Monday, November 23, 2015

What are 1099's and Why Do I Need to Know?

The most dreaded 4 numbers in all of accounting would have to be 1-0-9-9. Most independent contractors and self-employed individuals are privy to these notorious IRS tax forms, however, small business owners may not be aware of their responsibilities for filing a 1099.

The tax Form 1099-MISC is used by the IRS to track revenue for all individuals, companies and organizations who are required to report their income on an annual basis. These entities include self-employed individuals, LLC’s, LLP’s, some corporations, attorneys and law firms.

Any business who makes payments to these entities are legally required to file a Form 1099-MISC stating the total amount paid to the vendor for the year, if that total exceeds the threshold as determined by the IRS. For many years, this threshold has remained at $600 or above.

However, as is usually the case with the U.S. tax code, there are always exceptions.  Therefore, it’s best to consult with your bookkeeper or accountant on which of your vendors and payments will need to be reported.

For businesses who neglect to file 1099’s properly, the penalties can be severe, ranging from $50 per 1099 form, up to 10% of the total amount not reported. In some cases, the IRS could deny the deduction of such un-reported expenses against your income. 

So, don’t delay. The deadline for sending all required 1099’s to your vendors is February 1, 2016.

Tuesday, April 21, 2015

How to hire a bookkeeper

Ok you are now convinced you need a bookkeeper, now what do you do? 

Being bookkeepers are not licensed by any state or federal agency or organization, anyone can say they are a bookkeeper.  Accountemps list five things to consider when hiring a bookkeeper. I have used a few of these and added a couple of my own.  With both you can’t go wrong!
  • First, make sure this is the person’s full time job.  This brings some more security that they are just not going to walk away.
  • Second, make sure they are insured. They should have both general liability and errors and omissions insurance.
  • Third, make sure they have some sort of engagement letter or contract that you sign. This leaves no doubt as to the work to be done and the cost for doing so.
  • Fourth, make sure they have either a formal education or training in accounting.  A good bookkeeper should be familiar with all the facets of accounting.
  • Fifth, ask for references and do you due diligence.  Although you may think no one is going to give you a reference that is going to speak poorly of them, you can get a good idea if the person has the same work ethic and business values based on who they give as a reference.  Also, check the internet for information on them.  Linked in, Facebook, website, Google search can be very insightful. 
  • Sixth, are they a member of or certified by any professional organizations. For bookkeepers the American Institute of ProfessionalBookkeepers (AIPB) and QuickBooks offer both membership and certification. 
  • Finally a really good bookkeeper should be able to work with you on your terms and make you feel comfortable.  You may not be ready to divulge all your log ins and passwords yet and you may never be. The person you are working with should be okay with that and accommodate and adjust. 


So go ahead take that big step in growing your business and surround yourself with the right people to help you.  You and your business will be glad you did. 

Tuesday, March 31, 2015

Do I really need a Bookkeeper?

Do I REALLY need to hire a bookkeeper?
There are many small business in the South Jersey/Philadelphia area that would answer “No” to that question.  Let’s take a look at their reasons and then let me explain to you why EVERY small business should have an outside bookkeeper in some capacity.

Their reason: “My wife/husband (mother, brother, friend, aunt, niece etc.) is going to help me and do it.”
My response: Although the person you put in charge of your books may have your best interest in mind, and may even be really good in math, they may not understand the nuances of accounting and how it can impact your business.  Also is this going to be their full time job or just something they do at night and on weekends to help out?
Their reason: “I can do it myself”
My response: Although many small business entrepreneurs can learn what to do, they usually fall short on either time or understanding of accounting when issues become more complicated as their business grows. 
Their reason: “My business is too small to need a bookkeeper.”
My response: This actually may be “somewhat” true. You may not need a bookkeeper on a weekly or even monthly basis, but EVERY business should have someone looking at their books on a quarterly basis.  You should have accurate records so you can look and evaluate your business to see where you are and where your finances need to be.
Their reason: “I already have an accountant so this is just an added expense.”
My response: Every business needs an accountant.  They are a vital part of your business in keeping your filings with state and federal agencies current. Although you may feel a bookkeeper is an added expense you need to look at how much you are paying your accountant at the end of the year.  Accountants charge anywhere between $150-$250/hour.  You will pay a bookkeeper anywhere between $40-$65/ hour.  Now think, would you really want to pay $200/hour for someone to sort through your receipts and figure out and fix all the mistakes made by your mother (who you have paid $6,000 this year already) or $50/hour to an outsourced bookkeeper that can have everything ready for your accountant so their bill will be significantly less. 

Take a couple weeks to think this over and in 2 weeks I will talk about how to find and hire a GOOD outsourced bookkeeper.