Welcome to BBA!

After the last day of the month, we will be working to close out the books as quickly as possible to ensure you receive your reports no later than the 15th of the following month.

Ideally, we will have read-only access to all of your bank accounts so we can pull statements and review transactions on your behalf.

I have designed our processes to prioritize any questions there might be for you, the client, so that you can get back to us in a timely manner.

Your prompt response is necessary to ensure we are able to deliver your financial statements by the 15th. Any delay in response or missing information from you may lead to a delay in publishing of your financial statements.

Please note that if reports are delayed for any reason, you will be notified via email and if there is anything we do not have from you, we will let you know what those items are.

A final reminder will be sent one week after the status update. After which, we will be waiting for the information necessary to complete your books.

Please know that any information received after the 15th will require a 5-day turnaround period.

Please be sure to alert us if any of the following occurs:

• You open a new bank account or credit card
• You change banks
• The business model changes materially (e.g., you only used to offer services but now you're selling merch too)
• You hire on any new staff or contractors
• The business applies for or receives any new loans
• Any major mixing of business and personal expenses

All of the processes here at BBA are designed to be as efficient as possible to save you money and reduce busy work for us.

I will provide my software and process improvement recommendations during onboarding that will keep inefficiencies in check. Your willingness to implement these systems is critical to keep your bill low.

Please know that the bookkeeping rate you are quoted is based on the time and effort it takes to complete your books and is not affected by your income or profit.

We will always prioritize your happiness and can work through inefficiencies when possible, but please know that this may result in a pricing increase.

In the event of a rate increase, I will have a discussion with you first, but you will be provided with written notice as well. This notice will include your new rate and the date it will go into effect.

Things that can trigger a rate increase:

• manual processes (e.g., keying in transaction data rather than an automated bank feed)
• increases in the number of accounts you have
• increased granularity in reporting (e.g., maintaining reporting for specific divisions or regions, etc.)
• management of inventory, payroll, or sales tax
• significant increase in the volume of transactions (only when we need to spend more time on your books)

If you're looking for services beyond basic bookkeeping, please message me directly and we'll set up a time to discuss.

Add-ons and service upgrades include:

• Visual reporting
• Advisory services (e.g., budgeting, forecasting, enhanced analytics)
• CFO-level services which includes the above enhancements in addition to a 60-minute monthly check-in with me via Zoom and custom templates you need to help you reach your goals. 

Mixing business and personal expenses creates a ton of headache and confusion and it is always recommended that you keep them separated!

From a bookkeeping perspective, keeping your business and personal separate reduces our questions for you each month, better efficiency, and a lower fee.

Beyond bookkeeping, keeping your financial information separate will really help you in the event of an audit, making the entire journey less intimidating.

In the event you pay a personal expense from a business account:

We will code this transaction as owner's draw and it will not count as a business deduction. If we see a recurring charge, we will notify you until you update the billing details.

In the event you pay a business expense from a personal account:

We won't have any idea this happened unless you tell us. This means you miss the deduction that you could have had and who wants to give more money to the IRS than they have to? If this does happen, please let us know as soon as possible with the date of the transaction, vendor, and amount. Our team will add this manually. Alternatively, you can reimburse yourself by writing a check or transferring funds from your business account to your personal and notifying our team that it is a reimbursement.

Please keep any overlap between business and personal to a minimum. This ensures we're able to work efficiently and keep your bill low!

Receipts are your responsibility and are not something we will manage on your behalf. This doesn't mean we don't have recommendations for you to do this efficiently though!

When managing receipts, it's a good idea to set up a Dropbox or HubDoc account (included with some Xero subscriptions so just ask me) which allows you to create folders for each fiscal year. When a new receipt comes in, save yourself time and effort later by adopting a DATE-VENDOR-AMOUNT naming convention.

For example: 2021-06-20 Amazon $45.16.pdf

For paper receipts, you can scan the receipt with the Dropbox app on your phone. This creates a PDF version in your folder and means you can toss the paper copy!

If you're ever audited, this tracking method will provide backup that any ambiguous purchases (like those at Target or Walmart) were for legitimate business expenses.

Some of the books I recommend for any business owner. Each of these has helped me immensely in the way I run my business and might help you too:

• Profit First by Mike Michalowicz
• The Soul Sourced Entrepreneur by Christine Kane
• Why Simple Wins by Lisa Bodell
• The 5 Choices to Extraordinary Productivity by Kory Kogon, Adam Merrill, and Leena Rinne

The below information reflects the Department of Labor's recent final ruling which took effect on 3/11/2024. Prior to this ruling, the classification between employee and contractor was more open to interpretation but this recent update from the DOL really helps clarifies this space.

Because of the recent changes and likelihood of error, the improper classification of workers is a significant potential audit trigger which makes proper classification critical to get right.

The rule introduces six key factors to help classify workers correctly. Why is this important? Because employees have rights and protections that contractors do not.

The six factors are meant to be looked at holistically, meaning one factor is not any more important than any of the other factors so please bear that in mind when reviewing these for your specific circumstances.

1. Nature and Degree of Control Over Work

Essentially, who calls the shots? If your company determines the tools, timing, and manner in which work is completed, that worker is an employee.

2. Opportunity for Profit or Loss

This ruling outlines the potential for the worker to make more or less profit based on their own decisions. True independent contractors have a portfolio of clients which allows them to tweak service agreements, product offerings, scope of work, etc. to adjust their bottom line. If a worker has a fixed hourly rate and is unable to work beyond the hours you’ve set for them, that’s an employee.

3. Investment in Equipment or Materials

This one is pretty straightforward – does your worker pay for their own tools and equipment? That’s probably an independent contractor. If you’re paying for their computer, camera, software, or other equipment, you’ll need to classify this person as an employee.

4. Skill and Initiative Required

Does the work you need done require specialized skills and self-directed autonomy? If so, this is leaning toward an independent contractor classification. If the job requires following a standard set of procedures without room for creative interpretation and initiative, this would be an employee.

5. Permanency of the Relationship

How long and to what degree of closeness will you be working with this person? If it will be an indefinite and exclusive relationship, you’ll want to classify this person as an employee. A set term or causal partnership with clear scope of work and guidelines for cancelation on either side would lean more toward an independent contractor classification.

6. Extent to Which the Work is Integral to the Business

Is this work necessary and critical to primary function of the business? This would include things like sales or operation managers who interact with customer directly each day. If so, this person would be considered an employee. If the work is beneficial but not necessary, such as a freelance writer who creates blog posts, you may be looking at an independent contractor.

Once you hire an employee:

There is typically a short window to report your new hire to your state so be sure to do this as soon as possible. You will also need to collect several important onboarding documents (e.g., W2, I-9, a Federal W4, etc.).

I highly recommend getting set up with a third-party payroll processing company. Most provide helpful HR packages that can help you with employment contracts, benefits, and job descriptions.

My recommendations for a payroll processor are either ADP or Gusto. If you need help making a choice, reach out to me on Voxer or via email and we can discuss what makes the most sense for you.

 Once you hire a contractor:

One of the biggest indicators that you're actually hiring an independent contractor and NOT an employee is that you sign their contract, not the other way around. Once you've reviewed the Department of Labor's six factors for classification (see Employee vs Contractor) and know that you're hiring an independent contractor, obtain a W9 from them and get a copy of the contract between the two of you.

Again, make sure it's your signature that they need on their contract or you may run into compliance issues with the most recent DOL ruling.

When it comes time to pay your contractors, I suggest selecting a method that prepares the 1099 for you (e.g., a payroll system) or allows you to not need to file one.

Some payroll processors, like ADP and Gusto, allow you to pay your contractors alongside anyone else already receiving wages and will handle the 1099 for you. Just note there are monthly fees if you go this route. This is a good method if you're an S corp owner and are already paying yourself and you plan to have an ongoing relationship with the contractor in question.

To avoid having to issue a 1099 at all, pay via a third party processing software such as Stripe, PayPal, Dubsado, Honeybook, Wave, QBO, or Xero. If you go this route, the payment processor will automatically issue a 1099-K if the specific requirements and thresholds are met. This means you do not need to send a 1099-NEC! If there's confusion from your client or vendor on what you need to send them, refer to the section below.

If you have a client who paid you via cash, check, bank transfer, or a personal app (Zelle, Venmo, PayPal friends & family), then your client is right to ask you for a W9. If you need help filling that out, just ask.

However, most of my clients should not receive 1099s from their clients because they accept payment via a third-party processor (Stripe, PayPal goods and services, Wave, Honeybook, Dubsado, etc.)

Below is the swipe copy you can share with your client who is making this request.

-----

Per our accountant, a 1099-NEC is not required because we were paid via a third-party payment network that will issue a 1099-K instead.

Please reference the 1099 instructions, page 3 bottom right that reads “Form 1099-K. Payments made with a credit card or payment card and certain other types of payments, including third-party network transactions, must be reported on Form 1099-K by the payment settlement entity under section 6050W and are not subject to reporting on Form 1099-MISC. See the separate instructions for Form 1099-K.”

https://www.irs.gov/pub/irs-pdf/i1099mec.pdf

----

If you continue to receive pushback from your client, please reach out to me for support. It is never a good idea to file returns that you do not need to file “just in case”. This can result in double reporting and further issues down the line.

If you're looking to offer benefits for your employees or are curious whether your benefits as a business owner are truly right for your needs, I highly recommend meeting with a benefits broker. The health and life insurance benefits space is very complex and having a professional guide you through the many options can provide clarity and help you get the best coverage for your specific needs.

My preferred broker, Karrisa Martino, has experience working with small business owners and self-employed individuals. She has an excellent interview with Serena Shoup on her podcast which you can listen to here.

To reach out to Karrisa, you can connect with her via LinkedIn or Facebook. You can also email her at [email protected].

If you’ve heard stories about how difficult it is to qualify for the home office deduction, you can breathe more easily. Changes in the tax law have made it easier to qualify for the deduction.

So even if you haven’t qualified for the deduction in the past, you might be entitled to take it now.

Some people believe that taking the home office deduction invites an IRS audit. This isn't really true but even it is, you have nothing to fear from an audit if you’re entitled to take the deduction and you keep good records to prove it.

To qualify for the deduction you must:

• Be in business
• Use your home office exclusively for business and
• Use your home office for business on a regular basis

These are the three threshold requirements that everyone must meet. If your home office space meets the first criteria, then you must also meet any one of the following requirements:

• Your home office is your principal place of business.
• You regularly and exclusively use your home office for administrative or management activities for your business and have no other fixed location where you perform such activities.
• You meet clients or customers at home.
• You use a separate structure on your property exclusively for business purposes.
• You store inventory or product samples at home.
• You run a day care center at home

There are two ways to deduct business mileage and other related auto expenses:

1. The actual expense method - allows you to deduct the business use percentage of actual costs for your vehicle. These costs include gas, repair and maintenance, registration fees, insurance and more. The business use percentage is determined by calculating all miles driven for business purposes and dividing by total miles driven.
2. The standard mileage rate - this method allows you to deduct 70 cents per mile driven. While tracking of mileage is still required for this approach, it is much simpler and has additional benefits over the actual method.

For my clients, I almost always recommend the standard mileage deduction method. First off, the record keeping requirements are much simpler in that you only need to track mileage and dates driven.

Additionally, if you use the standard mileage method in the first year of using a vehicle for business purposes, you can switch to the actual expense method in a later year. Although technically can switch between methods from year to year, it's nearly impossible to switch back to the standard mileage method after changing to the actual expense method.

If you're doing your own taxes, you will want to keep things as straightforward as possible. If you're working with a CPA or tax preparer, check with them to see what they may recommend for you.

If you have more questions here, reach out to me on Voxer and we can chat!

Estimated tax payments and payments on your personal tax return are actually personal expenses and as such, are not deductible. If you pay them from your business, we will treat them as owner’s draw. 

You should be saving 25% or more of your profit for taxes. You should work with your CPA to determine what your estimated taxes should be an when you should file. 

Here are some general tips: 

Who needs to file: Sole proprietors who have a profit in their business. Sole proprietors file their business income on Schedule C of their 1040. Sole proprietors are either doing business by themselves with no business registered, as a registered sole proprietorship, with a DBA, or as a single-member LLC. 

What estimated tax payments are: An estimate of the taxes that allows you to avoid penalties and avoid paying in taxes all at the end of the year when the money may have been spent already. 

How to calculate your payment: 25% or more of your profit 

How to file your estimated payment: Either online or by mailing a check and a paper voucher. Your CPA can help with this and should be involved. 

In general, you are allowed to deduct expenses incurred for the purposes of generating income that are necessary and ordinary in your line of work.

Where things get tricky is when an expense could be considered personal in nature.

Our relationship here is not to question what you deem to be genuine business expenses but the onus is on you to prove that the expenses you plan to deduct meet the requirements established by the IRS.

Most of our clients work with a tax preparer or CPA to ensure they're doing this correctly and can prove the legitimacy of their expenses in the event of an audit.

If you have deducted non-business expenses and therefore underreported your taxable income, you may be subject to have to pay the tax you should have paid, plus interest, penalties, and the cost of representation under audit. You should consult with your CPA regarding deductions and also understand your responsibility and risk.

Do you know someone who needs a good bookkeeper? 

Direct your referral to the homepage  and make sure they include your information in the "How did you hear about us" field on the intake form.

If they decide to work with us, we'll send you a $100 referral fee via PayPal when they make their first payment.