This post is from December 2021, but it is time to pop it back up to the top!
Warning: This is a very long post, and I wrote it when I was in a VERY BAD MOOD. So I am trying to tone it down a bit, but it is still important information!
A reminder that I am raising my bookkeeping rates starting with the 2022 bookwork. My base fee is now $90 per hour for new clients with a discount for “legacy” clients. You will see the fee change on your engagement letter. (November 2023, this is still true.)
There are a number of ways to keep your bookkeeping fees down, and they all boil down to the same idea, “save Jane’s time”. Here are my Top Ten Time Sucks:
- Entertainment expenses
Simply put, there are no more entertainment expenses; they went away with the 2017 tax legislation. Tickets to sporting events, concerts, ax throwing, and golf. Yep, golf. And yep, I mean it. You can still spend business money on this stuff, but you cannot deduct it from your taxable income. I have been asked why this expense went away, and the answer is that entertainment expenses had been on the chopping block for a long time due to rampant abuse.
- Business meals
You can deduct the expense for meals that are consumed as part of doing business. That means taking a client or potential client out for lunch or dinner. It can also mean a “working” lunch with employees. Forgetting to pack your lunch is not a business expense. Your drive thru coffee on the way to work is not a business expense. Any meal you eat by yourself is not a business expense. So many of my clients put those coffees or lunches on their business debit cards that I just started disallowing anything that was less than $15.
A quick note, for 2021 and 2022 only, business meals eaten in restaurants are 100% deductible, not 50% like usual. But before the pandemic hit there was talk of the meals deduction going away, just like the entertainment deduction, and for the same reason: rampant abuse.
- Automotive expenses
If you use a vehicle for your business you can deduct the expense of using the vehicle. You can do this one of two ways: you can use the standard mileage expense, or your can take a portion of your actual expenses.
Standard mileage is almost always the best way to go. We need a ton of information to calculate actual expenses correctly. And no matter which method you choose you must keep an accurate mileage log. If you haven’t been keeping a log, start now.
A little break in the action here; items 8, 9 and 10 are mostly time sucks because of how much time I spend arguing with my clients about them. The advice to professionals when we cannot get enough information about these kinds of expenses (especially automotive) is to deny the expense. That is absolutely what the IRS will do, I’ve seen it happen.
- “Can I deduct lost income?” and its cousin, “I want to deduct my time.”
This is really easy. “No” to both. There is no expense for lost income unless you already claimed and paid tax on that income (I don’t have a single client this applies to) and your time is worth nothing. This is another one that the wasted time is mostly the arguing.
Of course you have to write checks sometimes, and that is fine! But if you are a QBO client there is no information downloaded from the bank about checks, except for the check number. So I usually have to go into the bank account and look at each check. And about 65% of the time I cannot read who the check is written to, and 90% of the time there is no indication of what expense the check was written for.
The easiest solution here is to enter your checks into QBO when you write them. Then I can easily match the check and we’re done. I am happy to give you a quick Zoom class on how to do this. I can honestly say that what takes me hours will take you minutes.
- Transfers between accounts
This is another one that is perfectly ok *IF* I have access to all the accounts in question. If you pull from a savings account to plump up a checking account, or if you have overdraft protection, or if you are managing cash flow by moving money between accounts that is fine, but I need to be able to see both sides of the equation. Also, if you are doing this, please PLEASE PLEASE transfer the exact same amount from one account to another. Don’t take $2000 out of savings and deposit with cash from the register and a refund check from the BWC.
I know Venmo is super easy, but I hate it with the fire of a thousand suns. There is no way for me to know what Venmo is being used for unless I have access to the Venmo account. It is a bank account that refuses to admit it is a bank account, and it is infuriating.
- CashApp and Zelle
I combined these two because they are basically the same problem. These are usually money out and I have no idea what for. They also tend combine business and personal since people only have one account (see also: Venmo). If you are going to use these a lot we can talk about how you can take care of these items in QBO so I don’t have to (another good candidate for a Zoom meeting).
- Amazon (and PayPal)
Here is an earlier attempt at explaining why Amazon sucks up so much time. There is no way to tell what an Amazon expense is for. Everyone combines business and personal with Amazon. EVERYONE. And some people use Amazon so much they cannot even figure out what they spent. I have started segregating Amazon into its own expense category and asking for help with it every once in awhile. So I guess just bear it in mind.
- Using your business account for personal expenses
This is such a huge time waster that I already wrote more than 400 words about it. Please do not use your business account for personal expenditures.
Ok that’s basically it. But I feel so bad about scolding everyone that I have a peace offering, and that is the very first Top Ten List that David Letterman presented on his show. Makes me giggle just thinking about it.
From September 18, 1985, the “Top Ten Things That Almost Rhyme With Peas.”
And, the number one word that almost rhymes with peas is: