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How To Prepare Taxes for 2022 Tax Season

 

 

Now that tax season is officially over, it is time to prepare for next year. To have an efficient tax filing in 2022, you must stay organized year-round. 

2022 Tax Season
Check out the info below for professional advice about tax preparation for the 2022 Tax Season.

 

Benefits of Tax Planning

 

Tax planning is beneficial to you in the following ways:

 

  • Get your tax deductions and tax credits. Keep track of all your supplies purchased, depreciation, and mileage. Subtract these expenses from your taxable income. Tax credits also reduce the amount of taxes you owe by reducing your income tax dollar-for-dollar.

 

  • Help decide on using standard deductions or itemizing. Many taxpayers use standard deductions because it is much faster at a flat rate. Itemizing is a longer process, but typically ends up with more deductions. Itemizing takes your tax deductions one by one.

 

  • Determine your tax bracket and plan for tax time. Knowing which tax bracket you fall in is vital so you know your standing and gives you time to prepare. The higher your income is, the more money you may have to pay in taxes.

 

  • Keep a good track of your tax records to file on time. The most important part of tax planning is keeping records of past tax returns and current documents. If you work with a tax preparer, this helps them keep you on track.

 

How to Stay Organized

 

Reduce the amount of paperwork as much as possible. Digitize everything you can and stay orderly with a spreadsheet. You may find that software like Quickbooks works best for you. Take a photo of your receipts while you are on the go. Quickbooks tracks the date, vendor, amount, and payment method for you. This prevents a pileup of printed receipts in your office.

 

When making note of your expenses, accurately add the date, location, amount, and item. Keep food and office supplies separate. Add in the number of miles driven, location, and reason for driving there so that you have good representation for the IRS if needed. 

 

Monitoring and collecting this data also shows your business where it is spending the most amount of money. This helps you determine whether it is a good use of your budget.

 

Should I Hire a Tax Planner or Tax Preparer?

 

A tax planner structures transactions to minimize the legitimate amount of tax you pay. Tax preparers file taxes for individuals and businesses. They ensure you consider all your legal deductions, so you realize your full tax benefit. 

 

PL Consulting has comprehensive interview techniques. Our computerized tax return preparation process assures that your return is complete, correct, and presented to you promptly. We assist you in planning your tax obligations for the entire year, so there are not any surprises at tax time. We ensure you gain the full benefit of your deductions through our intensive education and training.

Questions about our tax preparation services? Call us at 410.764.3731 or contact us on our website. Stay up-to-date with PL Consulting on our LinkedIn.

 

 

Accounting Concept Basics

 

 

Whether you hired an accountant or not, you should understand the basics of accounting concepts as a business owner. Accounting runs on the following concepts.

 

Accounting Concepts

 

What Are Accounting Concepts?

Accounting concepts are like general guidelines to use in certain accounting situations or when an issue occurs. Applying these concepts to accounting work ensures that financial statements are both informative and reliable. They are typically known as Generally Accepted Accounting Principles (GAAP)

 

These principles and standards are deemed acceptable for creating financial statements. GAAP helps create uniformity and consistency of financial reporting that companies should be adhering to regardless of size or industry.

 

Some of the concept names and how they are followed vary slightly from accountant to accountant. The following concepts are important to understand.

 

 

Accounting Year Concept: An accounting year is the time period in which your business completes the accounting process. This can be considered a quarterly, monthly, or annual period.

 

Accruals Concept: The accruals concept means that revenue is recognized when it is earned, while expenses are recognized when the assets are consumed. Auditors only certify business financial statements that have been prepared under this concept.

 

Business Entity Concept: Business owners should keep their finances separate from the business itself.

 

Cost Concept: This concept involves recording the fixed assets of your business on the basis of your original cost during the first year of accounting. Assets minus depreciation are recorded, and rises and falls in the market are ignored. 

 

Going Concern Concept: Businesses are expected to continue running for a long period of time. They should carry out their commitments and obligations unless they are forced to stop functioning and liquidate their assets at “fire-sale” prices.

 

Matching Concept: This accounting principle requires that for every entry of revenue recorded in the same period, an equal expense entry should be recorded. The purpose is that no deferral of expense recognition is shown in later reporting periods. 

 

Materiality Concept: Record transactions when the failure to record them alters the company’s financial statements. Fully represent your finances and cash flow by following this concept.

 

Learn More About Accounting Concepts

Our professionals at PL Consulting and Bookkeeping Plus offer diverse services related to all your financial matters. We can help you with any questions or concerns regarding accounting. 

 

The benefit of working with PL Consulting is that you do not have to choose between different companies if you need a bookkeeper and accountant. Our company is proficient in both with a  focus on small to midsize businesses. We are your go-to resource for bookkeeping and accounting services. 

 

Our team serves the Baltimore, Maryland area and beyond. We customize our services to each client. Your ideas are unique to your business, and we understand that. We help you maintain good records and financial statements.

Questions about how our accounting services can help your business? Call us at 410.764.3731 or contact us on our website to schedule an appointment with one of our accounting professionals. Stay up-to-date with all things financial by following our LinkedIn.

 

Small Business Bookkeeping Tips To Use Year-Round

 

Bookkeeping is the record-keeping of your business’s financials. Without a proper plan of action, your business has a chance of failure. 

 

Although year-end bookkeeping tips are extremely important to your small business, it is important to know your numbers year-round. Set up a clear process and follow these bookkeeping tips. 

 

 

Bookkeeping Tips

 

Understand the Components of Bookkeeping

Before starting your bookkeeping, you must understand what the components of bookkeeping are. The four main components include accounts payable, accounts receivable, payroll, and bank reconciliation. 

 

Additionally, your business bookkeeping may include cash, inventory, loans payable, sales, purchases, owners’ equity, and retained earnings. 

 

Use a Bookkeeping Software

Cloud-based bookkeeping software will make your life much more organized. Using these platforms makes it easier to keep track of your finances. There is no need to keep a paper trail because you can scan the receipts and invoices directly into the software. Regularly run reports to ensure that everything is going as planned.

 

Some useful software that you may want to use includes Quickbooks, Xero, FreshBooks, and Wave. 

 

Set Financial Budgets

To not go over your annual spending limit, set a budget for your business. Create different categories for your expenses including utilities, marketing, donations, travel, and more. Review this budget yearly and adjust as needed. Roll over or invest any money that is left over at the end of the year. Get rid of ongoing expenses that no longer benefit your business. 

 

Analyze Your Financial Data

Keeping your books orderly is not enough to make your business grow. You must analyze business reports. Track your data findings to see the increases and decreases in sales and expenses. These numbers help you understand what is working in your business and what needs to change. 

 

Separate Your Finances

It is best to keep your business finances separate from your personal finances. Mixing the two makes it difficult to keep accurate track of business expenses. You should also get a separate credit card for your business to further separate finances. This will build your business credit, which is important when applying for loans.

 

Get Bookkeeping Help From the Professionals

Not sure how a bookkeeper will help your small business? Learn all about bookkeeper responsibilities first. It may seem easier to perform all the bookkeeping on your own when you are first starting, but once you continue to grow you might need to pass off that responsibility to another source.

 

Our professionals at PL Consulting and Bookkeeping Plus offer diverse services related to all your financial matters.

 

The PL Consulting team serves the Baltimore, Maryland area and beyond. We customize our services to each client. Your ideas are unique to your business, and we understand that. We help you maintain good records and financial statements.

 

Questions about how our bookkeeping services can help your business? Call us at 410.764.3731 or contact us on our website to schedule an appointment with one of our bookkeeping professionals.

 

How to Use Quickbooks

 

It is important to choose the best software that fits your business model for accounting and bookkeeping. Some software allows you to digitally track your finances AND has accounting features. You must consider what is the most convenient and user-friendly software for you and your employees. 

 

Many small business owners start out using Quickbooks because you do not need to be an accounting expert to use it. Here is a guide on the Quickbooks basics.

 

 

Quickbooks

 

Overview

 

The QuickBooks software integrates with PayPal, Shopify, and Square, making it easy to track payments among many other features.

 

There are five plans to choose from, which are all targeted at small businesses and freelancers. Each small business plan allows you to:

 

  • Track income and expenses
  • Invoice and accept payments
  • Maximize tax deductions
  • Run general reports
  • Capture and organize receipts
  • Track miles
  • Manage cash flow
  • Track sales and sales tax
  • Send estimates
  • Manage 1099 contractors

 

How It Works

 

Quickbooks has many features that help you get the job done. Since there are so many features to use, it can get a little overwhelming. If you have specific questions about the features and how they perform, head to their website for detailed explanations. You even can try out demos to make sure you are comfortable with the system before purchasing it. 

 

All the information added to your account makes it possible for you to run reports on the success of your business, profit-and-loss statements, business expenses, balance sheets, and more. You can access some features on the mobile app and complete everything else online. 

 

Quickbooks Payroll

 

Payroll is an optional add-on for your account. Employers get many benefits from using Quickbooks Payroll services. Some services include HR support, worker’s compensation, health benefits, and 401 (k) plans.

 

There are 3 payroll plans to add to your account that are mainly used in small to mid-sized businesses. 

 

Quickbooks Online Mobile App

 

Download the mobile application on your phone to access Quickbooks on the go. You can enter transactions, record expenses, and send invoices anywhere. If you just made a purchase, you can take a quick photo of your receipt and Quickbooks will track the date, vendor, amount, and payment method for you. 

 

The base plan works best with the app because each feature is available on both versions. No matter the plan, though, you can still use the mobile app.

 

Quickbooks and Accounting Help

 

PLCFO’s many years of experience with QuickBooks, but our company can adapt to whatever software works best for your business.

 

QuickBooks can only be upgraded to a newer year or higher version, but if you need to downgrade, historically, there has been no way to do it. We figured out a way to downgrade to an older version of Quickbooks or convert it to a different year if you need to.

 

If you have questions about how to use Quickbooks or need help with accounting, please contact us at 410.764.3731 or visit our website to schedule an appointment with one of our professionals.

 

What is a Bookkeeper Responsible For?

 

 

Our bookkeepers at PL Consulting handle many tasks when working with your business. Keep reading to learn more about bookkeeper responsibilities and how we can handle finances for you.

 

Bookkeeper

 

Bookkeepers Main Responsibilities

 

Bookkeepers are responsible for a variety of daily, weekly, monthly, and annual tasks. The following responsibilities are the most common among bookkeepers. All responsibilities break down into these components.

 

  1. Accounts Receivable
  2. Accounts Payable
  3. Bank Reconciliation
  4. Payroll

 

Accounts Receivable

 

Bookkeepers send out invoices to your clients when they perform services or complete product transactions. All information about receiving (or not receiving) payment is kept track of by your bookkeeper.

 

Accounts Payable

 

This responsibility focuses on paying the bills to vendors. Having an improper accounting system setup can deplete your cash flow too soon or cause you to double pay vendors. Bookkeepers monitor bill payments, due dates, and vendor information.

 

Bank Reconciliations

 

Your bookkeeper will consistently go through all your bank and credit card transactions. The main purpose of this is to categorize them, make sure there are no duplicate transactions, and ensure that no suspicious charges occurred. Once they enter everything, bookkeepers reconcile each account against their bank statements to confirm nothing is missing.

 

Payroll

 

Bookkeepers review employees’ work hours, days off, commissions, and garnishments. Once they enter everything, management approves it before processing. Once processed, bookkeepers pay all state and federal liabilities, file quarter-end and year-end reports, and get all new employees properly set up in the system.

 

Bookkeepers vs. Accountants

 

There is a thin line between accountants and bookkeepers nowadays, especially with software that allows business owners to digitally track their finances and accounting on their own. There are still many differences between the two. Some businesses require both, while others just need to hire one of them to help. 

 

In a recent blog post, we answer the question, “What exactly do accountants do?” Read both blog posts to help you determine which one will best suit your business’s needs.

 

Can Bookkeepers Prepare Taxes?

 

Bookkeepers can prepare taxes, but they typically do not. It is best to hire a CPA to complete your taxes for you and your business. Instead, a bookkeeper prepares detailed financial statements, performs audits of public company books, and prepares reports for taxes.

 

Hire a Bookkeeper from PL Consulting

 

Our professionals at PL Consulting and Bookkeeping Plus offer diverse services related to all your financial matters.

 

The benefit of working with PL Consulting is that you do not have to choose between different companies if you need a bookkeeper AND accountant. Our company is proficient in both with a  focus on small to mid-size businesses. We are your go-to resource for bookkeeping and accounting services. 

 

Our team serves the Baltimore, Maryland area and beyond. We customize our services to each client. Your ideas are unique to your business, and we understand that. We help you maintain good records and financial statements.

 

Questions about how our bookkeeping services can help your business? Call us at 410.764.3731 or contact us on our website to schedule an appointment with one of our accounting professionals.

 

 

 

Frequently Asked Tax Questions

 

We get many tax questions coming our way daily. We do our best to thoroughly answer our clients. Our team compiled some of these questions so you have something to refer to when you need it last minute. Keep reading for answers to these frequently asked tax questions.

 

Is a TIN the same as an EIN?

 

A tax identification number (TIN) is a nine-digit number assigned to businesses by the IRS. Every company in the United States has a tax ID number. 

 

An employer identification number (EIN) is also a nine-digit number issued by the IRS. The IRS uses the EIN to identify taxpayers liable to file business tax returns. You do not need to have employees to get an EIN.

 

So what is the difference between a TIN and EIN? TIN identifies individuals and businesses to ensure tax compliance. You add your TIN in tax returns and other documents that you file with the IRS. An EIN is a type of TIN. It is used when identifying business entities instead of individuals.

 

Is tax evasion a felony?

 

Yes, tax evasion is a serious violation and a felony. Individuals and companies that fail to pay their taxes result in substantial financial penalties and/or criminal charges.

 

If you owe past due money, receive puzzling correspondence from the IRS, or your return has been selected for an audit, we are fully qualified to assist you before the IRS or the Franchise Tax Board. We specialize in collection and appeals representation.

 

What tax bracket am I in?

 

Federal income tax brackets are different for single filers, heads of household, and married people who file jointly and separately. These change from year to year, so it is important to check which one you are in. This article breaks down the tax brackets for 2021.

 

When is tax season?

 

Tax season typically starts on January 1st and ends on April 15th (Tax Day) every year. During this time, individuals, companies, and tax preparers gather information and file for the previous year’s taxes.

 

The upcoming 2021 tax season ends April 15, 2021. You must file your taxes to avoid penalties and fees.

 

How are taxes calculated?

 

The IRS goes through several complex steps to calculate income taxes. The following categories and steps are included when determining your taxes:

  1. Gross income
  2. Adjusted gross income (AGI)
  3. Taxable income
  4. Personal exemptions
  5. Tax brackets
  6. Tax credits

 

If you want further details and explanations on tax calculations, contact us!

 

Tax Questions

 

Hire a Tax Accountant From PL Consulting

 

Our professionals at PL Consulting and Bookkeeping Plus will assist you in tax planning, accounting, tax returns, and more. We ensure you file your taxes on time and accurately. 

 

Our team serves the Baltimore, Maryland area and beyond. We customize our services to each client. Your ideas are unique to your business, and we understand that. We help you maintain good records and financial statements.

 

Do you have tax questions or want to learn about how our tax and accounting services can help your business? Call us at 410.764.3731 or contact us on our website to schedule an appointment with one of our accounting professionals.

 

 

What Exactly Do Accountants Do?

 

You hear about accountants a lot, especially during tax season. What exactly do accountants do, and why are they important to small business owners?

 

Managing your business finances correctly and efficiently can mean the difference between business success and failure. That is where accountants come in.

 

Where an Accountant Fits Into Your Business

 

Not all business owners are savvy in the accounting field, so they outsource their accounting work to professionals. This gives business owners the chance to focus on building their business without having to figure out the numbers. Professional accountants ensure your finances are being handled properly. They keep track of your financial transactions and make suggestions to help you make as much money as possible.

 

Although professional accountants assist you in managing your business finances, you should not rely on them solely for your financial success. Create a plan and note your financial responsibilities to keep everything in order. Be sure to understand your financial situation so you know what to ask and expect of your professional accountant.

 

Along the way, always follow up to ensure your accountant is providing the best quality services for your business. As your business grows, your accountant should adapt as well.

 

What Exactly Do Accountants Do

 

Accountant Job Responsibilities

 

Accountants deal with the ongoing finances of a business and handle the finances that are already completed and closed out. 

 

The five basic roles of accountants include: 

  • Accounts receivable
  • Accounts payable
  • Payroll
  • Financial controls
  • Financial reporting

 

These reports give businesses an idea of their financial progress and current standing. This helps to analyze the growth of a business and gauge any changes that may need to be made for improvement. Accountants also handle the tax portion of a business, providing tax planning and advice.

 

Is There a Difference Between Accountants and Bookkeepers?

 

Yes, there is a difference between accountants and bookkeepers. Bookkeepers maintain records while accountants translate those records. Accountants interpret the financial data that the bookkeeper documents and compiles the information into financial reports.

 

Hire an Accountant From PL Bookkeeping Plus

 

Our professionals at PL Consulting and Bookkeeping Plus will assist you in tax planning, accounting, tax returns, and more. Check out our list of accounting services

 

Don’t see what you are looking for? We offer diverse services related to business, tax, and financial related matters. If we cannot assist you, we will refer you to the right place. We keep strong relationships with many individuals and firms.

 

We are your go-to resource for bookkeeping and accounting services. Our team serves the Baltimore, Maryland area and beyond. We customize our services to each client. Your ideas are unique to your business, and we understand that. We help you maintain good records and financial statements.

 

Questions about how our accounting services can help your business? Call us at 410.764.3731 or contact us on our website to schedule an appointment with one of our accounting professionals.

 

Last-Minute Tax Tips

 

Tax day is almost one month away! Keep reading for some last-minute tax tips for last-minute filers.

When is the last day to file taxes?

First, know when to file your taxes to avoid any late fees or penalties. For your 2020 taxes, the last day to file is Thursday, April 15, 2021. If you need more time, you can try to file for a tax extension. This gives you until October 15th to file your tax return. 

 

What tax bracket am I in?

Know which tax bracket you are in when assessing your financial decisions. This is especially beneficial to next year’s tax return, but it still gives you an idea of how much you will need to pay in taxes this year. If you are unsure of which tax bracket you are in, this tax bracket calculator may help you. 

 

Credits and Deductions

Business tax credits are subtracted directly from your taxes, while deductions reduce your taxable income. File for all the deductions and credits possible. Do your research to ensure which ones apply to your business, and have proof of why. 

 

Common deductions for small business owners:

 

Common business tax credits: 

 

Last-Minute Tax Tips

 

Gather Receipts

If you haven’t been collecting your physical and digital receipts from purchases all year, now is the time to get those together. Your receipts are proof of purchases made throughout the year concerning your business. You may write off some of these amounts as deductions, saving you money. 

 

Have a plan of saving receipts for 2021 so that you aren’t in the same situation next year. This keeps you organized, saves you less time gathering items, and reduces your taxable income.

 

Hire a Tax Accountant

If you are struggling to complete your taxes, or just simply don’t want to, PL Consulting is here to help you. Hire our professional tax accounting team to help you file your 2020 taxes. Though this will be a financial investment, it will save you money. We will manage your business taxes this year and plan for upcoming years. 

 

Our professionals at PL Consulting and Bookkeeping Plus will assist you in saving as much money as possible. We are qualified to assist you with any issues relating to the IRS, relocation, or out-of-state taxes.

 

We are your go-to resource for bookkeeping and accounting services. Our team serves the Baltimore, Maryland area and beyond. We customize our services to each client and help you maintain good records and financial statements.

 

Questions about filing for taxes last minute? Call us at 410.764.3731 or contact us on our website to schedule an appointment with one of our professionals.

 

 

Important Business Loan Terminology and Definitions

 

 

You may apply for a business loan in your startup company or established small to mid-sized business. Business owners need loans for many reasons. This includes business renovations, payroll, new products, and more. 

 

Applying to business loans means lots of new terminologies. Know at least the basics when you apply for a loan to show professionalism and understanding.

 

 

business loan

Are you getting ready to apply for a business loan? You need to know these loan terminologies and definitions.

 

 

ACH Payments (Automatic Clearing House): This electronic bank-to-bank payment occurs when a 3rd-party vendor has access to your bank account to withdraw fees with your approval. It is most commonly used when employers deposit payroll into employee’s bank accounts.

 

Amortization: This is the process of gradually writing off the initial cost of a loan within the statement period.

 

Annual Percentage Rate (APR): This calculation results in how much credit costs. It considers the timing and amount of capital received, fees paid, and periodic payments made.

 

Assets: An asset is anything owned by yourself or your company that has value. These are collateral in business loans. 

 

Balloon Payment: A balloon payment is the unpaid amount of a loan due at the end of a loan term.

 

Bridge Loan: This short-term loan typically covers expenses until more permanent financing is available. Bridge loans have high-interest rates. 

 

Cash Flow: A business’s cash flow statement shows the total amount of money, both physical or virtual, transferred in and out of the business. It is a combination of information from the profit & loss statement and balance sheet. 

 

Debt-to-Income Ratio: To calculate the debt-to-income ratios, divide all monthly debt payments by gross monthly income. This shows lenders your ability to make monthly loan payments.

 

Gross Profit: Also known as gross income, this amount equals the cost of goods sold minus total revenue. 

 

Interest: This payment differs in amounts each month, but is paid regularly by the borrower to the loaner. Interest payments may be higher at the beginning of the loan, but then lower as time goes on.

 

Liabilities: These are debts and financial obligations that your business handles. 

 

Line of Credit: Use this fixed amount of capital any time until the term ends. After it is paid off, you may continue to borrow the fixed amount.

 

Net Income: A business’s net income equals total earnings minus the cost of goods, taxes, and interest.

 

Origination Fee: This fee comes from a lender for managing your loan.

 

Principal: The principal is the total amount of money borrowed. This does not include interest payments and fees.

 

Promissory Note: A promissory note is a document the borrower signs to agree that they will repay all borrowed money by a specific date. 

 

Repayment Period: This is the time given for the borrower to make all payments due on a loan. 

 

Secured Loan: A secured loan requires collateral from the borrower in the event they default on the loan.

 

Unsecured Loan: An unsecured loan does not need collateral from the borrower in the event they default on the loan.

 

Questions about business loan terminology and definitions? Call PL Consulting & Bookkeeping Plus at 410.764.3731 or contact us on our website to schedule an appointment with one of our professionals.

 

 

Can I Use My Personal Bank Account for Business Transactions?

 

When many small business owners or gig workers start out, they find it easier to use their personal bank account for business transactions. Although it may be easy at first, it causes problems for you in the long run. Create a separate business account as soon as your business gets off of the ground. 

 

 Personal Bank Account

 

Mixing business and personal finance make it difficult to keep an accurate track of business expenses. Get a separate credit card for your business to further separate finances and build your business credit. 

 

Continue reading for more information on personal bank accounts vs. business bank accounts.

 

Expenses, Deductions, and Cash Flow

 

Keep all your business expense records in one place. This helps analyze your business’s progression. It also allows you to see what expenses you can deduct from your taxes that year. 

 

Easily conduct a cash flow statement to see where each of your transactions is going. By separating your accounts, you can compare cash from operating activities to your business’s net income to determine the quality of earnings. Use your statement to show investors the cash flow coming in and going out. This shows them your overall performance.

 

Bookkeeping Software

 

We advise you to digitize your bookkeeping rather than holding onto all your paper receipts. Use bookkeeping software like Quickbooks. Connect your business account to the software to keep track of your business transactions. If you mix your business and personal transactions, your record-keeping will confuse you and get off-balance.

 

Small Business Bank Account

 

Choose which bank account is best for you. Some business checking accounts are free. Other accounts need minimum balances and/or other requirements to waive the monthly fees. Business accounts offer you the protection that personal accounts do not offer. Customers and clients find it more professional to do business with someone that has an established account over a personal one. 

 

In the event of an emergency, most banks will loan your business money when you have an account with them. Responsibly using a credit card helps your business establish a positive credit history, even though you may already have one personally. 

 

Hire a Professional from PL Consulting

 

Hire a professional accountant and bookkeeper to help you maintain your business’s finances. Though this will be a financial investment, it will save you money and help smoothly manage your business. 

 

Our professionals at PL Consulting and Bookkeeping Plus will assist you in finding the best bookkeeping software to connect your business bank account to. 

 

We are your go-to resource for bookkeeping and accounting services. Our team serves the Baltimore, Maryland area and beyond. We customize our services to each client. Your ideas are unique to your business, and we understand that. We help you maintain good records and financial statements.

 

Questions about keeping track of business transactions? Call us at 410.764.3731 or contact us on our website to schedule an appointment with one of our professionals.