Thursday, March 17, 2011

Tax Tip of the Week--Do you Barter??

Bartering has become more prevalent with today’s turbulent economy and businesses desiring to increase resources with decreased working capital.

The act of Bartering is when you exchange goods and/or services in lieu of of money. Even if you barter for someone else’s products and/ or services, you will need to report the fair market value of that product and/or service you received on your tax return.

Before you barter, you should familiarize yourself with the tax requirements, and not assume that because not money exchanged there are no tax liabilities for bartered income. Barter dollars or trade dollars are identical to real dollars for tax reporting. You may be subject to liabilities with your income tax, self-employment tax, employment tax, and excise taxes or on the other hand, your bartering activities may result in capital losses or gains.

In the event that you do engage in barter transactions know that as wonderful as the offer may sound initially, as you consider your full financial picture, you may or may not find it beneficial for you to engage in bartering activities.

For help with your business accounting or tax related needs, contact the professionals at www.EnvisionTaxandAccounting.com

Saturday, March 5, 2011

Business Tip of the Week!


Get in the habit of keeping good records and holding on to your receipts. Many business owners know they should, but don't practice good record keeping. Get it together  because it is a very important part of the growth and maintenance of your business. Keeping good records will help you:

1.  Monitor the progress of your business
You need good records to monitor the progress of your business. Records can show whether your business is improving, which items are selling, or what changes you need to make. Good records can increase the likelihood of business success. 

2.  Prepare your financial statements
You need good records to prepare accurate financial statements. These include income (profit and loss) statements and balance sheets. These statements can help you in dealing with your bank or creditors and help you manage your business. Don’t rely primarily on pre-installed software on your computer, seek help from a tax professional that specializes in business taxes and bookkeeping. Its better to invest a little extra now to have your records maintained properly than to risk not having properly formatted records later.

3.  Identify source of receipts
You will receive money or property from many sources. Your records can identify the source of your receipts. You need this information to separate business from non-business receipts and taxable from nontaxable income. 

4.  Keep track of deductible expenses
You may forget expenses when preparing your tax return unless you record them when they occur.

5.  Prepare your tax return
You need good records to prepare your tax returns. These records must support the income, expenses, and credits you report. Generally, these are the same records you use to monitor your business throughout your business cycle.

6.  Support documents for info reported on tax returns
You must keep your business records available at all times for inspection by the IRS. If the IRS examines any of your tax returns, you may be asked to explain the items reported. A complete set of records will speed up the examination.

7.  Retain your support documents
The length of time you should keep a document depends on the action, expense, or event the document verifies. You must keep your records as long as they may be needed to prove the income or deductions on a tax return.

-You must keep all records of employment taxes for at least four years.

-Keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition. You must keep these records to figure any depreciation, amortization or depletion deduction and to figure the gain or loss when you sell or otherwise dispose of the property.

-When your records are no longer needed for tax purposes, do not discard them until you check to see if you have to keep them longer for other purposes. Say for instance, your insurance company or creditors may require you to keep them longer than the IRS does, so check with these individuals before discarding your documents.

Final thought:...being organized is the key. Create a system that is functional for your to quickly set aside your important documents that are needed for good record keeping. It can be a simple as using a shoe box to safely store your records & receipts :)