What Is The Difference Between Bookkeeping and Accounting For Small Business

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

Bookkeeping vs Accounting

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

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

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

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

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

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

Why Your Small Business Needs An Accountant

Why Your Small Business Needs An Accountant

As a small business owner, you likely spend too much time during each week taking care of the accounting side of your business. You might feel as if your business is too small to consider hiring an accountant. What many business owners fail to realize is that when you try to complete your small business accounting processes by yourself, it can take away from your ability to conduct the other important tasks of the company while also being highly frustrated. You might be wondering, “How do I find a small business accountant near me?” Tom DiTullio Accounting is available to help you with all of your business accounting needs.

Spend your time on the important tasks

When you choose to outsource your business accounting tasks to an accountant for small business services, you can free up your time to such things as working towards securing clients, customers, new business and your goals rather than on daily administrative and bookkeeping tasks.

In order to find an accountant who can meet your needs, you will want to find a firm that is able to offer a range of services from which you can choose. This may help you to have only the services that your particular business requires while also allowing you to get back to doing what you do best.

Access to expert help and advice

The duties and responsibilities of an accountant are myriad. Your ideal accounting services should comply with IRS standards. Attending to these tasks may be difficult when you also need to pay attention to growing your business. If you try to do them yourself, you may make mistakes. An experienced accountant from Tom DiTullio accounting can offer strategic insight and advice about the particular ins and outs of your business.

Putting a focus on your business’s growth

Outsourcing your accounting can also help you to focus on the areas in which your business may grow by looking at your patterns of cash flow. You can then optimize your pricing and inventory to enhance your bottom line. This may help you to understand how to grow your business rather than getting lost in the minutiae of daily administrative tasks.

Tax considerations

Tax laws change frequently, and staying on top of the changes can be difficult for most small business owners. With our help, you can feel more confident that your taxes will be calculated and submitted properly while also understanding the various deductions you may be eligible to take. This can help you to avoid potential penalties while also helping you to reduce your business’s tax bill.

Audit representation and readiness

When you have a good accounting team on your side, you can make certain that your business is prepared in the event that it is audited. We can help you to prepare for an audit and navigate your way through it. We can also help by making certain that you understand and implement the best practices for document and receipt retention so that you will not be caught unaware.

Tom DiTullio Accounting understands how important accounting services are for the success of your business. Call us today to schedule your consultation so that you can learn more about how we can help you succeed.

Is Credit Card Interest Tax Deductible for a Business?

Is Credit Card Interest Tax Deductible for a Business?

If you are a small business owner, it is likely that you dread tax time. The tax code is highly complex when it comes to your business expenses and the tax deductions that your business can take. It is important that you don’t miss available deductions because out of every $100 in deductions, your business will save an average of $30. A very substantial expense for most small businesses is the credit card interest that they pay each month. There are times when the law allows you to take a deduction for the interest that your business pays and situations in which a deduction is not allowed.

When credit card interest can be deducted

The interest that is business-related is deductible on your taxes. For example, the interest that you pay on credit card debts and business loans can be deducted if the incurred debts are related to the activities of your business. You are even allowed to deduct the interest that you pay for cash advances if the money was then used for your business. You are only allowed to take a deduction for interest in the year in which your business paid it. The interest that might be deductible might include ATM fees, late fees, finance charges, annual fees, foreign transaction fees and others. In order to take advantage of these deductions, you will need to save all of the relevant credit card statements and receipts to make filing your taxes easier.

When can businesses not deduct credit card interest?

Before the Tax Reform Act was passed in 1986, taking a credit card interest deduction was fairly straightforward. All interest that was paid was deductible even if it was associated with non-business expenses and personal credit cards. Since the law was passed, you are no longer able to deduct interest on your personal debts in order to reduce your taxable income. If you use a personal credit card to pay for business expenses, you will need to keep thorough records and to review them carefully to figure out which expenses were business-related and which ones were not. When you do this, you will then need to calculate the percentage of your total interest payments that you can allocate to your business so that you can take the appropriate deductions.

Steps to make the process easier

There are several steps that you can implement to make filing your returns easier. You can start by maintaining a credit card for your business that is separate from your personal credit cards. This will not only make it easier for you to calculate the interest that you spent for your business-related purposes, it will also allow you to have access to the benefits and rewards that are offered by many business cards. A business credit card may also help your business to build an excellent credit history so that you can secure lower interest rates in the future.

Claiming deductions for your business expenses is important for small business owners. If you do not maximize the deductions that you can take, you are simply losing money. To learn more about your business’s taxes and the deductions that you might take, contact us today by leaving your information in our contact form.

What You Need To Know About Tax Planning For Small Business

What You Need To Know About Tax Planning For Small Business

Some small business owners make the mistake of failing to think about their taxes until the time for filing is drawing close. Instead, tax planning should be a continuing process. At Thomas M. Ditullio Accounting, our team of professionals understands the importance of tax planning, and we work closely with our clients to help them to save money when they file.

What is tax planning for small businesses?

When you engage in tax planning, it involves the process of considering your different options in order to inform you about how you should conduct your transactions in such a way that you might be able to reduce or eliminate your tax liability. Reviewing your expenses and income each month and meeting with your tax professional at Thomas M. Ditullio Accounting at least quarterly might help you to analyze how to take advantage of the deductions, credits and tax provisions that are available to you. It is important for you to understand that using the provisions fraudulently in order to reduce your business’s tax liabilities is considered to be illegal tax evasion. Tax planning is instead a legal way to help you to reduce the tax burden that your business might otherwise face.

Factors that the IRS may consider when it is determining fraud

There are four primary areas that the IRS tends to focus on in order to determine whether or not a business has committed fraud, these include:

It is very important that you avoid these improper tax strategies.

Strategies for small business tax planning

There are numerous tax strategies that you may have available to you. Your tax planning strategy should be based on its structure in order to accomplish some of the following goals:

  • Getting a lower tax rate
  • Reducing your taxable income
  • Claiming the available credits and deductions
  • Controlling when taxes have to be paid
  • Minimizing the effect of the alternative minimum tax
  • Avoiding tax errors

It can be very difficult to come up with exact estimates, but you are likely already projecting your revenues, cash flow and income for your general planning purposes. The more accurate that your estimates are, the likelier that your tax planning efforts will be successful.

Business entertainment expenses

One legitimate type of deduction that may be available to your business is a deduction for business entertainment expenses. As long as you follow the specific guidelines, these expenses may help you to lower your tax bill. To qualify, the expense must have been incurred either after, during or before a business discussion. The location must be one that is reasonably conducive for business. For example, while a quiet restaurant may pass muster, it is unlikely that a dance club will. Locations that are generally considered to be too distracting include sporting events, hunting trips, skiing trips and theaters. You may take up to 50 percent of your entertainment expenses as a deduction, but you must have good records to support them. The purpose of the meeting must have been arranged for business purposes.

Automobile deductions for businesses

Certain deductions for maintenance and operating costs for your vehicle may be deductible as business expenses if you use it to conduct business. You may be able to deduct the mileage expenses that are allowed by the IRS. The amounts change from year to year, so you will want to talk about the amounts with your tax professional at Tom Ditullio Accounting.

You might be able to maximize your available vehicle deductions if you own two vehicles by including both in your deductions. Your business miles that are driven are determined by your business use. To figure that out, you divide the business miles that were driven by the total miles for each vehicle. This can result in substantial deductions. It is very important that you keep good records, including mileage logs and receipts.

Time spent working at home

Understanding the home office deduction is important, but it is also complicated. If you have a home office, you will need to understand how to conduct business at home in a manner that will allow you to take the deduction. In order to deduct home office space, it must be located in a room that is not used for other purposes. You should also make its purpose stand out by displaying your business phone number and business address on business cards, having your business visitors sign a guest book when they visit and keeping a time and work activity log. You should also keep copies of all of your paid invoice and your receipts. This helps by making it significantly easier to figure out the percentages that should be allocated to your business use of your home.

Under Section 179 of the tax code, you can take immediate deductions for qualified business property that you purchase up to a certain limit. The equipment may be used or new, and it includes some software expenses. Even if you do not qualify for the home office deduction, there may be some deductions that you can still take. Meeting with your tax professional can help you to figure out what deductions might be available to you. To learn more about tax planning, contact Thomas M. Ditullio Accounting today by calling us at 856.228.2205.

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How To Choose The Best Accounting Software For Your Business

How To Choose The Best Accounting Software For Your Business

As a small business owner, you may find the available accounting software choices to be overwhelming. There are several things that you should consider when you are trying to choose an accounting software, including the money that you have available to pay for it, the needs that you have and the features that your business requires. Here is what Thomas M. Ditullio Accounting recommends to help you choose the software that will work best for your accounting needs.

Your budget

You can find accounting software at a variety of price levels, depending on the particular features that you choose. Many providers have subscriptions that are available for different packages, and some providers offer free versions with limited functionality or users. For paid subscriptions, you can expect a price range from under $10 per month to up to $40 per month. Additional features increase the costs and include such things as the following:

  • Tracking expenses
  • Recurring invoices
  • Tracking sales
  • Past-due billing
  • Payroll services
  • Team functions
  • Company branding
  • Advanced reporting capabilities

Your needs

It is important for you to think about why you need accounting software. Some businesses are able to make do with handwritten ledgers, but most need the ability to use software to improve the ease and efficiency of their accounting practices.

If your business is new, using software from the beginning can help your business in the future. It’s much better to begin with accounting software than trying to implement it months or years down the line. If you have a growing business, manual systems can become too complex and inefficient, leading you to need to use software. Similarly, if you require immediate access to accounting information, software can be used to quickly give you the numbers, names, addresses and credit histories that you need.

The software can be used to help your business to streamline its operations. The various tasks can be integrated to help you understand and track how your business is doing and to keep up-to-date with your expense tracking. You may already have software but have found that it is too complicated. If this is the case, you may want to find a software package that is simpler to use. Finally, if you want to make certain that you are complying with the applicable regulations and laws, a good accounting software system can help.

Choosing the features

There are numerous available functions and capabilities offered by various types of accounting software programs. Most small business owners look for time savings and ease of use as the foremost features that they are looking for. A good software package should include the ability to tailor it to your needs and to help you to see your business’s big picture. Some of the available features might include the following:

  • Performing basic accounting tasks
  • Automating billing, payments, notifications and other processes
  • Creating estimates and quotes
  • Preparing taxes
  • Allowing multiple users
  • Processing payroll
  • Allowing mobile access
  • Integrating with third-party applications and tools

There are a number of other benefits that you might receive from your accounting software. Some packages offer all-in-one solutions, simple interfaces, reduced stress, tracking capabilities and do-it-yourself solutions. You’ll want to think carefully about what features you’d like as well as what you need in the context of your available budget.

Picking the right accounting software

When you are trying to find the accounting software that will work best for your business, you’ll want to ask vendors a number of questions. Ask if their product is designed for small businesses and if it is a good fit for your industry. You’ll also want to find out if the company offers customized solutions, the number of employees and clients the software can accommodate and whether or not the software helps your business to comply with regulations and tax laws. Finding out how your data is backed up and protected is also important, and it makes sense to ask about the security measures, the total cost and whether or not there are setup fees involved. Finally, you’ll want to find out about the vendor’s customer service and technical support that it offers.

Choosing a good accounting software is important for your business. In order to make certain that your information is accurate, it is a good idea to get help from a professional at Thomas M. Ditullio Accounting. We can work with you and your software to help your business start on the path to success. To learn more, fill out our contact form today.

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