The Benefits of Choosing TMD Accounting as Your South Jersey Small Business Accountant

Accounting, Small Business

When you own a small business, you wear many hats. Not only are you responsible for the day-to-day operations of your company, but you are also responsible for making sure your employees are paid in a timely fashion, that taxes are paid properly and that your financial records are complete. This includes accounts payable, accounts receivable, balance sheets and more.

 

For the average business owner, dealing with financial matters can be stressful and you may begin to resent the time you spend on them, especially when you would rather be interacting with customers or developing new products. That is where TMD Accounting, your small business accountant in NJ, can help.

Bookkeeping Assistance

One of the ways a small Jersey accountant can help your company is by handling the bookkeeping services necessary to organize your finances. There are many options today for bookkeeping software and a small business accountant in NJ can help you choose one that fits your business needs. They will also be sure to choose options that will grow with your company. Of course, the answer to “why should I use an accountant for my small business when I have staff who does my bookkeeping” is simple. Your accounting staff needs guidance and may need training on the software that is chosen, something a small Jersey accountant can assist with.

Monitor Your Company’s Financial Health

Another important reason to work with TMD Accounting is to monitor the financial health of your business. A critical part of any company’s financial health is cash flow, and most business owners are unaware of the various formulas necessary to improve it or address any issues with it. Working with a small business accountant in NJ will provide you with a monitoring system to watch all transactions in your company and make sure that money is moving in and out of the business properly.

Tax Code Changes

The United States has a complicated tax code that changes quite frequently. It is almost impossible for a business owner who is not familiar with the tax code to handle that aspect of their company properly. Forms submitted to federal, state and local governments must be accurate or you could face penalties that may be extensive. If you are asking, why you should use an “accountant for my small business,” tax regulations should be at the top of the list.

Forensic Accounting

Although you may trust your accounting staff implicitly, the news is filled with stories of people who were trusted and took advantage of that trust. Using a small business accountant in NJ will provide you with a level of forensic accounting that could discover problems in your financial system. Although the problems may not be signs of fraud, they may simply be incorrect data in your financial software, funds not placed in the proper account or simply a misunderstanding about how a financial matter should be handled.

Business Transitions

Businesses undergo transitions over time, whether it is a shift in ownership, merges or a change in products or services. When your company is undergoing any type of transition, using a south Jersey accountant is critical to be sure the transition goes smoothly. They can identify any possible risks that may occur during the transition or threats to the business that could result in devastating consequences if not addressed. As the transition progresses, a small business accountant in NJ can put financial processes in place to protect your interests and the interests of your stakeholders.

Focus on Other Aspects of Business

One of the most important answers to “why should I hire an accountant for my small business” is that it allows you to focus on other aspects of your business. As a business owner, you may find yourself taking on too many responsibilities in an effort to reduce costs. In the financial aspect of your company, however, this can lead to errors that could be very costly.

 

In addition, when you are focusing on day-to-day finances, you are not focusing on other matters related to running a business. When you started your business, you had a vision of how it would operate and without financial guidance, that vision may become blurred. In order to pay more attention to the things that made you start your company in the first place, your products or services, allow a south Jersey accountant to focus on your financial health.

Cost Savings

It may seem counter-intuitive that hiring a small business accountant in NJ will save money, but the fact is that their expertise can do just that. A south Jersey accountant will look over your finances and pinpoint where the money is going, providing you on areas where you can save while also identifying tax breaks that can reduce how much you will owe each quarter. They can help you avoid penalties and fines by filing your tax forms regularly as well. One of the best ways to view the hiring of a south Jersey accountant is as an investment, not an expense.

Looking For a South Jersey Accountant?

If you are considering an accounting service for your business, contact TMD Accounting today to learn more about our small business and personal accounting services. Our motto is “where numbers matter and people count,” something our team lives by each day. With over 40 years’ experience as a south Jersey accountant, TMD Accounting can help your business grow while protecting your financial interests. Family-owned and operated, our staff is flexible and reliable, and we always keep our services affordable. Contact TMD Accounting today by filling out the easy online form or call 1-856-228-2205.

Managing Cash Flow as a Contractor: Tips and Tricks

Accounting, Small Business

There is no question that one of the hardest industries for managing cash flow is the contracting business. Whether you are a construction business or an independent contractor of another kind, there are common mistakes that you may be making that hamper your cash flow. Check out these tips and tricks if you are a contractor who wants to maximize your cash flow and keep your business running smoothly.

Importance of Budgeting

One of the first tips provided by a South Jersey accountant is to create a workable, manageable budget and stick to it in order to protect cash flow. With the right budget, you can see where your money is going, identify areas where you can reduce spending as well as areas where income may be increased. Independent contractor accounting services recommend that contractors create a budget for the next 18 to 24 months with a fluid cash flow model for the next six to a year.

 

By monitoring cash flow for those months, you will be able to identify periods when cash is limited, whether it is because business is slower due to inclement weather or there is a lull between projects. Not only will you be able to identify slower months, it will also allow you to identify months when cash is flowing more freely and allow you to adjust spending so you are able to hold onto some of that cash for the leaner months.

Build Savings

Contracting is often described as “feast or famine” where you have periods of the year when business is booming and others when there is little work coming in. For example, if you are a roofing contractor, you may have several months in the winter when there is little to no work. During the spring and summer, there may be days of zero rest. When you create your budget, you want to look at about six months of expenses and income. Total the amounts and divide by six to get a monthly average. Whenever your income exceeds what you budgeted, put the difference into savings. When you hit those lean times, you can use savings to carry you through if necessary.

Cash Flow by Project

Another tip offered by small business accounting services is to monitor cash flow by project. To do this, you will need to determine the time frame for the project that includes when each aspect of it will be completed, when you must disburse payments and when you have to bill the owner. This will help you accelerate receipts and realize a better cash flow from each project. Keep in mind for this method to work, you will need timely collection and billing processes, methods for disbursing payments and accurate scheduling. You can also ask for upfront deposits for long-term projects in order to keep your cash flow stable, small business accounting services recommend.

Avoid Low Revenue Projects and Underbidding

Too often, contractors are guilty of taking projects that will yield low revenue, especially when business is slow. In competitive markets, it is also tempting to underbid just to get the job. A South Jersey accountant advises against those options as they can include a significant amount of risk. Every bid issued should reflect your expertise, past performance and safety record as well as the technology you have invested in, your ability to meet deadlines and other qualifications that will encourage customers to choose you over another company.

Tax Savings

When it comes to taxes, you want to pay what you owe, but there is no reason to pay more than what you must pay. Tax codes have many deductions and some are designed specifically with contractors in mind. This is where independent contractor accounting services can be very beneficial as they can identify many tax savings that the average person is unaware exist. Look at any fixed assets you plan to purchase in the future to see if it might be more beneficial to purchase in this tax year to recover some of the costs in tax deductions. In this industry, many owners overlook fuel credit for use off-highway, research and development for improving a process or the deduction for creating energy-efficient buildings by installing upgraded HVAC, lighting and other features, according to a South Jersey accountant.

Living Better with Technology

Have you been putting off technological advancements because your cash flow is tight? You may think this is helping, but it could actually be having a negative impact on your budget.  There are many types of software today that can actually save you time which, in turn, saves you money. This means that outlaying funds for updated technology can actually improve your cash flow rather than reduce it. Independent contractor accounting service experts also say that technology can reduce human error and help your company run more efficiently.

Succession Planning

Although it may not seem to have an impact on cash flow, TMD Accounting, a South Jersey accountant explains that putting a plan in place for when you are no longer the owner is critical to the success of your business. It is one of the most important steps to creating a financially sound company. Not only will it make you rest easy that your company will continue after you have retired or passed on, it will indicate to employees that you intend to stay in business. This can help with employee retention while also helping promote investment in the future of your business.

Need Help Managing Your Cash Flow?

If you are struggling to manage the cash flow in your contracting business, contact TMD Accounting today to see how our friendly team can help. You can reach us by calling 1-856-228-2205 or filling out the easy online form. With 40 years’ experience, we live by our motto: “where numbers matter and people count.”

What is the Best Time to Hire an Accountant for Small Business?

Accounting, Small Business

When you operate a small business, you sometimes feel like there are not enough hours in the day to keep your business running smoothly. For many small business owners, it goes beyond the products and services they offer or interacting with customers. There are also those not-so-fun requirements, like balancing checkbooks, doing payroll and organizing finances. Although you may be an expert in your field, very few business owners can manage the strict financial requirements necessary to keep a business running. That’s where small business accounting services can help. However, when you decide it is time to bring in an expert to handle your company finances, you want to be sure you bring them in at the right time for both you and the accountant.

Don’t Wait for a Crisis

The first thing to consider when deciding to hire a South Jersey accountant is to do so when things are running smoothly. You don’t want to bring in an accountant after there is already a crisis. This may include falling behind in filing your taxes, a need to file an extension on your tax filing or failure to make timely payroll tax payments. If you are already buried under in receipts and other bookkeeping tasks, hiring an accountant is a good idea, but you may pay more for them to get you organized.

How Do I Know if I need an Accountant?

There are signs that you may need to bring on an accountant like TMD Accounting. If you are finding yourself spending most of your time working on financial matters than you do in the day-to-day operations of your company, you may need expert assistance. Business owners who find themselves staying late to complete accounting tasks or taking the work home with you to do when you could be spending time with family. If you are asking friends or family members to assist you with complex financial matters or if your company is growing rapidly, small business accounting services may be the answer.

Tax Repercussions

One of the main reasons to hire a South Jersey accountant is to avoid any tax repercussions that may occur due to errors. The United States tax code is very complicated, and it is unlikely you are familiar with some of the rules and regulations required of a small business. It is very easy to miss a filing deadline or to misunderstand questions asked during tax filing season, but an accountant is trained to understand the codes, even those that may have changed since filing last year. If you are facing an audit, you definitely want an accountant to be on your side, guiding you through any dealings with the IRS and helping minimize any penalties.

Starting a New Business

If you are just starting a new business, an accountant can help create financial projections and reports while also helping your plans look more professional. They can help you choose the right legal structure for your company and provide you with advice on how to best set up your accounting systems so that they run smoothly and more efficiently. As your new business grows, the accountant will continue to guide you so that your growth is optimized. Because they were with you from the beginning, they will have a better understanding of your vision.

Seeking Financing

Many businesses neglect to hire an accountant before seeking additional financing. Banks don’t simply hand out money, especially to small businesses who may not have the track record a large company may have. When you have an accountant working with you, banks are more likely to offer funding as they will see that you are serious about the success of your company. A small business accounting service can also help you choose the best funding for your business in order to save you higher costs in the long run.

Time Savings

Probably the best reason to hire a South Jersey accountant is to save time. Part of operating a business means creating reports, reconciling accounts, entering data, scanning receipts and reviewing expense reports. Shareholders want to see accurate profit and loss statements as well as professional balance sheets. The average business owner does not have the expertise necessary to excel at all these tasks. This is where an accountant can help. Accountants offer a range of packages. You may only need them to compile monthly or annual reports, or it may be time to turn over all your financial tasks to a professional, including payroll, accounts payable, accounts receivable and more.

Business Expansion

When it comes time to expand your business, an accountant will be an invaluable asset. An accountant can help improve your returns on investment by advising you the best way to allocate resources properly. They can also help you identify consumer behavior so that products or services are tailored to specific needs. An accountant can also monitor your operations and make recommendations on areas where you can improve your company’s financial health.

If you are considering hiring an accountant for your business, contact TMD Accounting today to see what options are available. Our motto is “where numbers matter and people count,” a statement we live by every day. With more than 40 years of accounting experience, you can be sure that our accountants will handle your every need. Contact TMD Accounting today by calling 1-856-228-2205 or by visiting our website to learn more.

How Much Should a Small Business Set Aside for Taxes?

Small Business, Tax Planning

There is no question that every small business owner dreads the arrival of tax season. Between gathering all the information you will need to complete your taxes, finding all the forms necessary and then completing all those forms, it can be frustrating, time-consuming and stressful. Add to that the possibility you could have to write a hefty check to the government, and it is easy to see why businesses may not look forward to filing taxes. TMD Accounting offers these tips to help you avoid a big payment on April 15.

Understand Tax Obligations

As a business owner, there are more things to consider than filing your return at the end of the year. You need to understand what taxes need to be filed each year in order to enter the correct information on your tax forms. As a small business owner, you may be subject to self-employment tax as well as income tax. If you have employees, you must also file quarterly employment taxes. States with sales tax also require that you file those quarterly while some states require corporations to pay franchise tax. This may be once each year or also may be needed quarterly. If you must pay indirect taxes on goods sold, known as excise tax, you will need that information as well.

The 30 Percent Rule

One method many small business owners use, according to small business accounting services, is the 30 percent rule. Setting aside 30 to 40 percent of your revenue should cover the amount due on your federal and state taxes each year. This is highly recommended for sole proprietors who don’t have employees as they are more likely to owe at the end of the year than an LLC or a corporation. You can accomplish this a number of ways. One way is to place 30 percent of every client payment into a business savings account. This is a great way to save toward a tax bill if you have a small number of clients who only pay you a once or twice a month. If you have a higher volume of clients, however, you can simply total your income for a week or the entire month and put 30 percent of that total in an account.

Monthly Method

Another way to determine what to put away for taxes a South Jersey accountant says is to calculate your average monthly income. Add up the total amount you have earned and divide it by the months you earned it. For instance, if it is April, add up your income from January through March and divide it by three to get your average monthly income. Once you have determined that figure, calculate 30 percent of the average monthly income and place that in an account. You can also calculate this amount by using the previous year’s income. Simply divide your entire revenue by 12 and then compute 30 percent.

Underestimating or Overestimating Taxes

According to TMD Accounting, as long as you pay 100 percent in the present year that you paid in the previous year in quarterly estimated tax, you can’t be penalized for underpaying. If your income is over $150,000, that number rises to 110 percent. You will know if you have underestimated when it comes time to file your taxes as you will have a balance owed to the IRS when you finish computing your income and expenses. There is no penalty for overestimating. However, those funds that you set aside could have been used in other areas of your business. The good news is that if you overestimated what you would owe, you have funds in your account that can be applied to the next year.

 

Even better news is that the funds will continue to earn interest until you need to use them for your taxes the following year. However, don’t make a habit of overestimating as that is pulling money from your business you could be using. If you consistently find yourself over or underestimating taxes, it may be time to talk to small business accounting services to be sure you are not assessed a penalty or tie up funds unnecessarily. The good news is that if you overestimated what you would owe, you have funds in your account that can be applied to the next year.

When Should I Start Setting Aside Funds?

The best time to start setting aside funds for taxes, according to a South Jersey accountant is as early in the year as possible. Taxes don’t take a break which means as soon as the new year rolls around, you need to move past the previous year and start fresh for the new year. If your fiscal year is the same as a calendar year, start putting money away as of January 1. If your fiscal year is different, such as from July 1 to June 30, begin putting money away on July 1. Even if you have not paid your taxes for the previous year, you can still tuck the funds away.

When Do Taxes Have to be Paid?

If you anticipate that you will owe more than $1,000 for the year, taxes must be paid quarterly. Income earned from January 1 to March 31 must be paid by April 15 while April 1 through May 31 must be paid by June 15. Any income earned from June 1 to August 31 is due by September 15 and September 1 through December 31 taxes paid by January 15 of the following year.

If you are struggling to prepare for tax season, it is time to call TMD Accounting. With 40 years’ experience with small business accounting services, TMD Accounting can help you get your taxes filed and make sure you pay only the amount you are required to pay. Contact our experienced team today by calling 1-856-228-2205 or by visiting our website.

How to Find the Best CPA Bookkeeping for Your Startup or Small Business

Small Business

As a small business or startup owner, you want to ensure your enterprise thrives. While you may want to focus on your company, you need to take care of those other matters, such as financial planning and taxes. It may be time to seek professional help. Working with a certified public accountant (CPA) is an excellent way to ensure you make the most of your financial success.

Not only will an accountant help you with the necessary forms and paperwork, but they can also provide you with valuable advice on financial planning and projections. Together, you can get help to set realistic and achievable financial goals for the future, ensuring continued success for your business.

Do You Need a CPA for Your Business or Startup?

Knowing when to hire a certified public accountant is half the battle. While there is no set time for every small business owner to hire a professional, some signs indicate you might need one.

No Experience With Financial Matters

If you are starting your business and are unfamiliar with accounting basics, a CPA can help you develop your financial strategy, teach you how to manage your finances, and ensure that you avoid mistakes that could cost you in the long run.

Need to Establish a Legal Structure for Your Business

When deciding on your company’s legal structure, an accountant can explain the options available, helping you choose the best one for your business or startup. Many business owners need to become more familiar with business taxes since most have only filed personal taxes in the past. A CPA can ensure you pay the right taxes for your business type and industry. They can also help you take advantage of tax credits and deductions to save money.

Require Help With an IRS Audit

If your business is growing rapidly, an accountant can manage your cash flow, help you use your money more effectively, and identify areas where you can cut expenses. Unfortunately, there are times when you could face an audit from the IRS. In that scenario, a certified public accountant can guide you through the process and ensure that you comply with tax laws.

Find Funding for Your Business

Finally, if you need a small business loan, an accountant can help you prepare the financial documents required by lenders and ensure that your loan application is well-organized and detailed. When looking for a company that offers small business accounting services, here are a few tips to choose the right professional for the job.

Finding the Right CPA for Your Situation

A business accountant can benefit your company at every stage of its growth. From managing finances to providing valuable insights and advice, the right accountant can be your business’s trusted advisor. You want to ensure you find the right fit for your small business or startup.

Search for Referrals

First, ask for referrals from lawyers, business advisors, bankers, and other professionals. Many of them have worked with CPAs that they trust for their financials. You may even want to attend local business events hosted by your Chamber of Commerce. Also, utilize your existing networks, such as family, friends, and colleagues. Someone is bound to know a reputable CPA to help your business or startup.

Skip the Internet

Finding a trustworthy business accountant is crucial for the success and growth of your company. While you may come across multiple options by doing a quick online search, you may want to avoid hiring someone you find on Google or online directories. Some CPAs may pay to add their names to a list of local business professionals. However, you don’t have to discount an online search completely. If you cannot find a personal referral, use the internet to read reviews about the local CPAs in your area.

Choose a Certified Public Accountant

Keep in mind that not all accountants are the same. Working with a certified public accountant can provide numerous benefits for your business’s financial health. CPAs have passed a rigorous examination and must be licensed. That ensures they possess the necessary knowledge and experience to provide reliable financial advice.

Additionally, a CPA’s certification must be periodically renewed to keep their skills and knowledge current with the industry’s standards. Many business owners and startups want to work with a CPA to get a handle on their business finances.

If you’re looking for a CPA, you can start your search by reaching out to the American Institute of Certified Public Accountants (AICPA). The AICPA maintains a directory of CPAs, accounting firms, and accounting organizations that can connect you with the right professional.

Once you have found a CPA, ask them a few questions. First, find out the accountant’s experience with small businesses or startups. A qualified accountant should understand the complexities of running a small company. Along with that, they should have references from past clients. Also, ask if the accountant has experience in your specific industry. You will want to work with someone who understands your business’s needs.

Make sure to also inquire about their services. Many of these professionals provide tax and auditing assistance. However, other CPAs can offer to help with bookkeeping, business valuation, or budgeting. Additionally, ask about the billing process. Most accountants charge by the hour or offer a monthly retainer.

Need an Accountant for My Small Business?

At TMD Accounting, we provide you with the flexibility, dependability, and affordability you need in an accounting firm. With over 40 years of experience serving Gloucester County, we have helped numerous small businesses and startups manage their financial health. If you would like to schedule a consultation, call us at 856-228-2205.

How to Use a Comparative Income Statement for Your Small Business

Small Business

While running your business, you might not have time to analyze financial numbers. However, knowing how decisions affect your company’s financial health is crucial. When you review your books and records, you can make plans to grow your business. It is time to become familiar with a comparative income statement if you want to boost your profits. Here is how this financial statement can help your small business.

 

Is This Document the Same as an Income Statement?

Some people may refer to an income statement as a profit and loss statement. No matter the name, the report shows your sales minus any expenses. At the top of the statement, you will see the number of sales earned in a period. After that, the business expenses are deducted, giving you a net profit at the bottom of the statement. This income statement can show how your business decisions affect the net income for that period.

Looking at an individual statement will only give you the results for one specific period. In many cases, you will want to compare one period to another to see the long-term effects of your decisions. That is where a comparative income statement can help. If you need help compiling an income statement, any company offering small business accounting services can assist you with that document.

 

Is a Comparative Income Statement Important?

A comparative income statement will combine the information from several statements into a single report. This statement can help you measure your business performance and identify financial trends. It also allows you to compare your profits and losses to other businesses. The statement is usually organized into two or three columns representing an accounting period. The most recent periods are usually closer to the left side of the page.

 

A comparative income statement can assist with many types of accounting tasks, such as:

 

  • Provide a review of the business’s performance
  • Compare profit and losses to previous periods
  • Determine a pattern in sales
  • Measure your business against others

 

A comparative income statement makes an excellent tool for business owners. For instance, an income statement might tell you that sales dip every April. You can boost your marketing efforts for the month when you have access to that specific information.

When you compare several financial statements, you can see a trend in performance. Comparing reports is time-consuming and confusing, but this statement allows you to track your business’s performance trends. With a comparative income statement, you will not have to flip between the documents. You have all that information right in front of you.

 

How to Read a Comparative Income Statement

If you want to understand your business’s financial data, take a look at your comparative income statement. You will want to analyze the information in two ways: horizontally and vertically. With these types of analyses, you can understand the business’s performance. Additionally, the statement can help you see patterns to help predict future trends.

 

Horizontal Analysis

The horizontal analysis examines your business’s trends over a period of time. It can help you see growth patterns. To calculate growth rates, you need to analyze the change percentage between accounting periods. If you want to find the change in the percentage between two numbers, you need to determine the difference in dollar changes for each period. For example, if you gain $55,000 in 2021 and $60,000 in 2022, then your business’s dollar change is $5,000.

You can divide the dollar change amount by the year’s profit. For example, if the base year profit is $55,000 for 2021, then the result is 0.09 ($5,000 / $55,000 = 0.09). After getting that number, you will want to multiply the result (0.09) by 100. With that, you will have the percentage of change. For this specific example, there is a 9% change.

 

Vertical Analysis

Vertical analysis helps compare the size of different line items in a financial report. To use vertical analysis, you have to divide each line item by the total amount of revenue from a product or service. After that, you can multiply that number by 100 to get your business’s percentage. With that, the number tells you what percentage of each dollar was earned as profit.

 

Why Are Comparative Income Statements Crucial?

You have to measure performance when you are a small business owner. When you don’t understand a comparative income statement, you might not know whether your decisions work for your business. Additionally, these statements help you track profitability over several periods.

The comparative income statement shows you how your business has performed. For example, you can compare your return on investment (ROI) from last year to the current year. When it comes time to sell the company, some buyers will use comparative income statements to determine whether the business is a good investment.

Accounting is a challenging part of running a business. However, it can be an eye-opening experience, especially when you review your financial statements. You want to know whether the time and effort are paying off for your business. A comparative income statement will provide detailed insight into your business’s financial health.

 

Contact the Professional Team at TMD Accounting

When you need an accountant for my small business, call TMD Accounting. We’ve served the Gloucester County area for over 40 years. Our team assists small business clients with their bookkeeping and accounting needs. To learn more about what our professionals can do for you, give us a call at 856-228-2205.

Common Mistakes in Small Business Tax Preparation

Small Business, Tax Planning

Tax planning and preparation are major challenges for small business owners. While you might be an expert in your area of business, that doesn’t mean that you are also an expert in the intricacies of Internal Revenue Service (IRS) rules and tax laws. The U.S. Tax Code is highly complex, and there are many ways that small businesses can encounter problems with their taxes. Here are some of the most common mistakes made by small businesses and encountered by TMD Accounting that you should avoid.

1. Choosing the Wrong Business Entity Structure

There are several different types of legal entity structures that you can choose for your business. Each of these structures has advantages and disadvantages. When you choose the wrong one, your business structure can expose your company to potential liability and result in higher taxes. The following types of structures are the most common:

  • Sole proprietorship
  • Limited liability company (LLC)
  • S-corporation
  • C-corporation
  • Partnership
  • Limited liability partnership (LLP)
  • Nonprofit

Some businesses choose the wrong tax entity while others fail to choose a structure at all. Either of these errors can greatly impact the future of your business. For example, while a sole proprietorship is the simplest structure for a business to form, it doesn’t provide any personal liability protection. Choosing a C-corporation structure for your company comes with many reporting and documentation requirements and can double the taxes you might owe. When you prepare to open your business, getting small business accounting services from TMD Accounting can help you select the most advantageous structure for your company.

2. Failing to File Taxes Or Send Proper Payments

When you need to file different types of taxes and send payments to the IRS will vary based on your business’s structure, your industry, and whether you have employees. There are many different forms that might be required, and you might also need to file different forms with the state as well.

Certain taxes must be filed every quarter, including payroll, estimated income, and sales taxes. Others must be filed annually, and you must also send your employees and contractors other forms directly so that they can file their tax returns.

Failing to file the right forms and submit payments on time can get your business in trouble. You might face high penalties from the IRS that could cripple your business. In certain cases, failing to file business tax returns or remit tax payments when they are owed could also expose your business to criminal liability.

3. Classifying Workers Improperly

Many businesses improperly classify their workers. For example, you might decide to classify your workers as independent contractors to try to save money on your tax bills. However, if you improperly classify workers, it could result in significant penalties. Make sure you understand the classification rules and follow them to avoid serious tax problems.

4. Underestimating Taxes or Underreporting Income

If you file your taxes as an S-corporation, partnership, or sole proprietorship, you will likely have to make quarterly estimated tax payments to the IRS. While you aren’t expected to guess how much your business will owe exactly, you are expected to be reasonably close. If you fail to make quarterly estimated tax payments or greatly underpay them, you could face a stiff penalty. If you understate the amount you owe by a substantial amount, the IRS might believe you were negligent and force you to pay a 20% penalty. If the IRS believes you tried to intentionally defraud the government, you could face a fine of up to 75% of the amount owed as well as criminal charges.

5. Commingling of Personal and Business Expenses

A major mistake that many small business owners make is mixing their personal and business funds and expenses. The IRS has strict rules against commingling personal and business funds. You can only deduct business expenses from your income and not personal expenses. To prevent you from deducting the wrong expenses, you must ensure your personal and business finances are kept separate. This means having a separate bank account for your business and only using a business credit card for business purchases and not your own. If you do use personal assets to operate your business, including your vehicle or a home office, you must keep detailed documentation to support your deductions.

6. Poor Organization and Record-Keeping

Failing to keep good records throughout the year can make tax time difficult. If you leave everything until the last minute, you’ll likely miss out on business deductions you would otherwise have been able to claim. Disorganized records and poor documentation can also result in higher small business accounting services fees when it’s time to prepare your business tax returns.

To prevent these problems, make sure you have a system to track your expenses and income on a continuing basis throughout the year. Each month, your cash flow, credit card statements, and bank account statements should be reconciled. You can use software to help manage your bookkeeping so that tax time will be smoother for both you and your accountant.

7. Taking Improper Deductions

The deductions you can claim for your business are those that are involved in the ordinary process of operating your company. You can review IRS Publication 535 to learn what is deductible. If you claim deductions for things that are improper, you could face an audit and potentially severe penalties. Even if you claim legitimate deductions, you could be penalized if they are out of sync with your business’s income or the deductions claimed by similar businesses in your industry.

If you report a loss for your business several years in a row, the IRS could decide that your venture is a hobby instead of a business. If that occurs, your ability to claim deductions could be disallowed completely.

Find an Accountant for My Small Business

The best way to avoid potential tax issues is to be honest and remain organized. Working with TMD Accounting can also help you avoid potential mistakes in preparing your taxes and claim all of the deductions to which your business should be entitled. To learn more, contact us today at 1-856-228-2205.

Cash Management Tips for Your Small Business

Small Business

As a small business owner, you need to manage your cash flow. Any owner should understand how cash moves in and out of their business. Being aware of cash flow can help your daily operations. All companies need to have a plan that focuses on cash management. Here are a few tips to help with these tasks.

Prioritize Your Bills

When you receive an invoice, you may want to pay it right away. However, that is not always the best course of action. You should extend your payable for as long as possible so that you can spread out your payment. It is not a good idea to pay all bills at the same time. It could drain your business’s cash, which can strain your supplier and employee relationships, especially if you cannot pay on time.

Instead of paying immediately, you need to review your bills and sort them according to priority. By staggering payment days, you can take care of the most important bills first, such as payroll and rent. After that, focus on the bills that are less important and have more flexible payment dates. In some cases, you can get a discount for paying a bill before the due date. With that, you should prioritize those bills to help save some money.

Be careful with this tip. You always want to pay on time. Late payments can affect your credit and require you to pay late fees.

Select the Right Payment Cycle

When you need to pay your employees, schedule the payroll to match your revenue streams. Some businesses, like retail stores and restaurants, generate revenue on a daily basis. They can cover those costs for the weekly payroll. However, for companies with a slow revenue stream, it can be a challenge to meet payroll obligations. Some businesses will adjust their payroll cycle to a biweekly or monthly schedule. Make sure to follow all applicable state laws regarding wages. Some states may have requirements that businesses must follow for payroll frequency.

Negotiate Supplier Payments

In many cases, you can negotiate with a supplier regarding payments. If you have a great relationship with a supplier, they are more likely to work with you. Think about flexible payment options to manage your cash. Many suppliers will offer special payment terms, especially if you order regularly or in bulk. With a payment agreement with your supplier, you can get more time to settle those invoices.

Collect Receivables Quickly

When you need to manage your money, you should look at your cash flow. You can improve that flow by collecting receivables on a timely basis. There are a few ways to expedite the process of collecting receivables. First, request a deposit from customers when taking an order or project. You could also offer discounts for customers who pay quickly. Also, you may want to move outdated inventory with discounted prices. Finally, use online invoices that offer more payment options for your customers.

Manage Your Credit Policies

When you offer any credit to your customers, you must establish a few credit policies to manage your cash. For example, you will want to take a look at your invoicing. It is crucial to quickly send out the invoices and follow up with customers for payments. Before you extend any credit, make sure to require a credit check for all new customers. Those customers who pay late can hurt your available cash. You will want to identify those late payers and develop a cash-on-delivery policy for those who don’t pay on time.

Use a Business Credit Card

Many people might not want to open a new credit card. However, a business credit card can free up your cash to pay everyday expenses. When choosing a business credit card, you should find one with a rewards program. In some cases, you can reduce your costs and get a percentage back on a few purchases.

Track All Expenses

You must keep track of all your business expenses. Make sure to check your monthly statements. If you need help with this task, small business accounting services can help you keep track of your expenses and cash flow.

Open a Line of Credit

If you want to maintain a balanced cash flow cycle, consider opening up a line of credit to get quick access to cash. Many businesses have a line of credit to bridge any gaps between their receivables and payables. Also, a line of credit can help cover unexpected expenses, buy equipment, and help with growth opportunities.

Use the Latest Technology To Accept Payments

When you want to accept receivables quickly, consider using online payment methods to collect those bills. Along with that, the latest technology can help you track the payments of every customer.

Manage Your Business’s Cash

When you can monitor your cash flow, it can help with your business’s short- and long-term success. By collecting payments quickly, monitoring expenses, and negotiating with suppliers, you will have a few options to manage the cash flow in your business. If you want someone to handle these vital responsibilities, make sure to find an accountant for your business.

Find an Accountant for My Small Business

TMD Accounting has been serving the Gloucester County community for over 40 years. Our accounting firm is a family-owned and -operated business. We are an affordable, reliable, and flexible way to help manage your company’s financial health. Schedule your consultation by calling 856-228-2205.

Your Small Business Tax Preparation Checklist

Small Business, Tax Planning

Small business owners should ideally prepare for tax filing season year-round. Planning can help to simplify the tax filing process and help small business owners to take advantage of potential deductions and credits for which they might qualify. As the tax season draws near, it is important to ensure you understand the various deadlines that apply and the documents you should gather. At TMD Accounting, part of our small business accounting services includes helping our clients prepare and file their business tax returns. Here’s a checklist that can help you get a jump on the upcoming tax season.

1. Know the Forms You Will File

The tax form your business will file depends on the legal entity structure you have chosen as follows:

  • Sole proprietorship – Schedule C with your individual Form 1040
  • Limited liability company (LLC) with one member- Schedule C filed with your individual Form 1040
  • LLC with more than one member – Form 1065
  • Partnership – Form 1065
  • S-corporation – Form 1120-S
  • C-corporation – Form 1120

Additional schedules and forms might also need to be attached based on the credits and deductions you claim and the types of income you need to report.

2. Information to Gather

Before it is time to file, you should gather the following information to make the process easier:

  • Employer identification number (EIN) or Social Security number
  • Business’s legal name
  • Business address
  • Business principal activity code from the chart in the instructions for
  • Schedule C
  • Income information from your business, including from sales, property sales, collected rent, dividends, interest, canceled debt, allowances, returns, and other income
  • Cost of goods sold for a deduction if your business sells products with a beginning and ending inventory by using the worksheet in IRS Publication 334, Chapter 6 to calculate it
  • Business expenses, including utilities, advertising, vehicle expenses, mileage, fees and commissions, contractor labor, depreciation, insurance, employee benefits, professional fees, legal fees, office expenses, employee wages, license, taxes, and others
  • Information broken down by location if you have locations in several states

Gathering this information can be simple if you use small business accounting software. If you haven’t kept good records, you might need to recreate them by using your bank statements, credit card statements, receipts, and other types of documentation.

3. Issue 1099s if Necessary

If you hired independent contractors or freelancers and paid them $600 or more during the tax year, you need to issue Form 1099-MISC to each one. This is a form used to report payments for work performed by non-employees and independent contractors. You aren’t required to issue a Form 1099-MISC if you paid a contractor through a third-party payment network such as PayPal. In that case, the payments will be reported by the payment processor on Form 1099-K. You can either print Form 1099-MISC through your accounting software or purchase blank forms from a local office supply store. Your accounting firm can also supply these forms for your business.

4. Know Your Other Small Business Tax Obligations

Small businesses also need to be aware of their other tax obligations and returns beyond the federal income tax, including the following:

  • Employment tax withholdings – Must be filed with the IRS along with quarterly payroll tax reports
  • Unemployment taxes – Paid by the employer without deduction from employees’ wages
  • Self-employment taxes – Covers the Medicare and Social Security taxes for self-employed people and must be paid quarterly together with estimated taxes
  • Excise taxes – Must be paid on certain types of activities or goods
  • Sales taxes – Might be required to collect and remit sales taxes to the state or local government
  • Property taxes – Local and state property taxes for your business property if you own it

5. Know the Filing Deadline

The filing deadline depends on the form you file. S-corporations, partnerships, and LLCs with more than one member that file Forms 1120-S or 1065 have a tax filing deadline of March 15. If this date falls on a weekend or holiday, your return must be filed by the next business day.

If you operate as a single-person LLC or a sole proprietor, you report your business income on Schedule C of your individual tax return. In that case, file Form 1040 and Schedule C by April 15. If it falls on a weekend or holiday, your return must be filed by the following business day.

6. Request an Extension if Necessary

If you can’t file your return on time, ask for an automatic extension. Single-member LLCs and sole proprietors can request an extension on Form 4868. Other business types use Form 7004 to request extensions.

An extension will give you an additional six months to file your return. However, if you owe money, your deadline for paying what you owe doesn’t change. Try to estimate what you owe and pay it by the original deadline so that you won’t be assessed penalties and interest.

Find an Accountant for My Small Business

While this tax preparation checklist can help you prepare for filing your taxes, working with an experienced accounting professional at TMD Accounting can make the tax process much more manageable. Contact us today to request a consultation at 1-856-228-2205.

How Tax Changes for 2022 Are Affecting Your Small Business

Small Business

During the 2022 tax year, small businesses did not face major changes in tax laws. However, there are several things small business owners should understand when it is time to file their business tax returns for the year. One thing that is critical for small businesses is to ensure they always make their estimated tax payments on time each quarter and understand their tax liability. Here are some of the tax laws small businesses need to understand for the 2022 tax year and how they might affect their tax returns when it is time to file from TMD Accounting.

Small Business Tax Deduction

Partnerships, sole proprietorships, LLCs, and S-corporations are all pass-through entities that can benefit from the small business tax deduction. For the tax year 2022, the owners of small pass-through companies can claim a deduction of up to 20% on their portions of the income earned by their business up to $182,500 for single filers or $364,200 for joint filers. If the business’s qualified income exceeds the threshold, limitations will be applied. However, companies with significant capital expenditures and those that employ a lot of employees might still be able to benefit from the small business tax deduction.

Standard Tax Deduction

Small business owners that do not itemize their expenses can claim the standard deduction on their returns. in 2022, the standard deduction for individual filers is $12,950. Joint filers can claim a standard deduction of $25,900.

Estate Tax

Small business owners might benefit from the estate tax exemption, which is $12.06 million for individual filers and $24.12 million for those who file jointly in 2022. The increased estate tax exemption offers protection to a greater number of small business owners who have accumulated substantial assets and want to avoid potential tax issues when they pass away and leave their estates to their families.

Deduction for Expensing Equipment

Small business owners can immediately deduct the costs of purchasing business equipment up to a maximum deduction of $1.08 million in 2022. The spending cap for equipment purchases in 2022 is $2.7 million under Section 179. This tax relief is permanent.

Certain assets that depreciate over time might be eligible for bonus expensing in 2022. This involves expensing the entire purchase cost at once instead of only a fraction of the cost per year. The ability to benefit from bonus expensing will be phased out in 2024.

Tax Credit for Paid Family and Medical Leave

Under the Tax Cuts and Jobs Act, businesses that provide paid family and medical leave as a benefit for their employees can claim a tax credit. Under the Consolidated Appropriations Act of 2022, the credit was extended through 2025.

Deferred Social Security Taxes Due

In 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This law allowed employers to defer the employer portion of their Social Security taxes due between March 27, 2020, and Dec. 31, 2020. Businesses that benefited from these deferments had to pay one-half of the deferred amounts no later than Dec. 31, 2021. Those businesses also must pay the remaining one-half of the deferred amounts no later than Dec. 31, 2022. If you don’t pay the deferred amounts on time, your business will face assessed penalties on the total amount of the deferred taxes.

What to Do

As a small business owner, you likely have learned that tax preparation for small businesses is a year-round process. This makes it important for you to regularly meet with your accountant and bookkeeper and provide them with accurate financial records each month. Doing so allows your small business accounting services provider to develop a good tax strategy for your business and avoid potentially negative surprises.

Make Sure to Keep Your Tax Records for the Right Amount of Time

Make sure that you understand the tax return retention requirements in your state. While most states require businesses to keep their records for seven years, some businesses retain their records for longer periods in case they are audited. Talk to your accounting professional to learn about your tax retention requirements in the jurisdiction in which your business operates.

Have a Separate Account for Taxes

If your business is new and isn’t earning much revenue yet, you might not think you need to open a separate account for taxes. However, having a separate account for business taxes can help your tax filing process to be simpler and establish good tax habits that can protect your business’s future health.

On average, around 30% of your profits will go to taxes of some type. Open a separate account for your taxes. When you complete your account reconciliations and learn your profit amounts, move 30% of that amount to your tax account. Setting aside 30% of your monthly profits in a tax account can help your business avoid huge tax bills when it’s time to file your tax return.

Find an Accountant for My Small Business

Small businesses should keep in mind how tax laws affect them year-round. Planning for taxes can help to minimize how much you might have to pay. Working with an experienced accounting professional at TMD Accounting can help you develop a sound tax planning strategy to reduce your taxes and ensure you comply with all of the laws that apply to your business. To learn more, contact us today to schedule an appointment at 1-856-228-2205.

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