Tax savings and tax reduction:What kind of simple accounting system should I buy for my small business for tax purposes? Can Quicken™ and QuickBooks™ use result in Real Tax Savings for 2013?

What kind of simple accounting system should I buy for my small business for tax purposes?  Can Quicken™ and QuickBooks™ use result in Real Tax Savings for 2013?

 

By Jeffrey Brooks, CPA, CFP, MBA for Jbrooks Wealth Advisors, PC, a Professional CPA and CFP Firm  jeff@jbrookswa.com  602-292-2009  Please consult with your professional tax CPA regarding your specific circumstances!

 

 

Our goal is to be the best CPA firm in Phoenix and in Arizona!   We understand tax reduction!  In previous issues of this blog, we have explained how clients can write off a large portion of their auto through Section 179 and bonus depreciation.

 

For some small corporations or partnerships with no bookkeeping skills, Quicken™ may be a better choice than QuickBooks™.

 

Some clients do not want to spend a lot time and money on accounting software. They want to just to:

  1. Give the CPA a set of books that can be used for Phoenix tax planning and preparation
  2. They want to get a refund back through tax savings and avoid a large amount of money on April 15th
  3. Avoid their CPA having to redo the books

 

We are a Phoenix tax accountant and tax CPA accounting firm that believe there is a “better way” that most CPAs have never thought about.

 

I have changed the name of the client for confidentiality reasons but I wanted you to see some proactive actions that could help reduce your income tax. I will call the client “Bob” :

 

  1. Bob: “Jeff, My plan is to do a Year to date expense report reimbursement using your tax savings strategy, then go month- to month.  Although I could take the YTD one and split it into Q1 Q2 and now start on Q3”. Bob, there are many Phoenix CPA firms and I appreciate your confidence in our firm! I like the year to date and then monthly from now on. Please make sure to reimburse yourself by 12-31-13 for December business deduction expenses paid personally.  (Reader:I have developed a tax savings proprietary system to obtain a reimbursement from the client’s corporation or partnership based on a  percentage of client’s personal expenses including home expenses).  In an earlier email with Bob, I recommended that he take advantage of Arizona Tax Credits. The benefit of these tax credits is you actually get back more money than you contribute to a private school, public school, working poor and military family.
  2.  Bob  “Obviously submitted for reimbursement are items paid by personal check”. Bob, yes. You do not want to wire transfer the money from your corporation to your personal bank account.
  3.  Bob,”Where do I account on the books for home office expense purchased on a company credit card – e.g. New computer equipment purchased ?”  Bob, your time should be focuses on servicing existing customers and selling to new customers.  The cheapest Quicken™ will cost you the least amount of  money and time. There is no need for accounting adjusting journal entries and understanding accounting that is required by QuickBooks(tm)   Since you and your wife are the only shareholders, you wear a lot of hats. You do not need to worry about being an accountant. Bob, If you use Quicken™, you will not have a balance sheet so you will have to differentiate balance sheet accounts by putting a “Z” in front of the account.  ZFFE for Furniture, Fixtures and Equipment. If QuickBooks™,  you have to set up a new asset that is called furniture, fixtures and equipment  or if you wish, you can have separate balance sheet accounts for each account. I favor simplification and having only one account.
  4. Bob, “ Record it here but DB CR it as line items so noting was paid for that way?  Bob, You will not need to DR or CR since you are not making an adjusting journal entries but just paying a bill.    I think you are saying that the business credit card was used.  QuickBooks™  and Quicken ™  have a “split” where you can using multiple expense types and  break down the payment on credit card  by the type of asset or expense.  Here is an example of a “split”.  I have a Wells Fargo business credit card that I rarely use so it would be a good example.  Here is a  hypothetical example: I am ready to pay the August bill today for $81.  I see two items on the credit card.
  5. ABC restaurant to buy a meal for a potential client  for $45
  6. I buy office supplies from Wal-Mart for $36

I would classify on QuickBooks™ or Quicken™ the $81 payment  to Meals and Entertainment $45 and  office supplies $36.  Since I am paying more than one type of expense, this is called a split.  Bob, Please let me know if you have any questions. Thank you very much! Jeff

 

 

“ Jeff, My wife had an interesting question – would there be any better tax benefit in having my corporation XYZ versus Bob make charitable contributions to church ?”  Bob, the only way it would be a benefit for XYZ  to make the payment as an Advertising expense is if  XYZ gets recognition in the church year book or underwrite an event. If not, it is always better to pay for the charity personally.  I recommend that you ALWAYS try to get an advertising expense deduction through the busines instead of a charitable donation because there is now the 2013 tax act that increases taxes when your total adjusted gross income is over a certain dollar amount.

  1.  “ Jeff,  I had been a little confused by where to put home office expense entries  vs which ones would end up on the end of month expense report. “  Bob, those on the monthly Excel expense report that are paid for personally  that relate to the corporation’s use of your home with a percentage being reimbursed by your corporation getting classified to an expense called “Office Admin Expense”. Expenses paid by the business will NOT go on this Excel spreadsheet but will be paid directly by the corporation to the vendor or credit card company.  Those business use expenses paid personally that do not relate to the use of the home by the corporation  will be classified to the correct expense category and will show up on the Excel Spreadsheet.  For example, any gasoline you paid for personally for  driving to San Diego (where you have some personal and some business purpose), will be included on the Excel spreadsheet and will be classified to auto expense.
  2.  “ Jeff, Let’s say I bought a computer for $100  On XYZ credit card that XYZ paid at end of month.

I record the expense as ZFFE” .    Bob, if you are using Quicken™, you would use  ZFFE, If QuickBooks™ you would choose an “asset” type account and would classify to an account you would set up called furniture, fixtures and equipment.

 

  1. “Jeff, When I submit monthly home office expense reimbursement, there will be no entry for $100 computer because the company paid it directly”. Exactly correct! Yes!!
  2.  “Jeff, so the reimbursement must coincide with personal check use for legitimate expenses.” Bob, Exactly correct! Yes!!

Here are my additional comments to Bob. The ONLY items on your Excel sheet would be for expenses that you pay personally because the account has to be in the personal name or because there is some personal portion of the dollar amount. I used the example of the Hawaii trip where a portion of the travel (i.e. hotel) were for personal days.  Of course, for the Hawaii trip, you could put the entire amount on a business credit card and then when you pay the credit card bill, you would use the “split” on QuickBooks™ or Quicken™ and show the personal portion as a “distribution” or “draw” for your  S corporation. The “distribution” or “draw” account would be shown on QuickBooks(tm) as an “equity account” and on Quicken as “Zdraw”.

 

“Jeff, I I found the guard dog line item in some research as tax deductible, but admit it sounds like a joke.”  Bob It could be used as long as there is valuable product that a thief would try to steal.   You probably remember Jim Croce’s song about “Bad Leroy Brown, madder than a junk yard dog”??

 

 

 

 

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About Jeffrey Brooks

Jeffrey Brooks, CPA, CFP, MBA since 1976 has specialized in helping clients save significant taxes, help businesses increase their cash flow, revenues and profits while increasing their control and satisfaction. Jeff and his accounting firm sincerely cares about the happiness of his clients.

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JBrooks Wealth Advisors, PC.

Certified Public Accountant
Address: 4647 N 32nd Street, Suite B245
Phoenix, Arizona 85018
Phone: 602-292-2009
Email: jeff@jbrookswa.com