FREQUENTLY ASKED QUESTIONS

Generally you should keep all records that substantiate income, expenses and all business transactions. The IRS recommends that these records are kept for a minimum of 3 years depending on circumstances.
See https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records

It is very important that by the end of the 4th quarter you at least begin preparing for tax season. These four steps will help you begin the process.

1. Organize Your Tax Documents and Financial Records
2. Gather information about dependents
3. Double-check personal information with your employer if applicable
4. Plan ahead if you might owe taxes

Generally to be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.

Generally, you must make estimated tax payments for the current tax year if both of the following apply:

• You expect to owe at least $1,000 in tax for the current tax year after subtracting your withholding and refundable credits.
• You expect your withholding and refundable credits to be less than the smaller of: 90% of the tax to be shown on your current year’s tax return, or 100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months.)

For estimated tax purposes, the year is divided into four payment periods. Each period has a specific payment due date. If you don’t pay enough tax by the due date of each payment period, you may be charged a penalty even if you’re due a refund when you file your income tax return at the end of the year.

In business cash is always “king”. Managing your cash flow properly will give you a complete picture of costs versus revenue and will ensure you have enough funds. Two of the most important things to do, to better manage your cash flow are to first regularly monitor it and secondly, ageing of accounts receivable should be avoided at all costs.

Simply put, your breakeven point is when your total sales (revenue) is equal to your total expenses (costs). At this point you have neither made a profit or a loss.

At Pinnacle Accounting, our goal is to not just have your books done, but to also help you grow your business consistently, through evaluation of your circumstances and providing a customized package to grow your business.

The structure of your business will depend on several factors, and what you intend to achieve as a business owner, as one size does not fit all. Each business structure, has both advantages and disadvantages. What may work for one, may not work for another due to varying rules and regulations across state lines. A professional is strongly recommended to help make such a decision.

In determining how to classify workers, a business must use the control test, generally used by the IRS. This includes behavioral control, financial control and the relationship. Generally if these are controlled by the employer, then you have an employee. See https://www.irs.gov/newsroom/understanding-employee-vs-contractor-designation

As a citizen, your tax obligations, is to correctly calculate all applicable taxes under tax law and pay it to the governing authorities by its due date.