Sunday, January 31, 2010

Grrrrr . . . . . Aaaaarrrrrgggghhhh ! ! !

Tax season again, and one of the things I have to deal with is putting together the annual report of Beth's home business.

. . . I'm not a bookkeeper.

. . . BETH IS CERTAINLY NOT A BOOKKEEPER ! ! !


I'm now struggling through the mess once again, and wondering how to get her to do it right from the get-go so that it's not a total cluster-#$&% at this time of year.

She originally started with a paper 3 column register. Then we spent big bucks on QuickBooks (way too complicated). Now we're currently using Quicken Home & Business. This is what I use for keeping our home accounts and paying the bills etc. She keeps a seperate file on her computer for the business and uses the "business" features of "Home & Business".

Aaaarrrghhh . . . what a mess.

The trouble comes from several flaws. All operater error of course, but that doesn't make the software any less aggravating. One flaw is it lets you put in negative numbers. Accounting doesn't have negative numbers ( it's a positive number in the debit column or in an expense category). Another flaw is it lets you choose an expense category in a place/situation where there should ONLY be income categories, and vice-versa.

She can't possibly have over $10,000 in invoices in a primarily service business and yet have a profit/loss report show a yearly profit of $650. Good for taxes you say, but that can't possibly be right. God help us if the IRS audits.

1 comment:

Gordon R. Durand said...

In my opinion 99% of all small business accounting is done for the benefit of the tax man; most operators know off the top of their head whether they're making or losing money and where, if anywhere, they might be able to do better. My brother-in-law runs an upholstery shop and keeps track of everything in a spiral-bound notebook.

My business is less complicated than most, but I start with Schedule C and work backwards, reading through it to get an idea what I can deduct and where to put the numbers. I use a spreadsheet because I'm too lazy to use a calculator. After Schedule C, I do Schedule SE, Form 8829 (home office deduction) Schedule A, and then — only then — start filling in Form 1040. Oregon 40 comes last.

As for the threat of audit, I plan to make it as inconvenient as possible. We will cook up a big pot of cabbage soup and I will eat raw onions and garlic. When the auditor arrives, I will usher him into my filthy office, dump a grocery sack of receipts out on the desk, and offer him a rickety wooden chair.

"OK," I'll say, "Let's see if we can figure this out."

In the end I may owe a few hundred in back taxes, interest and penalties. I'll write him a grimy check, thank him for his time, and show him the door.