The Ultimate Guide to Independent Contractor Taxes – New Jersey

Independent contractors have to worry about federal income tax, self-employment tax, and local and state taxes when they file their returns. Sole proprietors use Schedule C with Form 1040 to report their business profits and losses to calculate the taxes they will have to pay. To avoid an underpayment penalty, independent contractors must also submit quarterly estimated tax payments each year. When you begin working for one or more companies, they should determine whether you should be treated as an independent contractor or employer based on several factors. If you are classified as an independent contractor, you will be responsible for paying both your portion and the employer’s portion of your taxes and will receive a 1099-NEC at the end of the year instead of a W-2 for your annual earnings. Here is what you need to know as an independent contractor about taxes from TMD Accounting.

Taxes Self-Employed People Must Pay

Independent contractors must pay federal, state, and local taxes and the federal self-employment tax. Here are the taxes self-employed people must pay:

  • Federal income tax at a rate ranging from 10% to 37% based on the total income for the tax year
  • Self-employment tax to pay into Medicare and Social Security with tax rates of 15.3% for net profits of up to $147,000 and 2.9% for net earnings above that amount
  • Additional federal taxes in some situations such as the net investment income tax, alternative minimum tax, and additional Medicare tax
  • State and local taxes, including income tax, registration and licensing fees, and business tax
  • Sales tax if you sell goods
  • Excise tax if you sell items such as guns, cigarettes, alcohol, or telephone services

Understanding the Self-Employment Tax

The self-employment tax includes a 12.4% Social Security tax on your net profits up to $147,000 and a 2.9% Medicare tax on all net earnings. This means you will pay a total self-employment tax of 15.3% on your earnings up to $147,000 and 2.9% on any earnings above that amount. If you have net earnings of more than $200,000 as a single taxpayer or $250,000 as a joint filer, you might also have to pay an additional 0.9% Medicare tax.

Available Deductions for Independent Contractors

There are many different deductions that might be available to independent contractors, including the following:

  • Home office deduction for contractors who work from home and use the office space solely for business purposes on a regular basis
  • Health insurance premiums
  • Retirement plan contributions
  • Depreciation of your equipment, machinery, and furnishings for your office and business use
  • Truck and auto expenses if used for work
  • The qualified business income deduction
  • Expenses for outside services and contract labor
  • Miscellaneous business expenses

Preparing to File Your Taxes as an Independent Contractor

Before you file your taxes, it is important for you to organize everything. You will need to know the gross amount you made as an independent contractor and how much you spent on tax-deductible expenses. Gather your 1099-NECs, profit and loss statements, expense statements and bills, receipts, and other relevant documents together.

Report Income and Deductions on Schedule C

When you fill out your Form 1040, you will use Schedule C to report your business income and deductions. You will report other sources of income, including rental income, dividends, and interest on Form 1040.

Report Net Self-Employment Income on Schedule SE

Once you complete Schedule C, you will then carry over the self-employment income to Schedule SE to calculate your self-employment tax. The self-employment tax will then need to be entered in your Form 1040 tax section.

Complete Form 1040

On your Form 1040, you will include all of your other non-business income. You can also claim non-business deductions on Form 1040, including things like student loan interest, charitable donations, self-employed health insurance, itemized deductions, and others.

Calculate Your Federal Taxes

When you enter everything into your Form 1040 and perform the calculations, you will see your total federal tax obligation. After you subtract your estimated tax payments made during the year, you will either owe taxes or have an expected refund.

Estimate Your Taxes for the Next Tax Year

As a self-employed person, you will need to estimate the taxes you’ll likely owe in the next tax year so that you can divide that amount into quarterly estimated payments to send each quarter throughout the year.

Complete Your State Income Tax Return

Once you have completed your federal tax return, you will then need to complete your state return.

What Happens if You Can’t Pay?

If you can’t pay your taxes in full, you can complete Form 9465 to request an installment arrangement. However, you can’t owe more than $25,000 and must show that you do not have the means to pay your taxes. You will then have three years to pay. The IRS will penalize you for waiting to pay your taxes after the deadline. If you fail to file a tax return by the deadline, you will be assessed a 5% penalty for each month of the outstanding amount you owe but haven’t paid. If you submit your return on time but do not pay what you owe, the late payment penalty will be 0.5% of the tax owed for each month you are overdue.

Find an Accountant for My Small Business

Small business accounting services can help to make filing your taxes simpler. If you are self-employed, working with TMD Accounting might help to ensure your taxes are filed on time and correctly and that you claim the deductions that are available to you. Contact us today to schedule an appointment at 1-856-228-2205.

How to Pay Yourself From an LLC

How to Pay Yourself From an LLC

When you have an LLC (limited liability company), paying yourself can be complicated. How you take out money will depend on whether you are a multi-member, single-member, or corporation LLC. Here is how you can pay yourself through an LLC and make sure those earnings meet the IRS guidelines.


What Is an LLC?

An LLC is a business structure that combines the features of a sole proprietorship and corporation. Like a corporation, LLCs have limited protection against personal liability and debt. You will report business profits and losses on a personal tax return rather than a business one. There are three types of LLCs: single-member, multi-member, and corporate.


Single-member LLCs will have only one member. The IRS views single-member LLCs in the same way as sole proprietorships for tax purposes. Multi-member LLCs have more than one member. For tax purposes, the IRS treats these LLCs as a partnership.


Finally, there are corporate LLCs. In these situations, the LLCs are taxed as a corporation. If you want to establish your business as a corporate LLC, you must make a formal request to the IRS.


How LLCs Are Taxed

There are different ways that the IRS taxes an LLC. If you have an LLC, you will want to work with a company that specializes in small business accounting services. They can help simplify the process as your tax situation becomes more complex with an LLC.


Sole proprietorships and single-member LLCs are considered “disregarded entities.” That means the company’s losses, profits, deductions, and other financial information are reported on a Schedule C with a personal tax return.


Multi-member LLCs are a bit different. These partnerships do not file separate tax returns. Instead, they file a return with Form 1065 or Schedule K-1. These forms detail each member’s guaranteed payments and distributions for the year.


After that, the members will report their income with a K-1 on Schedule E for the tax return. Plus, they must report all self-employment tax on Schedule SE. Single- or multi-member LLCs do not pay corporate taxes. Keep in mind that single owners and LLC members are responsible for income tax on the company’s income. Along with that, they must pay a self-employment tax on their withdrawals for the year.


If the LLC is a corporation, the business must file Form 1120. All of the standard corporate tax rules apply. If the LLCs have elected to be considered an S corporation, all owners must report their portion of the corporate income, and the company needs to file Form 1120S.


Taxes can be tricky for LLCs. Some of the rules are different depending on your LLC structure. While you can use software to figure out your taxes, consider hiring a professional accountant for the job. With their help, you can make sure you pay the right amount of taxes for your LLC.


How You Pay Yourself as an LLC

The business structure of your LLC will determine how you can pay yourself. Even if you are an employee of your business, you need to find the proper way to pay yourself to avoid tax liabilities.


Single-member LLCs will function as sole proprietorships. According to the IRS, these companies are considered a “pass-through” business, which means the income “passes through” the partnership to be taxed under the owner’s personal income tax. As a result, an owner of a single-member LLC or sole proprietorships can pay themselves using the owner’s draw method. With that, you write a check from your LLC to your personal account.


The pass-through designation also extends to multi-member LLCs. According to each partner’s ownership percentage, all partners are taxed on the LLC’s income. In some cases, the partners will receive an owner’s draw. That income is considered a prepayment for profit distribution, and these draws can happen at the end of the quarter or year.


Other owners prefer a steady salary and will take a guaranteed payment. These payments are paid out even if the business has income loss. Guaranteed payments are considered business expenses, and they will increase the company’s net income. Multi-member LLCs will pay their members with owner’s draw, guaranteed payments, or a combination of these options. Once again, an owner’s draw is simply writing a check. The owner’s draw payments are subject to the self-employment tax.


Some LLCs have elected to be treated as an S corporation or C corporation. In those situations, the payout can be more complicated. With these tax classifications, the owners cannot take an owner’s draw, and they must be treated as an employee of the LLC. The owner-employee must receive reasonable compensation. You must issue all payments through a payroll system that withholds employee taxes. Along with that, the owner-employee can take a dividend or distribution of the company’s yearly profit. Those payments are considered taxable income.


Guidelines for Paying Yourself

While you might want to forgo paying yourself to help the business grow, you will still be taxed on the total amount of business income. Remember to pay yourself. You want to follow some basic guidelines when forming your payment structure.


If you have a partnership, always establish a guarantee payment amount or dividend schedule for the other members. You can set this up using your articles of corporation or partnership agreement.


You will want to work with an accountant to figure out your estimated tax payments. Ensure there is always a paper trail for your payments, whether guaranteed payment or owner’s draw. Record the payments in your company’s books so that you are protected in the event of an audit.


Understand Payouts for Your LLC Situation

As you can tell, LLCs do protect you from debts and liabilities, but they can lead to complications for tax time. At TMD Accounting, we can ensure your small business is covered for tax season. We have over 40 years of experience helping small and large companies with their taxes, payroll, and bookkeeping. When you need an accountant for your business in South Jersey, schedule a consultation by calling 856-228-2205.


What are the Major Roles of Accountants for Law Firms?

What are the Major Roles of Accountants for Law Firms?

Accounting can be intimidating even for the most seasoned attorneys. Law school might teach about torts and statutes, but there are no classes for accounting or bookkeeping. Whether you have a small firm or large corporation, accounting is vital to keep your books compliant with ethical rules and prevent you from leaving money on the table.


What Can an Accountant Do?

Accountants play a vital role in almost every business. Law firms are no exception. Many lawyers don’t want to handle monetary transactions or keep up with their financial records. For that reason, they often hire someone to manage those accounts. While you could hire a part-time bookkeeper, law firms should look for an experienced and trusted accountant to address these financial matters.

Legal accounting includes recording and analyzing the financial transactions of the law firm in an accurate manner. These professional accountants can help in other ways as well. They can act as an advisor and interpreter. An accountant needs to have strong attributes like attention to detail, an understanding of business ethics, and excellent monetary skills. These professionals can help finish audits, ready tax returns, and investigate fraud. A legal accountant has many different roles in a law firm.

Legal accounting contributes to the success of the practice. All financial statements need to be accurate, up-to-date, and complete. Your law firm can meet all of those obligations to your clients, partners, and the state bar with a clear financial picture. With all that in mind, here are some of the major roles that accountants can play in your law firm.


Provides Professional Financial Advice

If you are searching for financial advice, a trusted accountant can help with future plans. Accountants track your expenditure and revenue trends. In addition to that, they can help your law firm make important decisions, such as taking out a loan. If there are irregularities or discrepancies in your financial records, an accountant will straighten out those problems.


Helps With Taxes

No one wants to deal with filing taxes, especially busy attorneys. Hiring a professional accountant can help this stressful process become a little easier for your firm. Everyone knows that tax preparation can be a headache, especially if records are not appropriately managed. As a result, your practice might face penalties from the state and federal tax departments. With an accountant, you can ensure that all tax returns are filed and completed accurately and timely. You will not have to worry about missing out on deductions or paying extra penalties.


Deals With Outside Parties

Law firms have to deal with outside parties on a day-to-day basis. An accountant will act as a firm representative while speaking to tax authorities or loan officers. By allowing the accountant to handle these tasks, law firm members can focus on those other duties within the practice. Plus, an accountant can smoothly move these financial issues through the appropriate processes without any snags.


Handles the Law Firm’s Payroll Process

When you have employees, they will expect to be paid promptly. Payroll is a critical process for any business, especially legal practices. With an accountant, you can have a professional manage these processes to pay all your employees correctly and on time. An accountant can also take care of other payroll aspects of your law firm’s business.


Chooses the Right Financial Tools

There are so many choices on the market for accounting tools. It can be challenging to choose the best accounting software option for your law firm. An accountant will help with these decisions. Your accountant understands the needs of your law firm, and they are better equipped with financial knowledge. With that guidance, the accountant can help you find the best software for the practice.


Accounting Practices for Your Law Firm

Need to find a great accountant for your law firm? Before you begin the search, you must understand some basic accounting practices. With this basic knowledge, you can keep an eye on your financial records and understand the processes in your practice. There are plenty of functions that an accountant will handle on a day-to-day basis, including reconciliation and reports, accounts payable, invoice accounting, and financial compliance.


Why You Need a Professional Accountant

You can streamline your books and not worry about those financial inaccuracies when you work with an accountant. Hiring a professional accountant just makes sense for your law firm. As an attorney, there is enough on your plate. You don’t want to add the title of accountant or bookkeeper to your list of responsibilities. Outsourcing these duties helps your law firm focus on growing your practice and assisting the local community.

As you can tell, a professional accountant goes beyond just checking your books. These professionals will ensure that your paperwork and finances are ready for tax season. They can advise you during the process for a bank loan, and accountants are a great option to help with office tasks, such as payroll and revenue tracking. When you need help with those financial records in your law firm, make sure to hire a trusted and experienced accountant for your practice.


Let Us Help With Your Legal Accounting

You want to find the right accountant for your legal practice. Thomas M. Ditullio has nearly 40 years of experience offering small business accounting services. He has built a solid reputation throughout Gloucester County, providing services for businesses and individuals. At TMD Accounting, you can access a wide range of services, including financial management, tax services, and payroll. If you would like to schedule a consultation, please give us a call at 1-856-228-2205.

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 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.


What Is Payroll?

What Is Payroll?

A company’s employee payroll might be the largest single expense of a small business. It is comprised of the total wages paid to employees and other workers such as independent contractors. Processing payroll is also very complex, involving making deductions, collecting insurance premiums, collecting retirement contributions and calculating tax withholdings.

If mistakes are made with payroll, your business may face substantial penalties from the IRS and be subject to litigation from employees. This makes it extremely important for you to ensure that your payroll is completed properly. When you outsource your payroll to the accountants at Tom DiTullio Accounting, you may gain more confidence that it will be completed accurately and on time.

What makes up payroll

Payroll is divided into four main parts, including the gross wages, benefits and Social Security and Medicare withholdings and taxes. What your employees receive after the deductions have been made are their net incomes.

Independent contractors and freelancers are treated differently. Since they are not employees, they receive their gross pay without deductions. They are then individually responsible for paying their own taxes and purchasing their own benefits.

Why payroll processing is complex

One of the reasons that it is difficult to manage payroll is the required tax calculations and payments. Employers have to calculate the state and federal income taxes and then send the payments to the government. They must also submit withholding reports along with the payments that they send. Employees fill out IRS Form W-4 in order to specify their number of dependents so that withholding allowances can be calculated.

After calculating the allowances, the federal income taxes are calculated from the tax tables in Publication 15. These taxes are reported on IRS Form 941 and are paid at the same time that your company makes its Medicare and Social Security payments.

Payroll taxes must also be calculated for both the state and federal governments. Payroll taxes were the second largest type of revenue that the federal government had in 2015. In addition, employers are also required to submit 6 percent of their gross wages up to $7,000 per worker to fund the federal unemployment taxes for each worker. This is a business expense only and is not paid for from the employees’ pay. States also have their own unemployment plans, and if you have employees in multiple states, you will have to comply with each of their individual unemployment requirements.

Running payroll

While some small businesses run their own payrolls using accounting software, it is not advisable. When you try to complete your payroll on your own, you run the risk of making costly errors. It is also a very time-consuming task and takes away from your ability to attend to the other needs of your business. You would need to be able to set up new employees and to process the paperwork for different types of benefits such as health insurance plans. You would also need to withhold the proper amounts of state and federal income taxes, determine gross pay rates and collect all of the needed paperwork. Finally, you would then need to pay your employees their net pay amounts and send in the taxes and other withholdings on time and to the right recipients.

Get help from Tom DiTullio Accounting

When you choose to outsource your small business payroll to Tom DiTullio Accounting, you can remove the hassle of having to complete it yourself. Our experienced accountants understand the requirements and how to make the calculations accurately. We can pay your employees by paper checks that we deliver to your business in sealed envelopes or by direct deposit into their bank accounts. To learn more about how we can help, call Tom DiTullio Accounting today.