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how can i learn to do my own taxes? - Page 2

post #16 of 21
Quote:
Originally Posted by jason_kraft View Post

If you end up doing your taxes yourself, be as conservative as possible. If you don't have the receipt for a business expense, don't deduct it. If you're not 100% sure an expense is deductible, don't deduct it.

This is the best advice right here. I have experience preparing tax returns (about to sit for the CPA exam), and the one thing you can be sure of is that if you get audited, you must have a receipt to back up all expenses you deducted.

 

You could try to do your tax return yourself, but it will take a long time if you are not familiar with the Code. It's not about math at all; it's learning what's deductible and where to put it on the forms. A software will put it in the right place and may even help you determine what's deductible, but do NOT attempt to do this by hand without a software. Another note: just for depreciation purposes, it may be better to get a CPA. That stuff can get tricky in a hurry.

 

If you are looking at hiring a CPA, they will charge by the hour. You said that you have boxes of receipts. This will increase the amount of time needed to prepare your return, so the fee will be higher. If you want to hire someone, look for a good reputable CPA; I would steer clear of the national chains. Accountants may or may not be able to give you a quote. It depends on time, and until he/she sees your box icon_smile.gif, time may not be estimable.

 

I know it's a little late for this, but just a few tips for next year.

  • Keep all receipts, and enter them either into Excel or QuickBooks by category of expense (Ingredients, supplies, pans, etc). (If you don't have an accounting background* and/or don't want to spend the money on QuickBooks, just use Excel. It's perfectly sufficient.) This will allow a CPA to do your return much quicker (and cheaper) if you choose to use a CPA; it will decrease the time you spend doing it if you choose to do it, too.

* The reason that I say this is because QuickBooks takes some accounting knowledge to set up; of course, you can pay a bookkeeper to set it up for you.

  • Keep track of all income received including cancelled checks that you deposited/cashed.

 

 

HTH!

post #17 of 21

If you go with Quickbooks, they have their own professionals that work locally and can help you with that. 

 

Whats important is to make sure you know how to keep records going forward, to make sure you don't end up in the same situation again. That $500 you can't afford now might turn into $5,000 if you aren't following the rules, no matter how low your income is or how new you are in business. 

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post #18 of 21
Thread Starter 
Could someone tell me a good way to organize my receipts? I will start in on that and see where it takes me. And we have 4 kids together and are trying to get custody of my sister's 3 kids because she is off and on drugs and the baby was found in the street with only a dirty diaper on thank heavens she wasn't hit by a car. But we had to build a building for my cakes than turn around now and have to try to add on to the house after hiring a lawyer because the state gave the kids back to her again and she says she wants them so we have to fight and hire a private investigator but we got all the pictures we need, but can't afford for him to watch the house anymore so we talked to a neighbor to just call the police when she leaves them home again by themselves.
post #19 of 21
Thread Starter 
Annabakescakes, I agree totally and with your pm to. This is the first time I asked a question and stuff but I have read on here lots and I seen it lots.
post #20 of 21
Quote:
Originally Posted by annabananana View Post

Could someone tell me a good way to organize my receipts?

Your first step will be to set up a "chart of accounts", which is basically a list of categories (accounts) that includes income you receive and expenses you pay out. In a very simplified form you will have one or more accounts for revenue and multiple expense accounts. Your invoices that represent sales to customers will be entered into a revenue account. Receipts for purchases that are directly involved in making cakes (like ingredients) will go to a "cost of goods sold" (COGS) expense account. Receipts for overhead expenses (like insurance or advertising) are assigned to a non-COGS expense account.

More info:
http://outright.com/blog/what-is-a-chart-of-accounts/

If you have a list of all income and expenses for 2012 broken out by account (with the invoices and receipts to back it up) it will be much easier to do your taxes and you will have to spend less on a CPA. If you do not have accounting software you can do this with Excel or even a pen and paper.

Since it sounds like you spent a lot of money setting up your cake business it is even more critical to find the money to spend on a good CPA. You could end up overpaying your taxes by a significant margin if you do not take the deductions you have earned, which would negate the cost savings of not hiring a CPA. On the flip side if you take deductions for large expenses incorrectly you could potentially owe back taxes and penalties in the case of an audit.

I'm sorry to hear about what's going on with your sister's kids, I have experience volunteering with an advocacy organization that deals with these kinds of situations so I know it can be very difficult. Unfortunately the IRS probably won't care about personal hardships, they only care about receiving the tax revenue they are owed.
post #21 of 21

A good accountant is worth their weight in gold. 

If an issue comes up with the Infernal Revenue Service, the account handles it, not me. 

She's worth every dime I pay her!

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