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Small Business Taxes: Who Pays What?

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Businesswoman working at the officeThere are various federal taxes that may apply to your small business. The type and form of business you operate determines what taxes you must pay and how you pay them. At the federal level, several different taxes may apply.

Excise Taxes

The IRS defines an excise tax as a tax imposed on the sale of specific goods or services, or on certain uses. Federal excise tax is typically imposed on the sale of items such as tobacco, fuel, alcohol, tires, heavy trucks and highway tractors, and airline tickets. Many excise taxes are placed in trust funds for projects related to the taxed product or service, such as highway or airport improvements.

An excise tax may be imposed at the time of import, sale by the manufacturer, sale by the retailer, or use by the manufacturer or consumer. Some excise taxes are collected by a third party, which then must remit the taxes to the IRS in a timely manner. An example of a third-party collector of an excise tax is a commercial airline, which collects the excise taxes on airline tickets that are paid by airline passengers. Businesses that are subject to federal excise taxes must generally file Form 720, Quarterly Federal Excise Tax Return. Certain excise taxes, such as those owed to the Alcohol and Tobacco Tax and Trade Bureau, are reported on different forms.

Income Taxes

Income taxes must be paid on business profits. How that tax is paid depends on how the business is structured. Most small businesses are pass-through entities, which means that the business’s profits or losses are passed through to the owners and reported on their personal income tax returns.

Partnerships and multi-member limited liability companies (LLCs) generally file a partnership business tax return for informational purposes only. The individual partners and LLC members pay income taxes for their share of the income of the business. Note, however, that some LLCs elect to be treated as a corporation for tax purposes.

An S corporation files an S corporation income tax return for the business. Like a partnership, an S corporation’s net income is divided among the owners, who pay tax on their share of that income individually.

A sole proprietor reports business profit or loss on a separate schedule filed with the sole proprietor’s individual income tax return. Unless an election to be treated as a corporation has been made, the owner of a single-member LLC also reports the company’s profit or loss directly on the owner’s return.

Social Security and Medicare Taxes

Employers must generally withhold Social Security and Medicare taxes from their employees’ wages and must pay a matching amount. Employers must also withhold the 0.9% additional Medicare tax on employee wages and compensation that exceeds a threshold amount.

Self-Employment Taxes

Self-employment tax is a Social Security and Medicare tax primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes paid for other workers.

Federal Unemployment Tax

Employers are required to report and pay the Federal Unemployment Tax Act (FUTA) tax separately from federal income taxes and Social Security and Medicare taxes. FUTA tax is not withheld from wages; employers are responsible for paying the tax.

Business owners should exercise extreme care when it comes to paying taxes since any mistakes on their part could result in significant penalties. For assistance, consult a tax professional.

How to Maintain Customer Records in QuickBooks Online

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qb-resolutionsYour customers are your company’s lifeblood. Make sure their records are thorough and up-to-date.

When companies buy other companies, what’s often considered the most critical asset? The customer list. When a business is damaged and data possibly lost, which set of records do they most hope to recover? The customer list.

You probably spend most of your time in QuickBooks Online working with transactions and reports, but your customer records deserve equal time. If they’re incomplete or otherwise not maintained well, you lose time filling in the blanks when you’re trying to complete a task that requires complete customer profiles. Your searches and reports may not tell the whole picture. Your relationships can suffer, and you may miss out on sales opportunities.

QuickBooks Online provides excellent tools for creating and maintaining comprehensive customer and sub-customer records. Here’s a look at how it all works.

Moving Your Customer Data In

There are two ways to create customer records in QuickBooks Online. If you have an existing database in Outlook, Excel, Gmail, or Google Sheets, you can import it. This will save you an enormous amount of time, but it’s a challenging process. You select the file you want to import, and then you have to “map” it by matching the fields in your database to fields in QuickBooks Online. You’ll likely need our help with this.

Quickbooks online tips

To import a customer file into QuickBooks Online, you’ll have to “map” its fields. We can help you with this.

Your other option is to enter records manually. This is time-consuming, but the more information you can include about your customers from the start, the better. You can always edit your records to add, delete, or modify what you originally entered.

To get started, hover over Sales in the toolbar and click on Customers. Then click on New Customer in the upper right corner to open the Customer information window. The only field you’re required to complete is Display name as. You may want to do this if you have a new customer on the phone and you want to concentrate on the conversation. You can take notes about their contact information and fill in the record later, when you’re off the phone.

But wherever possible, as we’ve already said, complete as many fields as you can. You’ll enter name and billing and shipping address and phone number(s) on the opening screen. You can also supply contact details like fax number and website.

Creating Sub-customers

You’ll notice a checkbox that says Is sub-customer. QuickBooks Online lets you “nest” related records under the “parent” record. This can be an actual customer, but many people use it to document jobs they’re doing for the customer. So if you’re a contractor, for example, you might have sub-customers like Sun deck and Spa.

If you want to set up such a record, enter the job name and click in the box next to Is sub-customer. Two fields will open below that allow you to select the parent customer and to indicate the sub-customer’s billing status. The remainder of the fields will automatically fill in with the parent customer’s contact information.

Quickbooks Online tips

You can set up jobs as sub-customers in QuickBooks Online.

Supplying Details

When you’re setting up individual customers, you should add as much detail as you possibly can to each record, beyond basic contact information. QuickBooks Online’s record templates display a number of tabs running horizontally across the window. The most important of these are:

  • Tax info. Are the customers taxable or exempt? If taxable, what is his or her Default tax code? (If you haven’t set up sales taxes yet and need to, please let us help. It’s complicated.)
  • Payment and billing. Do they have preferred payment and/or delivery methods? Will you be assigning default payment terms, like Net 30 or Due on receipt? What is their Opening balance? If they’re brand-new customers who have never ordered from you, this will be $0.00. If they’re existing, active customers, enter any outstanding balance they have with you as of the date that you enter. This must be correct, to avoid any problems with the customers’ ongoing balances. Questions? Ask us.

Other tabs here are self-explanatory. When you’ve entered everything you can, click Save. The new record will now appear in the Customers list and will be available to select from the drop-down list in transactions.

There will be times when you have to refer back to these forms to answer questions. By maintaining detailed, accurate customer records, you’ll be ready to respond. If you have questions about any of the information requested, or about other elements of QuickBooks Online that are puzzling you, please contact us so we can set up a consultation.

How Using a Bookkeeper Can Help Run Your Business

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Largo CPA FirmA bookkeeper for your small business is not a luxury; it’s a necessity. You must always be aware of what is happening to your business on a basic financial level. Lacking that knowledge could hinder your business’s growth and success. Read more to learn what a bookkeeper does and how outsourcing your company’s bookkeeping tasks could help your business succeed.

What Bookkeepers Do

Bookkeepers are responsible for a businesses’ accounts. At the most basic level, a bookkeeper keeps the general ledger by recording cash flow. However, bookkeepers can also create valuable reports such as financial statements, prepare bank deposits, oversee payroll, approve a purchase, create invoices, and monitor delinquent accounts.

Outsourcing Bookkeeping is a Practical Choice

While bookkeeping was once a tedious and grueling task due to manually recording every transaction by hand, technology has advanced the process to make bookkeeping much more straightforward and streamlined. It is now possible to outsource your business’s bookkeeping to an online bookkeeper. This approach is a cost-effective alternative to hiring an in-house bookkeeper.

Why Outsourcing Bookkeeping is Important for a Small Business

Bookkeeping is a critical part of any business for legal and financial management reasons. Accurate records allow you to assess the financial health of your business at a glance. It also assists your accountant when it is time to analyze financial data and recommendations for spending and strategize for future growth. Additionally, it’s vital to have accurate bookkeeping practices in place if you ever need to respond to the IRS regarding inquiries or audits.

The following are some of the benefits of outsourcing bookkeeping for your small business:

1. All financial transactions are accurately recorded.

Every small business owner must know where cash comes from and where it goes. Bookkeeping makes this crystal clear. For example, you can quickly determine how much your business spent on office supplies or how lucrative a given client or customer is for your business. And don’t overlook the importance of accurate records when it comes to resolving discrepancies like those that can occur between employees, vendors, or customers.

2. Spending analysis helps streamline budgeting for your business.

Expense analysis allows you to adjust your businesses’ budget quickly and easily. You can examine financial statements to determine the products, services, and industries that help you generate maximum revenue. You can also identify expenses that were once justifiable but no longer serve your business plan. Perhaps your marketing in the local newspaper generated income at one point, but online advertising is more profitable for your company in today’s market.

3. Filing taxes is easier.

Tax time is stressful for any business. However, bookkeeping eliminates the need to sift through piles of receipts, invoices, and documents to gather information. Proper bookkeeping ensures that information is organized all year long.

4. Your records are accurate in the event of an IRS audit.

While the chances of an audit for a small business are low, there’s always the chance of an audit no matter how compliant your business is with current tax laws. Thorough bookkeeping is your first line of defense when and if the IRS decides to audit your company. Organized bookkeeping records allow you to answer the IRS’s questions about any financial aspect of your business.

5. Cash flow is managed correctly and accurately.

The top concern of any small business is cash flow. By outsourcing your businesses’ bookkeeping, you mitigate the challenge of monitoring cash flow because you keep track of cash moving in and out of your business. At a glance, your bookkeeper can tell you how much profit your business generates and if it’s sufficient for paying your business expenses. This benefit can save you headaches in the long run because it allows you to be proactive, not reactive, by garnering a line of credit or seeking other assistance if needed.

Realizing the importance of bookkeeping in running your business can provide peace of mind that allows you to do what is most important – manage the day-to-day operation of your business. Contact us now for reliable bookkeeping services.

An Executor’s Tax Responsibilities

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It is said that the only certainties in life are death and taxes. That expression may ring particularly true to anyone who has served as the executor of an estate. Nearly all estates have to file an income tax return for the decedent, and the executor also may have to file one or more income tax returns and an estate tax return for the estate. Read on for more information related to these requirements.

Decedent’s Final Income Tax Return

The executor is responsible for filing the decedent’s final income tax return (Form 1040 or Form 1040-SR). Because most individual taxpayers file on a calendar-year basis, the final tax year will typically cover the period from January 1 to the date of death. The final return is generally due on April 15 of the year following the date of death. An automatic six-month extension may be obtained by filing Form 4868 and paying any tax due with the extension.

The executor may file a joint income tax return with the decedent’s surviving spouse, provided the spouse has not remarried by year-end. Filing jointly can offer certain tax advantages but may not be the best option in all cases.

Estate Income Tax Return

The IRS considers the decedent and the estate to be separate tax entities. If the estate generates $600 or more in gross income, the executor is required to file an income tax return (Form 1041) for the estate. Before filing, the executor must obtain a tax ID for the estate.

The executor may elect to use a calendar or fiscal year for the estate. Careful consideration should be given to this decision because, in some cases, the executor may obtain additional tax deferral for a beneficiary by electing a fiscal year that ends after the close of the beneficiary’s taxable year.

Estate Tax Return

Because the estate tax exclusion amount is high — $11.7 million for 2021 — many estates will not owe any federal estate tax. The exclusion amount is typically adjusted for inflation every year. However, the exclusion amount is scheduled to drop to $5 million, as adjusted for inflation, in 2026.

Even where no estate tax is due because the exclusion amount is at the current high level, the executor may want to file an estate tax return if the decedent was married. That’s because current law permits a married person’s executor to make an election to pass the unused exclusion amount to the surviving spouse for eventual use on his/her own estate tax return.

In general, this “portability” election must be made on a timely filed estate tax return of the first spouse. Therefore, if there is any chance that the surviving spouse’s entire estate (including the amount passed from the first spouse) will exceed his/her individual exclusion amount, the executor for the first spouse will want to file an estate tax return to make the portability election.

The duties of an executor are complex and time consuming. The assistance and input of a professional experienced in taxes and estate planning can be invaluable when attempting to settle an estate.

How Does QuickBooks Online Handle Mobile Expenses?

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Largo CPA FirmIf you purchase several items and services away from the office, QuickBooks Online can help you record them while you’re out and about.

QuickBooks Online’s mobile app, available at the Apple App Store and Google Play, can do many of the same tasks that it performs on your office desktop. You can, for example:

  • Check account balances.
  • Add and edit estimates, invoices, and sales receipts.
  • Add and edit customers, vendors, products, and services.
  • Record invoice payments.

One of the most common uses of the app, though, is the recording of expenses. Rather than coming home from a trip with your briefcase stuffed full of receipts and notes about purchases you made, you can document them on the road using your mobile device. When you get back to the office and log on to QuickBooks Online, they’ll all be there.

How It Works


You can snap a photo of a receipt with your smartphone and attach it to an expense you record in QuickBooks Online’s mobile app.

Open your QuickBooks Online mobile app and click the plus (+) sign at the bottom, then tap the Expense icon. The New Expense screen will open. If you have a paper receipt, lay it flat on a table in a well-lighted area. Click the camera icon and then the Take Photo link. If you took the picture outside of QuickBooks Online for some reason, you’d select the Choose Existing link. Your device’s camera will open, and you’ll see four squared corners on the edges of the screen.

Hover your device over the receipt. You’ll need to position the camera so the receipt area that you want captured appears within the four corners. QuickBooks Online will provide advice along the way to help you do this. When you’re in the right place, you’ll see the phrase, Great! Snap the pic. Click the shutter icon below, and your device will snap the photo and display it. If you want to use it, click Use this photo (if you want to try again, click the X in the upper left of the screen).

QuickBooks Online will open the New Expense screen. You’ll see a miniature version of your receipt in the upper left corner. Looking at your original version—it will be too small to see here—fill in the blanks with the data from the purchase. Be sure to click the Billable button if you can bill someone else for it. Make any notes you’ll need in order to remind yourself of the transaction, and Add a Split if you need to divide the transaction between categories, customers or vendors, or billable status. Click Save when you’re done.

Automatic Synchronization


Once you’ve entered an expense in QuickBooks Online’s mobile app, it will be synchronized with your desktop, browser-based version.

Of course, no duplicate data entry is required once you’ve entered a receipt in the QuickBooks Online mobile app – the two versions always update each other.

Once you’re back at your desktop, on the browser-based version of QuickBooks Online, click Expenses in the toolbar to open the Expense Transactions screen. You should see the transaction you just created on your mobile device first in line on the list that displays. Click View/Edit at the end of that line to see it. Look toward the bottom under Item Details to see the link to an attachment that contains the photo you snapped of the receipt.


The record of the expense you entered on your mobile device will contain a link to an attachment that contains the photo of your receipt.

Of course, you don’t have to take a picture of your receipt with your mobile device. You can simply enter the details of your expense and Save the record.

QuickBooks Online’s mobile app can help you save time and improve the accuracy of your work done away from the office. As we mentioned earlier, the app is capable of doing much more than simply recording receipts. We’d be happy to run you through its pieces to make sure your remote accounting work is done correctly.

Payroll Taxes: Who’s Responsible?

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payroll conceptAny business with employees must withhold money from its employees’ paychecks for income and employment taxes, including Social Security and Medicare taxes (known as Federal Insurance Contributions Act taxes, or FICA), and forward that money to the government. A business that knowingly or unknowingly fails to remit these withheld taxes in a timely manner will find itself in trouble with the IRS.

The IRS may levy a penalty, known as the trust fund recovery penalty, on individuals classified as “responsible persons.” The penalty is equal to 100% of the unpaid federal income and FICA taxes withheld from employees’ pay.

Who’s a Responsible Person?

Any person who is responsible for collecting, accounting for, and paying over withheld taxes and who willfully fails to remit those taxes to the IRS is a responsible person who can be liable for the trust fund recovery penalty. A company’s officers and employees in charge of accounting functions could fall into this category. However, the IRS will take the facts and circumstances of each individual case into consideration.

The IRS states that a responsible person may be:

  • An officer or an employee of a corporation
  • A member or employee of a partnership
  • A corporate director or shareholder
  • Another person with authority and control over funds to direct their disbursement
  • Another corporation or third-party payer
  • Payroll service providers

The IRS will target any person who has significant influence over whether certain bills or creditors should be paid or is responsible for day-to-day financial management.

Working With the IRS

If your responsibilities make you a “responsible person,” then you must make certain that all payroll taxes are being correctly withheld and remitted in a timely manner. Talk to a tax professional if you need to know more about the requirements.