Posts Tagged ‘common mistakes’
Worker Status – When is a Worker an Employee?
Unless the worker is an independent contractor, the answer is always!
There are specific criteria to determine if a worker is an employee or an independent contractor. The key word in that sentence is “independent.” The most important factor is who is in control. This is covered in more detail in our March 2010 article Employee or Independent Contractor?
But there are several other issues that can also trip you up.
The Devil is in the Details
Do you hate paperwork? Almost everyone does, but when it come to dealing with the Internal Revenue Service, you need to have all the proper paperwork and have all the i’s dotted and the t’s crossed.
When you operate as a corporation, the corporation is a separate legal entity from you, so you should have a corporate paper trail that clearly reflects intent and action. One area that can really be a minefield is accounting for monies paid to corporate officers, other than payroll.
Is it a Loan or a Dividend?
In one scenario, William H. Bruecher III paid more than $27,000 in taxes on money his corporation supposedly loaned to him. Instead of receiving a salary, the corporation paid his personal expenses, classifying the payments as advances.
In an audit, the IRS will check to see if such advances are loans or dividends. If repayment by the owner and collection by the corporation seem assured, the advance is a loan.
To decide whether there is intent to repay, the following are factors:
- Is there a promissory notes or other written promises to repay the advance?
- Is the interest charged on the advance?
- Is there collateral to ensure repayment?
- Is there a history of repayment?
Neither Mr. Bruecher nor his corporation could produce documentation of any of these factors; therefore, the advances were taxable dividends.
Ten Most Common Bookkeeping Mistakes by Small Businesses
Stay on top your bookkeeping and you'll stay on top your business.
Whether you’re a one-person operation or a Fortune 500 company, bookkeeping is a significant part of your business.
It may not one of the more glamorous jobs, but bookkeeping is part and parcel of a company’s success. Mistakes and inefficiencies can cost a company both time and money.
Outlined below are 10 of the most common mistakes made by small businesses.
