Bookkeeping Basics

New Clients often ask: "What's the best tax advice you can give me?"

Beyond a shadow of a doubt...the absolute best tax advice we can give our clients is... keep accurate records at all times and most importantly... on a daily basis.

Why ? Simply put, without accurate, daily record keeping, you will more than likely cheat yourself. If you wait until tax season to get your records together, you are likely to feel totally lost and frustrated in the process. AND you are more likely to forget what you purchased for $1,250.00 at the office supply store at the beginning of the year.

Worse yet, unless you are filing the standard (short form), you run the risk of not being able to document for the IRS some or all of your claimed deductions. As we are all painfully aware, no documentation...no deduction allowed! Lack of proper documentation will cost you the proverbial "arm and a leg". Not to mention the stress your body will go through if you get a letter from the IRS that starts out "Dear Tax Payer, you have been selected for an examination of your tax returns"! If you are looking to minimize stress and you'd like to legally maximize your tax deductions, we urge you to put bookkeeping as priority one when it pertains to all tax matters.

Whether you choose to do your own taxes and bookkeeping for yourself, or pay someone else to do it for you'we urge you to keep track of the following items for both personal and business tax records:

1. All Bank Statements
2. All Credit Card Statements
3. Copies of all canceled checks
4. Any and all receipts, whether paid by cash, check or credit cards (Note: most receipts fade after a while, so it's highly recommended that you make hard copies or scan them as soon as possible)
5. Any closing statements for all real estate purchased, refinanced and sold (HUD1's)
6. If home improvements and/or repairs were made to any property, we need a detailed list of what was completed and why, plus all supporting documentation
7. Information on all automobiles that are going to be deducted.
   • Auto description
   • Date of purchase
   • Purchase price
   • Down payment
   • Amount financed
   • Monthly payments
   • Interest rate
   • Leased vehicle or purchased

In addition, we need to know the following for each vehicle used for business of any kind:

• Total annual miles... and from this figure subtract total annual personal and commuting miles (which are not deductible), to arrive at the total miles driven exclusively for business purposes.

Note: When it comes to auto deductions, taxpayers can choose one of two options to deduct expenses: A) Mileage method computed at current IRS rate by cents per mile, or
B) Actual expenses (i.e. gasoline, repairs, maintenance, insurance, registration, etc.)
plus depreciation for purchased vehicles only (if used 51% or more for business purposes).

As you can see, even though it's time consuming to keep mileage records, every 10,000 miles can mean up to $5,800 in auto deductions alone...so your time keeping a mileage log and records is definitely worth it!

To assist you in this area, we offer Mileage Logs, which can be found on the Tools menu.

Even though you are not allowed to depreciate a leased vehicle, you can deduct a percentage amount of your lease payment (depending on the amount used for business). Our tax professionals are prepared to help calculate your correct deductions, based on your individual tax situation.

For home office use we will need the following information: (see IRS form 8829):

• Total square feet of home
• Area used exclusively for home office
• Annual totals for: rents or mortgage interest, insurance, repairs & maintenance, internet, Home Owners Association fees, and all utilities