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Author: Jake Snelson

Tax Refund

Do Small Businesses Get Tax Refunds?

In 2021, the average tax refund was $3,039. Small potatoes? Hardly, especially given the economic downturn of the last couple of years.

New small business owners may be hopeful for a tax refund, a small gift to invest back into their operations. Not all types of small businesses can receive tax refunds, however. Is yours one of them?

Do small businesses get tax refunds? It’s one of the most common questions we receive—in the same way that there are many types of taxpayers, you’ll find there are more than a few types of small business tax entities.

Which Businesses Are Eligible for Refunds?

In general, your tax refund eligibility depends on whether you’ve paid more taxes than you owed, at least as an individual. While the same is loosely true for businesses, only C-corporations are entitled to tax refunds in their own rights.

The business entity you choose may influence your tax eligibility significantly, so we recommend choosing yours wisely from the outset. If your entity type passes your income directly onto you, the owner, you’ll be the one receiving the refund on its behalf. Sole proprietorships, partnerships, S-corporations, and limited liability companies (LLC) are all beholden to this convention and, accordingly, are not eligible for tax refunds on their own in any capacity.

If your business is a C-corp, all your revenue is taxed separately from your personal finances. C-corporations that have overpaid payroll or sales taxes, for example, are likely to see a tax refund at the end of the year.

Different Types of Taxes Businesses Pay

Small businesses pay many types of taxes in the United States. Among them:

  • Federal taxes
  • State taxes
  • Local taxes
  • Self-employment taxes
  • Payroll taxes
  • Income taxes, both state and local
  • Excise taxes
  • Property taxes
  • Sales taxes

How to Maximize Your Tax Refund

As a small business owner, there are plenty of ways you can maximize your tax refund every year:

  • Review your bank and credit card statements
  • Prepay upcoming expenses
  • Check for tax credits you may be entitled to
  • Offer matching 401(k) benefits
  • Reward employees generously
  • Check for a home office deduction
  • Track your mileage and other expenses

Business tax credits may be particularly lucrative for your small business. You may also benefit from other subsidies, such as research and development tax credits, credits designed to assist in employee leave, and work opportunity tax credits for those who hire marginalized individuals.

Your Small Business Accountants and Bookkeepers

Do small businesses get tax refunds? The short answer: It depends. For the full answer, consider Vyde for all of your accounting needs.
It’s a lot of ground to cover; that can’t be denied. If you’re an entrepreneur looking for the best possible outcome, we would love to hear more about your story and assist in any way we can.

home office

Taking Advantage of the Home Office Deduction

Are you self-employed and using your home for business? If so, you may qualify for the home office deduction. Here at Vyde, we want to help all of our clients stay compliant, stay organized and save on taxes. Here are some guidelines and tips to help you take advantage of your home office to maximize your tax savings:

Can you claim a home office deduction?

There are requirements you need to meet to qualify for a home office deduction: Do you use an area of your home regularly and exclusively for business? Are you self-employed?

If you answered yes to both questions, you likely qualify. It’s important to note your workspace does not need to be a separate room or even an office to qualify. For example, if you use half of your basement to create and ship custom word-working projects and that space is dedicated to your business, you could claim a home office deduction for that workspace.

How do you calculate your home office deduction?

There are two ways to calculate a home office deduction: the simplified and standard methods. For either option, you will need to know the square footage of the dedicated workspace in your home.

Simplified Method

To calculate the home office deduction for the simplified method, multiply the square footage of your office space by $5. That’s it!

Is your home office 300 square feet? Great! The IRS gives a $5.00 deduction per square foot for any space that is used exclusively for business (maximum of $1,500 for a 300-square-foot space). For example, if you are using an office that is 150 square feet, with the $5.00 deduction, that amount would be $750.00.  It’s that simple!

Standard Method

With this method, you deduct the actual expense of your office. For expenses that only impact your office (such as paint, office decorations, repairs to your office, etc.) you can deduct 100%. For other expenses (such as depreciation, rent or mortgage, property taxes, home insurance, utilities, maintenance, and general repairs), you can deduct a percentage of those expenses. To calculate this percentage, divide the square footage of your office by the square footage of your home. This tells you what percentage of your home your office takes up. For example, if you have a home that is 2,000 square feet and a home office that is 200 square feet, you could deduct 10% of your utilities, rent, repairs, etc.

Still have questions?

At Vyde, we help businesses save time, money, and stress by taking care of their bookkeeping and taxes. If you have additional questions about the home office or other deductions, our team would love to help! That’s our specialty. Reach out to our team or try our services for free to schedule a consultation with one of our accountants.

17 Reasons Why Bookkeeping Is Important for a Small Business  

As a small business owner, you already have a lot on your plate. And while bookkeeping is integral to any business, most business owners aren’t experts. A simple mistake can lead to loss of revenue and investors, and tax filing errors.

Accurate bookkeeping can mean the difference between success and failure for many businesses. So what is bookkeeping, and why is bookkeeping important for a small business? 

What Is Bookkeeping? 

Before delving into why bookkeeping is important for a small business, a core definition is in order. Bookkeeping is creating, organizing, and maintaining a business’ financial records. It is how you track your business expenses and revenue, and is crucial to tax filing, investor reporting, decision making, and more. 

Why is bookkeeping important? Let’s take a closer look at 17 reasons why bookkeeping is important for a small business:

1. Organize Your Business Records

Codifying financial information is perhaps a bookkeeper’s most vital role in your business. Regardless of what’s happening in your business or industry, you need those records to make decisions, interest investors, apply for loans and grants, budget effectively, monitor your revenue and losses, and more. 

2. Make Decisions Easier

Another reason why bookkeeping is important is it impacts your ability to make sound business decisions. Having a clear understanding of your financial records and projections helps you make decisions involving: 

  • Loans and other financing opportunities
  • Identifying and hitting company goals 
  • Hiring and firing employees, as well as their wages and bonuses 
  • Taxes, cash flow, and grants

And those are just a few examples. With a bookkeeper, you can evaluate your records using accurate data to help you make informed decisions. 

3. Create Accurate Financial Records

Your business decisions are only as good as the records you have on hand. It can be difficult for business owners to individually track every expense, loss, and profit. Maintaining accurate records requires a lot of work, even for small businesses. 

For example, do you know how much your business has spent on payroll this year? How about the amount spent on inventory so far this year? Do you know where all your receipts are? 

4. Tax Filing

Business taxes are complex, time-consuming, and can be stressful when trying to do them alone. Bookkeeping services that include tax filing take a lot off your plate come tax time. An expert will know things such as:

  • What forms need to be filed
  • Any deductions or credits your business qualifies for
  • Potential tax write-offs
  • Accurate data for revenue and expenses

If your taxes are off in any way, you’re more likely to be audited. If that happens, you’ll need to supply the IRS with the records your bookkeeper will have readily available.  

5. Budgeting

A bookkeeper provides you with organized and accurate financial records. You can review those records to help budget your expenses, find areas where you can save, see where a supplier may have increased costs, and more. 

6. Attract Investors

Many small businesses need funding, especially when first starting out. One of the simplest ways to receive funding is through investors. But investors require an overview of your business and finances before they’ll want to invest. Not having up-to-date records will likely turn away potential investors. 

7. Better Cash Flow

Bookkeeping can improve a business’ cash flow in many ways. For starters, you’ll be able to manage vendors, customers, and employees more efficiently. That means you can find ways to cut costs and ensure your customers are receiving services on time.

8. Get an Accurate Overview of Your Business

Bookkeepers don’t just provide you with a look at your financial records. You get an accurate overview of your business’ entire operation, including revenue, profit and loss margins, and so on. 

9. Easier IRS Audits

Another reason why bookkeeping is important is to protect your business in the event of an IRS audit. With detailed books, the odds your business will be audited are lower—but it can happen. Should you be audited, you’ll need to provide the IRS with answers to any financial questions they have and provide accurate records. 

10. Easier to Set Business Targets

The goal of every small business is to grow, but that’s a challenge if you have poor financial records. Bookkeeping provides accurate data, so you’ll have an easier time setting business goals rather than making guesses that could leave you disappointed. 

11. Meet Government Regulations

You must comply with federal, state, and local business regulations, including following tax codes, antitrust regulations, and state licensing requirements. An accurate overview of your business will help you ensure your business stays within government regulations.  

12. Get Extra Peace of Mind

With so much riding on accurate records and overviews, a bookkeeper provides peace of mind and reduces the risk of failing, being audited, missing business opportunities, and so on. You’re already spinning a lot of plates as a business owner; the last thing you want on your mind is wondering whether your books are up-to-date and accurate. 

13. Proper Reporting to Investors

Once you’ve secured investors for your business, you’ll need to report to them routinely. Investors want to know whether or not a company they’re supporting is making a profit and how it performs overall. That’s where good bookkeeping records come in. 

14. Track Business Growth

Creating achievable business goals won’t matter if you can’t accurately track your business’ growth. But with accurate overviews and financial records from a bookkeeper, you’ll see the growth over time and be able to celebrate milestones and adjust your goals as necessary. 

15. Meet Proper Record Laws

Businesses are required by law to maintain accurate records. For example, the IRS requires companies to keep employment tax records for at least four years. Additionally, you’ll need to provide your income and deduction records on your tax return. 

16. Learn from the Experts

An easily overlooked reason why bookkeeping is important for a small business is that it gives you the chance to learn from an expert. If you’re interested in knowing how the books work, you can get a better overview of your records, how they are organized, and the data used for them. 

17. Ensure You’re Not Missing Valuable Business Deductions 

Taxes are complicated, and tax laws can change from year to year. That includes business deductions which reduce your tax responsibilities. A bookkeeper will make sure you never miss out on these profitable opportunities. 

Let Vyde Handle the Books 

Now that you know why bookkeeping is important, let us handle the books. Vyde lets you choose the plan that best fits your business at an affordable price. So whether you need help catching up on your books or you’re searching for a reliable ongoing small business booking and tax service, trust Vyde. Don’t wait. Contact Vyde to assist you in all of your small business taxes needs.

Save for Taxes

Tax Guide for Small Businesses: How Much Should You Save for Taxes?

Tax Guide for Small Businesses: How Much Should You Save for Taxes?

Running a small business has its pros and cons. It can be incredibly freeing to be your own boss, but doing your own taxes? That can be intimidating. 

All businesses need to pay annual taxes. If your small business expects to owe more than $1,000 in federal taxes, you’ll also need to pay quarterly taxes. There are several ways to calculate how much (and when) you need to pay. The type of business you are running and the state you live in will affect what you owe.

Let’s look at this in more detail. 

Which Taxes Do I Have to Pay? 

If you are self-employed, you are subject to the following taxes:

Self-Employment Tax

The federal government sets the self-employment tax at 15.3%. This applies to all profits made by self-employed individuals and businesses. 

Federal Income Tax

You will need to pay federal income tax in addition to the self-employment tax. The percentage you must pay in federal income tax depends on which income bracket you fall into. The percentages range from 10% to 37% and are determined by income and your filing status (whether you are a single filer, married and filing jointly, or the head of household). 

Rate Single Filers Married Filing Jointly Head of a Household
10% $0 – $10,275 $0 – $20,550 $0 – $14,650
12% $10,275 – $41,775 $20,550 – $83,550 $14,650 – $55,900
22% $41,775 – $89,075 $83,550 – $178,150 $55,900 – $89,050
24% $89,075 – $170,050 $178,150 – $340,100 $89,050 – $170,050
32% $170,050 – $215,950 $340,100 – $431,900 $170,050 – $215,950
35% $215,950 – $539,900 $431,900 – $647,850 $215,950 – $539,900
37% $539,900+ $647,850+ $539,900+

State Income Tax

Not all states have income tax, but the majority do. The amount varies from 3% in Pennsylvania to 13.3% in California. You’ll need to look up your state’s income tax laws.

State Sales Tax 

Every time your business sells a product, it is subject to state sales tax (for the 45 states that require it). When you charge your clients for the sale of products, you should collect sales tax. 

In most states, you do not need to collect sales tax for the sale of services, but check with your state’s specific laws to make sure you’re compliant. 

Other Taxes

A few other common taxes you may need to pay are: 

  • Property Taxes 
  • Franchise Taxes
  • Excise Taxes

The best way to know which taxes you will need to pay is to contact a tax professional. 

How Much Should a Small Business Save for Taxes?

A common question small business owners have is: How can I know exactly how much I’ll owe until I file at the end of the year? 

The truth is that you won’t know with full certainty.

However, you don’t need an exact number, only a good estimate. The federal government allows you to make estimated quarterly tax payments throughout the year, and at the end of the year, you settle up with your annual filing. 

A Good Rule of Thumb

So, how much should your small business save for taxes? About 30-40% of your net income. 

This is a reliable rule of thumb because, on average small business owners make $66,000 or less, putting them into the 22% tax bracket or below. Add that to the 15.3% federal self-employment tax, and you’re probably right in the middle of that range. 

This doesn’t account for everything you’ll have to pay, and you may want to pay more based on your particular financial situation, but it’s a good place to start. 

What If I Don’t Pay Enough Taxes? 

If at the end of the year you file your taxes and discover you’ve underpaid, don’t panic. 

The government’s Safe Harbor rule states that so long as you paid 90% of the taxes you owed for the current year or 110% of the taxes you owed based on the earnings you made in the previous year, you will not be fined for underpaying your estimated taxes. 

This is why the 30-40% rule of thumb can be a safe way to help small businesses decide how much to save for taxes. However, you will need to pay whatever amount you still owe at the end of the year. 

If you underpaid your taxes (less than 90% of what you owed), you might be subject to fines and penalties. 

What If I Pay Too Much in Taxes? 

There’s no fine for paying too much. If you overpay, you’ll get a tax refund at the end of the year for the amount you’re owed.

Of course, overpaying can hurt your business indirectly, as it ties up money you could otherwise use to run day-to-day operations or make investments. Hiring a reliable bookkeeper, however, can prevent this from occurring. 

Get Professional Tax Help

Taxes don’t have to be stressful. With the help of expert tax and accounting professionals, tax season will just be another date on the calendar. 

Don’t wait, contact Mazuma to assist you in all of your small business tax needs.

Interested in Learning More?

Schedule a free consultation with our team!

How to Catch Up on Bookkeeping in 6 Simple Steps

Small businesses owners have many tasks to juggle just to be able operate their business efficiently. These tasks can include: daily operations, marketing, sales, products, processes, management and more. Those tasks can quickly become overwhelming for small business owners. While many day-to-day activities of owning a small business differ based on industry, bookkeeping does not.

Every business involves bookkeeping. Delayed or inaccurate bookkeeping can swiftly become a financial disaster for any business. How can you grow your business, secure capital, or even file taxes correctly without accurate and up-to-date books?

Suddenly, your finances are a mess. You’re wondering how you got here and how to catch up on bookkeeping fast. Sound familiar? Investing in bookkeeping services like Vyde streamlines your bookkeeping processes and helps you grow your business. You can also take steps now to start climbing out of the financial mess into which you’ve somehow fallen. 

Bookkeeping services aside, if you’re eager to learn how to catch up on bookkeeping alone, you can follow these six simple steps to get the ball rolling.

 

1. Gather Your Receipts

If your receipts are scattered all over, it’s time to call them in. You’ll need to gather all of the receipts, invoices, and other financial documents related to your business, including records like:

  • Bank statements
  • Credit card statements
  • Business expenditures
  • Business revenue
  • Customer accounts
  • Bad debt expenses
  • Vendor accounts
  • Receipts for non-deductible items
  • Deposits / ATM slips
  • Reconciled bank statements

Additionally, if you have customers who are overdue on their payments, we recommend sending out pending invoices to those customers to avoid potential bad debt expenses.

 

2. Reconcile Bank Accounts

Next, it’s time to double-check your records. Take time to sit down with your credit card and bank statements. These statements should always match your business records, vendor accounts, and customer accounts. 

If you find a discrepancy or if they don’t add up, locate the error before moving on to step three. Unfortunately, discrepancies and human error are common problems for business owners who aren’t using a team of experts. 

 

3. Separate Personal and Business Expenses

An essential step to knowing how to catch up on bookkeeping is to take measures to prevent your books from becoming messier in the future. If you already separate your personal and business expenses, great. You can move on to step four. If not, you’ll need to separate those expenses to keep your books up to date. 

We always recommend keeping personal and business accounts separate, including bank accounts, credit cards, and other finances. Accounts that are tangled together create unnecessary stress when doing your bookkeeping or filing your taxes. Additionally, you could potentially be held personally liable for any loans for your business. 

If you’re unsure what purchases or expenses qualify as a business expense, review what items the IRS considers to be in that category. 

4. Go Paperless 

Going paperless will make your life easier whenever it’s time to update your books. Now’s a good time to start because you’ve already gathered your documents and receipts. Create digital records of all these financial documents independently or by using online tools, software, or a Vyde account.

5. Collect Tax Documents 

Tax season is an important time of the year for all American workers, but most businesses need to file additional forms for the tax year.

Did you pay an employee or independent contractor this year? You’ll likely need to file at least one of the following forms:

Employees: W-2 Forms

You must file a W-2 for all your employees for the tax season.

Independent Contractors: Form 1099-MISC and W-9

You’ll only need to file additional forms for independent contractors that you paid more than $600 during the tax year.

Your independent contractors must complete a W-9 form and return it to you. This form contains their taxpayer information, which you’ll use on the 1099-MISC form. The 1099-MISC form is required to track your payments to independent contractors and ensures they receive their tax documents. Get your tax documents in order, including what you’ll need for the above forms. Then, once your bookkeeping is up to date, keep it updated.

6. Have Everything Reviewed by a Tax Professional 

Now that you know how to catch up on bookkeeping, we strongly recommend using a tax professional. A tax professional removes much of the stress of tax season and can verify your financial information related to your return.

Additionally, using a tax professional will ensure that your business receives the tax deductions to which you’re entitled. Most tax professionals provide guarantees in the event of an audit and will represent you, speaking to the IRS on your behalf.

Catch Up on Your Bookkeeping With Vyde 

As a business owner, you have plenty of obligations outside of bookkeeping, and you’re likely not an expert. You wouldn’t handle your legal work, so why go at bookkeeping alone?

Vyde provides flexible business solutions that fit your needs and budget. We make bookkeeping for small businesses simple so you can focus on what you do best. The peace of mind about bookkeeping and taxes that we provide help you save time, stress, and money along the way. Contact us to start on your path to getting caught up on your business’s bookkeeping today!

Need Accountant

Do I Need an Accountant for My Small Business?

Why do you need an accountant for your small business? Your business does not have a lot of cash flow or many employees making filing taxes easy, right?

As a small business owner you might think filing your own taxes on top of all the other tasks you juggle will be easy, but filing your own taxes is a huge responsibility for small business owners.

Take it from us, though: after a certain amount of progress as a company, doing your own business accounting isn’t likely worth your time, especially if your background isn’t in finance. The truth is that small mistakes in your finances can add up and may cost you a lot in the long run. Here’s why you need an accountant for your small business and when you’ll know it’s time to find one.

Should I Hire an Accountant for My Small Business?

If you’re asking this question and your small business is already doing well, the answer might be “Yes.” Accounts do much more than just your taxes every year, although that is arguably one of the most valuable services any accountant has to offer your organization.

The world of business finance can be complicated, even if your scope of operations isn’t exactly titanic. Running into trouble with the IRS will usually end up being an absolute nightmare, even for very small infractions—hiring a business accountant early is one way to prevent trouble before your books have a chance to get ahead of you. However, this won’t always be an affordable option for some.

The power of an accountant on your team is undeniable, which then begs the question: when do I need an accountant for my small business? At what point does the payoff outweigh the costs associated with a professional accountant?

When Is the Right Time to Hire an Accountant for My Small Business?

After your business begins to flourish, your finances may become significantly more complicated. This is especially the case as you begin to make more new hires and earn more income—and, of course, spend more money, too.

Your job as a leader is just as important as any job you can delegate to somebody else. Small business owners will usually be excellent multitaskers by nature. Eventually, your stack of hats will become so tall and unwieldy that it’s likely to fall over. 

As soon as your finances begin to overwhelm you daily or weekly—losing track of receipts and invoices, for example, or simply not having time to document every transaction required for a complete account of your company’s activity—the time to hire a dedicated company accountant or bookkeeper has probably come to pass.

You may have an external bookkeeper preparing your finances early on for tax season. However, the investment in a certified accountant may eventually end up paying for itself. An internal accountant will be more familiar with tax codes and regulations and will be worth having if an audit comes along.

Why Do I Need an Accountant for My Small Business?

Are you running your finances for your business on your own? It may seem like a practical role to take on at the beginning of your venture, which is why so many small business owners end up giving it the ol’ college try.

After a certain point, however, a lack of expertise and even simple naïveté may cost you dearly. An innocent mistake may compound into something much more expensive in the long run—why waste your time trying to wade through something an accountant will have no trouble doing perfectly for you?

A business accountant can save you more than money in the event of an audit; they’ll also save you a lot of time as they take the minutiae of your finances off of your plate as a small business owner. 

What exactly does a small business accountant do? Their duties may cover any and all of the following essentials:

  • Bookkeeping: Documenting every fiduciary transaction passing through your small business is an enormous responsibility. All purchases, sales, payments, and paper trails must be maintained and kept up to scratch.
  • Payroll: This may include helping you oversee and carry out payments, filing your employees’ and contractors’ tax documents correctly, and, as mentioned, documenting all of the above.
  • Tax preparation: Unless you would rather outsource the professional responsible for closing out your books at the end of the year, you’ll need a small business accountant to create your reports and prepare your affairs to file. A great accountant will also be a lifesaver in an IRS audit—if you’re following the rules, they’ll be able to find the mistake and rectify it, incurring as few penalties as possible.
  • Insight, analysis, and interpretation: Unless you’re a financial expert, it always pays to have somebody who knows what they’re talking about behind the wheel. They may be able to help you navigate problems like overspending, helping you spot issues in your financial statements throughout the year. You might also find that they have a lot of helpful advice on where you could be investing more generously for the sake of growth and your future.

No matter what line of work you’re in, these generalized responsibilities will apply to any small business, whatever stage of development it’s in. You may know the trade better than anybody on your staff, but without the right partner to guide your hand as you make essential investments in your enterprise, your business might end up not seeing its full potential—or simply fall flat.

The need for a business accountant after finding your place in your industry is more than obvious—what about for brand-new businesses, though? Should start-ups hire a business accountant if they can afford it? To us, it’s simply another way to win.

Do I Need an Accountant for My Small Business Start-Up?

Depending on how established your small business is, your accountant might become a vital part of your organization as you scale. Defining your business goals is one thing—making it all happen realistically and practically is another matter entirely.

A great accountant can offer guidance at these pivotal intersections—helping you choose the right business structure, for example, and ensuring that everything you plan on accomplishing is feasible and compliant with every relevant body of authority (including the IRS!). They’ll also be extraordinary resources to lean on when applying for business loans, working with angel investors and other investments, and perhaps even when applying for small business grants.

A sudden windfall will do nothing for you if you have no idea what to do with it. Business accountants act as trusted confidants and will be able to help you manage your money wisely. Investing in yourself is another critical skill to master. An objective set of professional eyes will lead you to smart financial moves you might not have considered on your own.

What Can the Right Small Business Accountant Do for You?

Why do I need an accountant for my small business? For the same reason, you hire a professional to manage your IT systems. Are your business’s tax problems perplexing you? A small business accountant is almost certainly the solution. The time to delegate has arrived. 

If you’re unsure where to begin, contact us for advice on all things financial. The earlier you get our team involved, the more we’ll be able to do for you once tax season finally rolls back around. 

Financial Records

How Long to Keep Financial Records

Have you ever wondered how long to keep financial records such as receipts, bank statements, and credit card bills? You’re not alone! Rather than keep everything forever and let the stacks of paper reach the ceiling, develop an organized system of keeping receipts for the recommended amount of time.

Remember, the IRS recommends keeping tax-related documents for at least six years. An audit can be performed up to six years after filing if an error is suspected, and you’ll want proof of your purchases if that happens.

How Long to Keep Financial Records and Why

Determining how long to keep financial records depends on several factors, including the record type and whether it’s for personal or business documentation. Whether you’re keeping the record for one month or 10 years, record-keeping best practices dictate you should store documents electronically (go paperless when you can), and always backup your files by saving them in the cloud. At Vyde, our accounting experts help our clients save and organize important financial information in a secure online portal so the information never gets lost and is easily accessible.


Below is a detailed summary of how long to keep financial records, categorized from the least amount of time to the most.

KeepItFor-01

1 Month

The key to successful record retention is staying organized. Set up an efficient monthly system and you’ll be more likely to stick with it. For instance, write the type of expense on each receipt and put it in a dedicated file each month. You’ll want to keep utility payment receipts, bank withdrawals, and deposit slips until you receive your monthly statements. After you’ve had time to review your statements, you can dispose of the receipts.  

Keep the following documents for one month:

  • Receipts for non-deductible items
  • Deposits / ATM slips
  • Reconciled bank statements

1-3 Years

You will need proof of payments and any business financial activity in case of disputes, identity theft, or fraud. Therefore, create a file for all banking and investment records for both your personal and business accounts. 

Keep the following documents for one to three years:

  • Paystubs
  • Bank records
  • Insurance policies
  • Investment statements
  • Mortgage statements
  • Receipts for charitable contributors
  • All business-related documents

7+ Years

You might be wondering how long to keep bank statements. Err on the side of caution. This will be helpful if you claim a loss or a bad debt deduction. 

Keep the following documents for seven or more years:

  • Income tax returns (federal and state)
  • W-2s and 1099s
  • Medical bills
  • Contracts
  • Receipts for tax-deductible items
  • Mileage records
  • Canceled checks
  • Real estate tax forms
  • Credit cards statements that contain purchases used as tax deductions
  • Retirement plan contributions

Forever

Why should you keep some items permanently? Some documentation has no expiration date, such as birth certificates and social security cards. Plus, these documents can serve as proof of identity. For paperwork like auto titles, or other purchases, store the related documents for as long as you own those items. 

Keep the following documents permanently:

  • Birth certificates
  • Social security cards
  • Passports
  • Education records
  • Auto titles
  • Investment statements
  • Home improvement receipts*
  • Receipts from major purchases*
  • Wills
  • Current insurance policies
  • Medical records
  • Pension / retirement contracts
  • Property agreements
  • IRA contribution records
  • Mortgage documents
  • Life insurance policies
  • Safe deposit box inventory

*for insurance purposes

Where to Store Your Financial Records

Where to Store Your Financial Records for Safekeeping

Keep vital personal documents, like birth certificates, passports, marriage certificates, etc., in a secure place, such as a home safe, fire-safe container, or a bank’s safe deposit box. 

Documents such as tax returns, receipts, bank statements, or pay stubs can also be kept in a safe deposit box or simply a locked file at home. For electronic documents, store them in a password-protected folder on your desktop or another secure location.

At Vyde, we help our clients save and organize important financial information in our secure online accounting portal. We not only complete your bookkeeping and taxes, but we also provide easy access to tax returns and other important business documents.

Why You Should Shred Discarded Documents

You may be tempted to toss old financial records in the trash. But if any of those documents contain sensitive personal information, like your account or social security numbers, you’ll want to shred them first. This reduces the risk of identity theft. 

Shred any document that contains:

  • Social Security numbers
  • Account numbers
  • Personal signatures
  • Birthdates
  • Phone numbers
  • Email addresses
  • Confidential information (medical, financial, or legal)

The Benefits of Record Keeping

Knowing how long to keep financial records is important because it can help you stay organized. This is crucial if you’re a business owner, as you’ll want to have everything readily available should you be audited or need to go to court. Organizing your records can also help you prepare accurate financial statements and tax returns, stay compliant, access important reports, apply for loans, and plan for the future. 

Vyde Can Help!

Need help organizing your business financial records? At Vyde, we can help with your business accounting and taxes. We’ll handle your books throughout the year so we can keep you organized and maximize your tax savings, all for a minimal monthly fee. Contact us today!

1. How long should I keep financial records for utility payments and bank transactions?

Maintain utility payment receipts, bank withdrawals, and deposit slips for at least one month. Review your monthly statements and dispose of these receipts afterward.

2. What financial records should I retain for one to three years?

Preserve documents like paystubs, bank records, insurance policies, investment and mortgage statements, receipts for charitable contributions, and all business-related documents for one to three years.

3. Which documents should I retain for seven or more years?

Keep income tax returns, W-2s, 1099s, medical bills, contracts, receipts for tax-deductible items, mileage records, canceled checks, real estate tax forms, and credit card statements used for tax deductions for seven or more years.

4. What documents should I keep permanently?

Essential documents like birth certificates, social security cards, passports, education and medical records, auto titles, investment statements, wills, insurance policies, property agreements, and certain receipts should be kept permanently.

5. Where should I store financial records for safekeeping?

Keep vital personal documents in a secure place at home or in a bank’s safe deposit box. For electronic documents, store them in a password-protected folder or secure location. Vyde offers a secure online portal for organizing and storing financial information.

Advertising Expenses

Top 20 Common Advertising Expenses Examples for Small Business Owners

Top 20 Common Advertising Expenses Examples for Small Business Owners

You’re probably spending a fair amount of money on advertising your small business to potential clients and customers. Did you know most of your marketing and advertising can be written off as a tax deduction to lower your tax bill? Whether you’ve got a whole marketing team running the show or you just purchased your first  ad, most money spent on promoting your small business is tax deductible.

According to the IRS, the criteria that your advertising expense must meet to qualify as a deduction is that it is ordinary (i.e. common and accepted in your industry) or necessary (i.e. helpful and appropriate for your business). Marketing and advertising are both essential to growing and promoting your business, which makes them ordinary and necessary.

Just because the IRS terms an advertising expense as “ordinary” doesn’t mean you can’t be creative when it comes to ways you advertise. As long as the purpose is to bring in new customers and keep existing ones, you should be covered. Just be sure you know and document the business purpose.

The few exceptions include expenses that are used primarily for personal use or gain, not business promotion. In addition, though donating products or money to a community event or charity are tax deductible, donating services or time are not. Again, be sure to know and be able to show how the expense benefits your business. When in doubt about a specific advertising expense and if it’s tax deductible, ask your accountant.

20 Common Tax-Deductible Advertising Expenses for Small Businesses

Here’s a list of the top 20 most common advertising expenses for small business owners to keep in mind come tax season. All of these are tax-deductible:

  1. Website set-up, design, and maintenance
  2. Pay-per-click ads and online advertisements (Google, Facebook, LinkedIn, YouTube, etc.)
  3. Social media promotions
  4. Promotional materials with your logo such as t-shirts, mugs, pens, notepads and more
  5. Graphic design fees: logos, business cards, brochures, signs, printed or online advertisements, flyers, or other promotional materials designed professionally
  6. Printing of promotional materials: business cards, flyers, postcards, brochures, and coupons
  7. Storefront signs
  8. Vehicle signs or vinyl decals for windows
  9. Giveaways and promotions
  10. Radio advertisements
  11. Magazine or newspaper advertisements
  12. Television commercials
  13. Balloons, decorations, refreshments, and any other expenses incurred for parties or open houses promoting your business
  14. SEO services
  15. Packaging, design, and materials for your products

Tax-Deductible Goodwill Advertising Expenses

Tax-Deductible Goodwill Advertising Expenses

The following are considered goodwill advertising expenses and are tax deductible as well. Goodwill advertising is any type of promotion that keeps your small business in the public eye.

16. Sponsoring a youth sports team in your community such as little league baseball or soccer

17. Money donated to a school, charity, or local cause

18. Participating in a parade to promote your business, such as handing out flyers, candy, frisbees, pens, or shirts

19. Giving away products or samples

20. Advertisements encouraging people to donate to a certain charity, like the Red Cross

Are you feeling overwhelmed by tax and bookkeeping tasks for your small business? Don’t let the stress get to you. Reach out to the tax experts at Vyde today. Vyde handles the paperwork so you can focus on what matters most—growing your business. Your own accounting department, all rolled into one. Don’t hesitate, contact Vyde now!

 

FAQs about Tax-Deductible Advertising Expenses for Small Businesses:

What qualifies as tax-deductible advertising expenses for my small business?

Advertising expenses must be ordinary and necessary for your industry. This includes various marketing efforts aimed at promoting your business.

Can I get creative with my advertising strategies and still claim them as deductions?

Yes, as long as your creative strategies aim to attract new customers or retain existing ones, they can be tax deductible. Ensure you document their business purpose.

Are there any exceptions to tax-deductible advertising expenses?

Expenses primarily for personal use or unrelated to business promotion aren’t deductible. Donating services or time is also non-deductible.

How can I determine if a specific advertising expense is tax deductible?

Consult with your accountant if uncertain about the deductibility of a particular expense. Ensure you can demonstrate how it benefits your business.

What are some examples of goodwill advertising expenses that are tax deductible?

Examples include sponsoring local sports teams, donating to schools or charities, participating in community events, giving away products or samples, and promoting charity donations.

Interested in Learning More?

Schedule a free consultation with our team!

Tax Extension

I’ve Filed a Tax Extension. What Now?

Tax day has come and gone and you didn’t have time to file your taxes. As long as you filed a tax extension, you have an extra six months to get your tax return to the Internal Revenue Service (IRS).

The IRS will allow you to file an extension for any reason, as long as you file form 4868 by the original tax deadline or they will automatically grant you an extension if you have paid your taxes by the original deadline.

But what happens after you’ve filed a tax extension? We’ll help guide you through the process.

IRS will allow you to file an extension

Check the status of your extension.

The first thing you need to do after you’ve filed a tax extension is make sure that it is approved. Although the IRS is good about granting tax extensions, you’ll want to double-check that yours has been approved. If you used an accountant to file your taxes, check back with them to see if it’s been approved. If you used a tax preparation service, you can check there to see your approval. Finally, if you mailed your extension form in, you’ll have to call the IRS customer service line to follow up on it.

Once you’ve verified that your tax extension was approved, you have six months to finish your taxes and submit them.

If your tax extension was rejected, it is most likely due to a clerical error. You may have misspelled something, or your last name doesn’t match the IRS’s records. If this is the case, you have 5 days to correct it and resubmit it.

Pay any taxes due.

Filing a tax extension does not extend the deadline for paying your taxes. If you owe any taxes, you need to pay them as soon as possible.

The IRS charges interest for any taxes not paid by the original due date.  After that date, unpaid taxes are charged a .5% interest rate for every month, or partial month, that the balance is not paid. The maximum penalty is 25% interest.

If you can prove that you had a reasonable cause for not paying your taxes by the deadline, then the IRS might waive the interest fees.

File your tax return.

The final step with a tax extension is to file your taxes. The IRS allows you to file a tax return up to 6 months past the original filing date. You can file your return any time before that date as well.

If you fail to file your tax return by the extended date, you can face more penalties. The IRS charges a 5% penalty for any month, or partial month, that your tax return is late. Again, the maximum penalty is 25%. You can avoid the penalty if you have a reasonable explanation as to why your return was late. The IRS suggests you attach your reasoning to your tax return in order for it to be considered.

If you have questions about your extension or business tax return, reach out to our team at Vyde. We would love to help answer your questions!

File your tax return

FAQs for Filing a Tax Extension

1. How do I confirm if my tax extension has been approved? After filing, verify approval status. Contact your tax preparer, service, or IRS customer service if you submitted it by mail to ensure it was accepted.

2. What should I do if my tax extension is rejected? A rejection could be due to errors. Correct any inaccuracies within 5 days, such as misspelling or discrepancies in personal data, and resubmit.

3. Is paying taxes postponed by filing an extension? No, the tax extension only extends the filing deadline, not the payment. Clear any owed taxes by the original due date to avoid interest charges.

4. When should I file my tax return after getting an extension? Utilize the granted six-month extension period to file your taxes. Submit your return within this timeframe to avoid late-filing penalties.

5. What penalties might I face if I fail to file by the extended deadline? Late filing incurs a 5% penalty per month on the unpaid tax amount. Attach a reasonable explanation if your return is late to avoid this penalty.

Financial Reports

What Your Financial Reports Really Tell You

 

Financial reports can be an incredibly helpful tool for small businesses. They can help you determine how much money you can pay yourself each month. Or they can help you decide if it’s time to expand your business. As helpful as financial reports are, they can only help you if you understand how to read them.

Luckily, Ben Sutton, Vyde’s co-founder and CPA, took the time to explain how an income statement and balance sheet work. It’s not the same as getting a 5-year accounting degree, but it’s going to give you the knowledge to make smart business decisions. Watch the video below for a great in-depth example of how financial reports work or keep reading to learn more.

Financial Reports Start with a Bank Statement

One of the things we ask our clients to send us each month is his or her business’ bank statement. This is so that we can begin to build your profit and loss, or income statement, and balance sheet. We’ll go through the bank statement to look for expenses and income. Expenses can come from a variety of places such as:

  • Marketing costs
  • Supplies
  • Food & entertainment
  • Business equipment
  • Auto expenses
  • Loan payments
  • Owner distributions

Income is simply what money your business generates. Customer payments are the most common form of income.

Keep in mind that as we move on these expenses will be split between the profit and loss statement and balance sheet. This is where the accounting rules come in. An accountant can determine what pieces of information belong on a profit and loss statement and what belongs on a balance sheet.

What Does My Profit & Loss Statement Tell Me?

A profit and loss statement (P&L) shows the revenues, costs, and expenses for a certain time period. We like to provide our clients with a monthly or quarterly P&L statement.

The P&L is only going to show the exact income and expenses that your business had that month. Accounting rules tell us which expenses belong on the P&L and what belongs on the balance sheet.

First, you will count any income your business had. Customer payments, as we said before, count as income. One confusing point would be any loans that you have taken out during the month. It may seem like income because money is coming into your account, but it isn’t. A loan is a liability and doesn’t belong on a P&L

Before we move on to regular expenses, we’ll want to look for the cost of goods sold. Cost of goods sold is what you spend on items that are required to produce your business’ services or products. This isn’t a required section on a P&L, but it’s useful for management to see what they’re spending directly on their services.

Next, are the monthly business expenses. Expenses are any other purchases that you make for your business. These include food, entertainment costs, auto expenses, and marketing costs. Some of the other expenses we listed in the first section aren’t part of the P&L. For example, business equipment and owner’s distributions aren’t part of the P&L. They are part of the balance sheet.

Once you have determined the income, the cost of goods sold, and the expenses, you total that to determine if you have a net loss or a net gain for the month. The P&L isn’t going to tell you how much money you have left in the bank. It’s simply telling you if you spent more than you brought in that month.

What Can I Learn From a Balance Sheet?

A balance sheet gives a company a quick glimpse at its assets, liabilities, and equity. The balance sheet will be broken down into those three categories: assets, liabilities, and equity.

The assets section starts with how much cash your business has on hand. Then you list your physical assets. If you bought equipment for your business during the month, like a computer or other purchases generally over $2,500, they go in the fixed assets category. To determine your total assets, you add your cash with your fixed assets.

Next, we’re going to go through our liabilities. Liabilities refer to money that we owe and include business loans, credit cards, auto loans, and more. After we’ve determined your business’ liabilities, we can move onto equity.

Equity is usually the most complicated part of the balance sheet. In the equity section, you’ll enter your owner’s distribution, or what you paid yourself that month. You’ll also see your retained earnings. The retained earnings are calculated by either adding the month’s net income or subtracting the month’s net losses from the last month’s total retained earnings.

Finally, you’ll add your liabilities and equity together. If you’ve done everything correctly, it should add to the same amount as your assets. That’s why it’s called a balance sheet. Because your assets should always equal your liability and equity.

Why Do I Need to Understand My Financial Reports?

Before we address the conclusions you can draw from your financial reports, we want you to understand how the P&L differs from the balance sheets. The P&L shows a period of time. Whereas, the balance sheet shows a point in time. So, the P&L can show you what you made, or lost, in your business in one month, and the balance sheet shows you overall where your business is at the end of the month.

Lesson 1: Don’t Manage Your Business Off of the Cash Balance. Manage it Off of the P&L.  

Without looking at both the P&L and the balance sheet, you can’t make smart business decisions. If you just look at the balance sheet, you may see that your business still has money, so you may try to pay yourself more, or make a big purchase. However, if you see that your P&L shows a net loss for the month, you might hold off on those decisions. The two go hand in hand when it comes to making a decision. You have to look at both to get an idea of where your business is truly at.

Lesson 2: Don’t Estimate Your Tax Liability on Your Owner’s Distribution  

Your financial reports are also going to give you an idea of what you owe in taxes. The biggest misconception small business owners have is that they are taxed on whatever money they pull out of the business, the owner’s distribution we’ve talked about. However, this isn’t true. The Internal Revenue Service (IRS) actually taxes you on your business’ net income. The IRS isn’t going to tax you unless you’ve made a profit on your business. In order to determine your net income, you’ll want to look at those income statements (the P&L) and determine if you had a net profit or loss. Once you know that, you can determine your tax liability.

I know the process can seem overwhelming at times, but analyzing both your P&L and balance sheet regularly can help you better manage and grow your business. If you are struggling to stay on top of your accounting and finances, reach out to our team at Vyde to see how we can help!

 
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Vyde is a licensed accounting firm (CPA) based in Provo, Utah, and members of the AICPA. We provide professional accounting services to businesses and individuals, with a focus on small business bookkeeping and taxes.

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