food and devotion to the hospitality business. You might think that an exceptional chef and a customer-focused attitude are the only two ingredients for a successful business. However, setting up a restaurant accounting system is crucial for your business. With this system, you can monitor your profit margins while still analyzing those other key performance indicators.

 

What To Know About a Restaurant Accounting System

Your restaurant’s accounting system is vital whether you have a new business or need to implement a better financial strategy. These accounting systems not only track the financial transactions, but you can prepare reports, gather all the data for taxes, and summarize your financial information in an easy-to-understand format.

With that information, you can make the best decisions for your restaurant. These decisions can minimize costly expenses and boost your profit margin. You could decide not to use an accounting system, but you will be left with messy finances that must be unscrambled for tax time. An accounting system helps you track all the numbers for a clearer picture of your restaurant’s financial health.

 

Implementing a Restaurant Accounting System

There are several steps to setting up an accounting program. Make sure to follow these tips for a successful implementation of the system.

 

Hire an Experienced Accountant

Consider using small business accounting services for the first step of the implementation. You will need help to set up a restaurant accounting system. Keeping accurate financial records is important, especially when you need to make business decisions for your restaurant. Taxes are frustrating. These records can help to complete the tax filing process. A professional accountant understands all the tax implications that can affect your restaurant. Plus, an accountant can make a few suggestions to help select the right software for your business.

 

Select the Right Accounting Software

If you are searching for the best restaurant accounting software packages, there are several options. Make sure to choose one that you can use and understand. Once again, an accountant can help you with this step. You should choose one with solid financial analysis features and reporting options. All of the software should generate profit and loss statements for your business. Think about choosing a software system that tracks accounts receivable and payable, generates invoices, and manages employees’ schedules. Those robust options provide you with the best tools to oversee your business.

Selecting Accounting Software

Accounting for a restaurant can be complicated, especially when you need to track the different salaries, workers’ tips, and other sources of income. Before you choose accounting software for your restaurant, ask for advice from your accountant. These professionals will know what you need in a software system.

 

Choose Your Accounting Method

Before choosing your accounting software, decide whether you need a single-entry or double-entry option to manage your books. Since many restaurants have inventory, it is advisable to select software with double-entry bookkeeping.

Another crucial decision is whether to use accrual or cash accounting. Consult your small business accountant for this decision. You might want to select accrual accounting since it provides you with the most accurate financial picture by recording expenses and revenue. Most of those records are tracked in real-time as the transaction occurs in your restaurant.

 

Choose a POS System

No matter the size of your restaurant, choose the right point-of-sale (POS) system to manage cash and credit transactions, send receipts, track inventory, and report on other details. You can quickly implement a POS system that works with your accounting program for a hassle-free way to manage your business.

 

Tracking the Restaurant’s Flow of Funds

With a restaurant accounting system, you can keep track of specific accounts for your business.

These flow of funds include:

  • Payroll

Payroll can be challenging for even the most experienced restaurant owner to manage. Many of the workers have different rates of pay. You can outsource your payroll services or use payroll software to keep track of these expenses.

  • Inventory

All restaurants will have inventory on hand. Remember that there are two classes of inventory: supplies and food. If you have too much stock, it often ends up as waste. On the other hand, too little inventory can hurt your sales and drive away customers. Some accounting software can help you track your daily inventory so that you can find the middle ground between profit and loss.

  • Accounts Payable

As a restaurant owner, you rely on supplies to operate your business. If you don’t have a handle on your finances, then you might miss paying those invoices. Accounting software helps manage those bills and maintains a long-standing relationship with vendors and suppliers.

  • Cash Flow

You need to keep track of the amount of cash that goes into and out of your restaurant. Accounting software helps you create statements to track your cash flow on a daily, weekly, monthly, or quarterly basis.

  • Sales

All restaurant owners need to track their sales. Accounting software helps you see how much money comes from beverages or food items. You can break down the sales from carry-out meals, eat-in meals, and even different menu options on these platforms.

  • Cost of Goods Sold

The cost of goods sold (COGS) can distinguish your food and supply costs from other expenses for your restaurant, such as rent or utilities. These accounts list your occupancy costs as expenses while the supplies and foods are identified as COGS.

 

As you can already tell, an accounting system is vital to help manage your business and keep it profitable for many years to come. Without the right software, you could lose track of your cash flow, miss out on invoices, and lose money on your inventory. Make sure to reach out to an experienced accountant who can help you find the best system for your restaurant.

 

An Accountant for My Small Business

With help from TMD Accounting, you can finally manage those financial records for your business. Thomas M. Ditullio Accounting has over 40 years of experience. His team provides a wide range of services in Gloucester County, such as financial management, payroll, and tax services. You can schedule a consultation by calling 1-856-228-2205.

 

How To Reduce Your Small Business Overhead Costs

How To Reduce Your Small Business Overhead Costs

In order to run your business, you will have to spend money to make money. If you do not keep these overhead costs in check, they can be major drains to your company’s bottom line. If your indirect costs are taking an increasingly larger amount from your revenue, you may need to reevaluate them and cut them where you can. Here are 12 ways you might be able to lower these costs so that you can improve your bottom line. 

1. Conduct a thorough review

If you have an accountant, ask for the most recent list of your business’s overhead costs. If you do not have an accountant, search using your company’s bookkeeping software to review the costs. Once you have the list, review everything and highlight items that:

  • Are unnecessary
  • Too costly
  • Inefficient

This can help you to identify where you need to make changes.

2. Don’t expect immediate and substantial cost savings

It is unlikely that eliminating a single line-item expense will solve your issue, especially if you have completed cost-savings exercises in the past. Making several small changes may result in more savings than you might realize, however.

3. Brainstorming

Your employees may offer excellent advice about where you might realize savings. If your company is moderately sized or large, you may want to incentivize making cost-saving suggestions by rewarding the suggestions that realize the greatest savings.

4. Reevaluate contracts with third parties

Review all of the third-party contracts that you have for leasing equipment and retaining services. You may be able to identify some older contracts that no longer meet your needs. Your business may have outgrown an existing contract, leaving you spending more to fill in the gaps in services yourself. This may lead to an increased contract price but a more substantial decrease in costs in your ledger’s other columns.

5. Clean your storage room

If you have outdated and non-working technology cluttering your storage room, clean it out and sell the equipment. You can also donate them to a school or a charity if they are still working. Make certain to ask for a receipt so that you can write off your donations on your taxes.

6. Look at your staff

You should also assess your staff and let go those who have been consistently underperforming. Underachieving employees drain your resources and the morale of your other employees, leading to less overall productivity. Make certain that your hiring and firing decisions are done in a legal manner so that you will not be sued.

7. Leverage your current base of clients to save on promotion costs

One of the best types of referral comes from your current clients. Enlist your happy customers to be the ambassadors of your brand while reducing your marketing and advertising budget. You can ask for testimonials and offer incentives for referrals.

8. Go paperless

By greatly reducing the paper that you use, you can save on storage space, paper, toner and ink and printers. Back up your important documents to a drive or the cloud and shred unnecessary files. When you have completed the transition from paper to electronic storage, sell your filing cabinets.

9. Use the right business credit cards

Most business owners have at least one credit card that they use for business expenses. Make certain that your card offers you the most benefits. If your employees use business credit cards, consider choosing business cards that allow you to control spending to certain categories and amounts on each card to save money.

10. Control purchasing

If you can, designate a person to be responsible for handling all of the purchasing. This person should be someone who is skilled at negotiating and who is able to ask for discounts. When this person has purchasing as his or her job, he or she should also look out for the best bargains.

11. Sublease space in your office

If you own your business’s space, you may have a group of rooms or floors that are unused. Sublease out this space to other businesses and subsidize your payments with the rents that you receive.

12. Determine how much space your business needs

Some businesses may find that they do not need their office space and are able to move to a telecommuting model. Others may find that relocating their offices to new locations may offer cost savings. Think about what your office is used for and why you have it. If you do need an office, think about downsizing or office rental agreements that let you have a professional space for a minimal cost.

Cutting overhead costs is an ongoing process offering results over time. It requires a careful evaluation to determine the greatest efficiencies. Keeping your overhead costs down should involve a structured method of review. Contact Tom DiTullio Accounting today for advice about how your business might improve its bottom line through cost savings.

Can I Claim Medical Expenses on My Taxes?

Can I Claim Medical Expenses on My Taxes?

Medical bills can balloon when you have medical emergencies that your insurance does not fully cover. Fortunately, you may obtain some relief by deducting a portion of these expenses on your tax return under the Internal Revenue Code. In order to take advantage of this deduction, it is important that you understand what is considered to be a medical expense and how to correctly claim the deduction.

Value of the medical expense deduction

Under the IRS rules, taxpayers are able to deduct the qualified medical expenses exceeding 10 percent of their adjusted gross incomes for the tax year. Your AGI is your taxable income minus such adjustments as your student loan interest, IRA contributions and your deductions. Only the portion of your medical expenses that exceed 10 percent of your AGI may be deducted.

Which medical expenses are deductible?

Only qualified medical costs are deductible. These include vision care, dental care, surgeries, treatment and preventative care. You are also allowed to deduct the costs associated with psychiatric and psychological care. You are allowed to deduct the costs of prescription medications and prostheses such as hearing aids, contact lens, glasses and false teeth. Finally, if you keep good records, you can deduct the costs of traveling for medical care, including parking fees, bus fares and vehicle mileage.

What’s not deductible?

You may not deduct any of your medical expenses for which you receive reimbursements, including from your employer or your insurance company. The IRS generally does not allow you to deduct the expenses that you incur for cosmetic procedures, non-prescription drugs or general health care products such as toothpaste or over-the-counter diet products.

Claiming the medical expenses deduction

You must itemize your deductions on your tax return to claim the deduction for medical expenses. This means that you will not take the standard deduction. You should only choose to take the medical expense deduction if the total of your itemized deductions will exceed your standard deduction. Deductions are itemized on Schedule A of your IRS Form 1040.

You will report your total medical expenses that you paid during the tax year on line one of Schedule A. Next, you will enter your AGI on line two and 10 percent of it on line three. Finally, you will enter the difference between your medical expenses and 10 percent of your AGI on line four. This amount will then be used to reduce your taxable income.

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To learn more about the medical expense deduction and other deductions that might be available to you, contact Tom DiTullio Accounting. We are experienced local tax preparers who can advise you about the different deductions that might be appropriate for you.

Are You Considering Starting A New Business-

Are You Considering Starting A New Business?

Do you have a great new product or are you in the service industry looking to branch out on your own? Starting your own business can be an exciting but stressful time. You may be an expert in your respected field, but the business aspect of all this is overwhelming. Here at Thomas M DiTullio Accounting we understand and are here to help you on this journey.

Here are some helpful Tax Tips to get you started on the right foot . . .

  • You need to decide on your business structure. Will you be a Sole-Proprietor or an LLC? A Partnership perhaps, or a Corporation. There are tax advantages, and disadvantages, to each entity. Your choice of the formation of your company will determine which tax forms need be filed as well as the filing frequency.
  • Depending on your business structure, you will be required to file “Business Taxes”. The general types of these taxes are income tax, self-employment tax and employment tax.
  • You will need an EIN (Employer Identification Number) for your business to open your new business checking account. This will also be necessary should you have employees.
  • Your “Accounting Method” will determine which set of rules you will use to determine when, and how, to report income and expenses. The most common method is the “Cash Method”. Income and expenses are reported in the year you receive, or pay, them.
  • We can assist you in determining what is the best strategy to having a very long and profitable business.
  • Will you need payroll? Payroll can be confusing but, if done right, it should be simple. We will file your payroll taxes on a weekly or biweekly basis to make sure you don’t get behind. We can also file the Quarterly and Year End Federal and State payroll forms to keep you compliant, for example Form 941, 940, NJ927, WR-30.
  • Do you need to charge and remit sales tax? We will be able to first assist you in determining if you need to charge sales tax or not and, if so, we would be able to file State sales tax forms on your behalf, for example ST-50.

Our office can form all types of businesses. We are on your “Team”. We will work for you to make sure you and your new business are compliant with all Federal and State regulations.

Please contact Thomas M DiTullio accounting with any questions at all. We are here to help you.

What Is The Difference Between Bookkeeping and Accounting For Small Business

While some people use the terms accounting and bookkeeping interchangeably, there is a difference between these functions in your business. People confuse these important business functions because of the similarities between bookkeeping and accounting. It is important for businesses to have strong bookkeeping and accounting functions in order to have better financial management. By understanding how bookkeeping and accounting differ from each other, you will be better able to avoid financial problems.

Bookkeeping vs Accounting

Bookkeeping involves keeping the books of a business. Bookkeepers record all of the financial transactions and financial documents of the business. Commonly, bookkeepers use software programs to assist them with recording the businesses’ financial affairs. They may also summarize and classify financial data. The importance of bookkeeping is that it helps to keep the records that businesses need. A bookkeeper’s job may include the following:

  • Recording debits, payments and credits
  • Reconciling all of the accounts
  • Receiving and sending invoices
  • Payroll tasks
  • Mantaining historical accounts and ledgers
  • Preparing internal reports

Accounting involves collecting, classifying and manipulating financial information for individuals and organizations. While accountants may perform some bookkeeping tasks, their jobs involve much more detailed work in analysis, reporting and advising. A business’s financial data will be analyzed, classified and interpreted for the benefit of the business. The importance of accounting to a business is getting insight into the business’s finances, making financial projections and making certain that the business complies with tax laws. An accountant may do the following:

  • Preparing statements
  • Completing the business’s tax returns
  • Analyzing operational costs
  • Giving business owners information so that they can understand the
  • business’s finances and make financial decisions
  • Establishing accounting functions
  • Customizing reports and statements
  • Creating budgets
  • Making financial and cash projections
  • Managing end-of-the-year finances

Bookkeepers record financial data, which is one component of accounting. Bookkeepers follow the orders that are given by accountants. Because these roles overlap, it is sometimes difficult for people to understand how the difference between bookkeeping and accounting. Many accountants complete bookkeeping tasks, and many bookkeepers go on to become accountants. The team at Thomas M. DiTullio Accounting offers a full suite of bookkeeping and accounting services.

To learn more about how we can help your business with its financial needs, call us today to schedule your consultation.

Who Can Claim Head Of Household?

Who Can Claim Head Of Household?

Many taxpayers are confused about what filing as a head of household requires. The IRS has some guidelines in place to assist taxpayers with figuring out whether or not they can file with this status. Filing as head of household may offer you the benefits of having a lower taxable income and a larger refund than filing as single. In order to qualify, you must meet the eligibility requirements. The accounting team at Thomas M. DiTullio Accounting can assist you with determining your appropriate filing status.

The criteria for this filing status include the following:

  • You must pay for more than 50 percent of your household expenses;
  • You must be considered to be unmarried for the tax year; and
  • You must have a child or dependent who qualifies.

Because some of the terms that are used are confusing, the IRS has some guidelines to help.

What is the IRS definition of head of household, and what is the difference between single and head of household on taxes?

The IRS defines head of household as a tax-filing status that can be used by unmarried or single taxpayers who keep homes for qualifying persons. This status offers some advantages over filing as a single person. You may enjoy a lower tax rate, a higher standard deduction and a potentially larger refund with this status.

Who can file as head of household?

You are eligible to claim head of household status if the following applies:

  • You were not married or you were considered to be unmarried on the last day of the tax year.
  • You paid more than 50 percent of your household costs during the year.
  • A qualifying person lived with you for more than six months other than temporary absences.

Maintaining a household

You must have paid more than 50 percent of the expenses required to maintain your home during the year. This includes paying more than half of your total household bills. If you receive some financial help for your household expenses from another person, you may still qualify as long as you used your own earnings to pay at least 50 percent of the expenses.

Considered unmarried

You must also be considered to be unmarried on the last day of the tax year. This means that you have either never been married, are legally separated or divorced, lived away from your spouse for six months or more of the second part of the tax year or you have a nonresident alien spouse and a child who qualifies and who lived with you for more than six months. You will still be considered to be married if the absence from your spouse was because of a temporary reason such as military service, college attendance, medical treatment or business trips.

Qualifying child

A qualifying child is one who meets the following criteria:

  • Is your biological, step or foster child, or he or she is your half sibling, step sibling, sibling or a descendant
  • Lived with you for more than six months
  • Is younger than you
  • Is younger than 19 by the end of the year or under 24 if he or she is a full-time student in college
  • Did not pay more than 50 percent of his or her own living expenses

Qualifying dependent

If you do not have a qualifying child, you can still file as head of household if you have a qualifying dependent:

  • Step, foster or biological children or half siblings, step siblings, siblings or descendants who are older than the age requirements but who are permanently and totally disabled
  • Your parent
  • Your sister-, brother-, mother-, father-, daughter- or son-in-law, or your nephew, niece, uncle, aunt, stepmother or stepfather

You must have paid for more than 50 percent of a qualifying dependent’s expenses during the tax year.

If you need help with your taxes and your filing status, contact the professionals at Thomas M. DiTullio Accounting today.

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