The Tax Goddess Blog

Bookkeeping and You, Are you Kidding?

So,

Last night  I was out for dinner with a good friend of mine who is a bookkeeper.  She was commenting on how the restaurant we were at she has seen in many of her clients books and how she knows that it therefore must be pretty good.

That little tidbit brought up a thought for me:  Do you know what an IRS agent can tell about you from your set of books?

I see it all the time.  A Business owner running their gym membership, their finance's new engagement ring, their trip to Hawaii, all thru the business, and the owner stating that these are truly business expenses.

Now, imagine how your IRS audit will go.  So, Mr. Jones, what, exact, business purpose did that 1 carat diamond relate to?  Was it your new "marketing" strategy?

I'm not saying don't take advantage of the full benefits of being a business (by any stretch of the imagination, I am always up for a bit of aggressive deductions) but BE CAREFUL!  Too many little "mistakes" (buying personal stuff on the business accounts) can leave you in dire straights when it comes to convincing them that the 25,000 in meals and entertainment really had a business purpose when 12,500 of that was spent over the one weekend that you got married!

Anyway, just be careful :)  If you are going to eat out, always have that little receipt with the 5 W's:

Who
What
Where
When
&
Why

Your Tax Goddess (looking out for your best interests :)

Finding your Transactions!

I wanted to get this out there for all the people beginning to record their 2008 information.

Memos are IMPORTANT!

It is not nice to try and find a piece of information that you knew you had somewhere and now you just can't find it!  Being able to sort by simple information, like a memo, is a good thing!

If you are using quickbooks, please remember to put your memo as a duplicate in both the memo section on any specific transaction (Like a check or credit card transaction) AND in the memo section that quickbooks can search (next to the account category drop down list)

Just a helpful reminder from you Tax Goddess!

It's all about the consistency!

Hi Everyone,

On the topic of consistency -

Mike Leeds, one of the sales trainers here in Arizona, spoke about consistency for the point of sales people and their efforts to obtain clients / sales (see here).  I want to talk about consistency in a different point of view - both his and mine getting you successful results.

Consistency counts when you are talking about your tax returns, about your bookkeeping, and about how you manage and organize your receipts.

If you ever get audited by the IRS or state government it helps your case if you can instantly pull out a receipt or find a check that the auditor is looking for.  If you can't find them and make an auditor wait, it normally 'seems' to an auditor more likely that you will not find the backup that they are asking for.  It is similar to when on one year of a tax return you report an expense one way and then change that method for the next year.  The auditor will ask questions.  (And, by the way, so will any good CPA!  We notice things like that so you won't get audited!)

It is important that you have good professionals on your side helping your keep things in an organized manner.  This may mean hiring a bookkeeper, a professional organizer, a good CPA or even just an assistant to help you.

Remember, saving money may be good in the short term, but if it costs you an audit, or worse (penalties and interest and more in tax!) it will be worth the cost.