Inspired Accounting

12/21/2021

09/30/2021

When you buy or sell something that is considered a capital asset, it's a capital loss or gain.

Makes sense.

There are a few types of asset losses/gains that are important for business taxes.

- Partnership Interests
- Corporation Interests
- Corporate Liquidations

The rules for each of these losses or gains can be a bit tricky. Check out https://buff.ly/3C762WK for more about asset loss/gain and get help from your accountant!

09/27/2021

For businesses, capital assets are property that is useful for longer than a year and is not intended for sale during the regular operation of the business.

Generally, these assets are used to generate revenue for the business and are expected to do so for longer than a year.

Buildings, computers, vehicles, etc. can all be considered capital assets.

When these assets have been owned for longer than a year they incur capital gain. If they are damaged, stolen, or become obsolete it is a capital loss.

The purchase of these assets is considers a capital expense. In most cases the cost of capital assets must be deducted over several years through depreciation.

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09/21/2021

A Section 179 deduction allows businesses to deduct the entire cost of an asset in the year it was purchased.

This deduction treats certain assets like business expenses in that it deducts the entire cost all at once instead over the life of the asset.

Naturally, there are some limitations.

A business cannot expense more than its taxable income in a year.

Only certain assets qualify. Those qualified assets include: computers, office furniture, and some equipment purchased for business use.

At least 50% of the lifetime usage of items must be strictly business use to apply the Section 179 deduction.

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09/15/2021

Asset depreciation spreads the cost of large assets out over many years by allowing a business owner to get back some of the cost through a deduction each year.

There are two kinds of depreciation:

Straight-line, which is applied to assets like buildings. With this method of depreciation, the cost is spread out evenly over the life span of the building (or other large asset).

Accelerated, which is applied to assets with much shorter life spans, such as computers or vehicles. Using this method of deduction, the cost of the asset is deducted more in the early years of use.

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09/14/2021

What is a profit and loss report?

It's pretty much what it sounds like: A report that summarizes your revenue and expenses. Basically, an overview of the financial health of your business.

The formula used most often in these reports is Revenue-expenses=profits.

There are a few others used to figure up things like gross profit, net profit before taxes, net operating profit and net loss.

09/13/2021

Business Assets are essentially anything your business owns. From the building you work out of, to the pens you write notes with.

Assets usually fall into to categories:

✅ Things that will likely last a year or less
✅ Things that will likely be useful for longer than a year

There are many factors to consider about assets like, depreciation, deductions, and selling value.

Come back to our page for more on business assets and how to classify them!

07/28/2021

Automation is one of the many ways to make tax prep a little easier for yourself.

You can use apps, websites, or other services to keep detailed records in a single place.

There are TONS of options for this with subscriptions to fit every budget.

QuickBooks is a wonderful all encompassing accounting tool. It offers many features to assist with bookkeeping, expense reports, and more all in one place. You can even scan receipts direct to the app!

Expensify is a great option for tracking travel expenses. You can scan receipts or link your business cards so it can track expenses straight from the account!

If monthly subscriptions aren't your thing, there are some less hands-off options that don't add another expense.

Use Google Sheets to track expenses and other relevant tax information. To keep receipts you can use the camera on your phone or the receipt function on Evernote.

07/22/2021

When it comes to taxes correctly classifying the people who work for you is a big deal.
Sometimes the line between independent contractors and employees is blurred but there are a few ways to differentiate.

According to the IRS, "The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work, not what will be done and how it will be done."

The IRS gives three basic factors to determine what sort of worker a person is.

Behavioral Control- A worker is an employee when "the business has the right to direct and control the work performed by the worker"

Financial Control - a worker is an employee is whether you control or direct the business and financial aspects of their work

Perception of Working Relationship- how both parties (the worker and the business) perceive the working relationship

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07/13/2021

Trick question!

Business should be prepping for taxes year round!

This means keeping detailed records of expenses, write offs, donations, profits etc. in an organized manner. That way when those quarterly and annual deadlines roll around you aren't scrambling to find what you need.

There are many options to automate these processes, and trust us, you should automate where you can!

Go one step further and enlist the help of an accountant to make sure everything is in order. That's one less worry on your shoulders!

07/07/2021

Saving isn't just a good idea for individuals.

Businesses can benefit from savings in many of the same ways individuals can.

There are the obvious benefits, like having extra money for emergencies, such as repairs, and other miscellaneous expenses.

Then there are the things you may not have thought of like, paying taxes, should you end up owing.

On the business specific end, savings could be used to give your employees bonuses.

The list of benefits for a business savings account could truly go on and on. If you are able, consider a separate savings account!