Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 10-20-2016, 12:24 AM
Junior Member
 
Join Date: Oct 2016
Posts: 4
New Business income record keeping

I've been running a guitar teaching business for a while now and have been doing it under the table (I know that's really bad) but I take a mixture of checks and cash, most of which I put on my personal bank account and use the debit card to buy things like all of my personal online shopping and things for the business, I do not yet have a tax ID and I have not made it an LLC. My question is how do I start showing income and not be penalized for my past? If I setup a business bank account and keep my personal account, where does the money come from to put into my personal account? Do I take it out of the business account or do I take some of the unreported cash I get and put it into the personal account? Do they audit your personal account and ask where that money came from? Do you recommend quickbooks self employed? Everything is so overwhelming, sorry for the lengthy question, any info will help greatly, thanks



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 10-20-2016, 05:33 AM
Moderator
 
Join Date: Oct 2010
Posts: 5,258
I've been running a guitar teaching business for a while now and have been doing it under the table (I know that's really bad) but I take a mixture of checks and cash, most of which I put on my personal bank account and use the debit card to buy things like all of my personal online shopping and things for the business, I do not yet have a tax ID and I have not made it an LLC.==>I guesss actually you need your tax ID , FEIN, to set up an LLC for your biz to open your biz acct for an LLC even as a disregarded entity, I mean SMLLC.

My question is how do I start showing income and not be penalized for my past? > Attempts to deceive the IRS can carry heavy fines and even a potential jail sentence, depending on the severity Basically youmust report even cash income under the table;since you are paid under the table, you will earn your entire gross income, because no deductions will be taken out of your pay. More money in your pocket. That sounds like a great thing, right? Not necessarily. If anybody pays you $600 or more within a year, they are required to file a 1099 form with the IRS and give you a copy, but even under $600 you have to report the income. If you didn't get a 1099 MISC form for the work you did and get paid in cash, then the IRS has no way of knowing that you earned the money BUT, if they ever get suspicious of you for any reason they can certainly find out about it (look at your bank records, etc.).then you neeed to pay interest/penalties by amended your past returns. As you own your own business and receive some of your revenue as cash, you'll need to hire an Enrolled Agent /a CPA doing taxes in your local area to help you set up an appropriate tax arrangement




If I setup a business bank account and keep my personal account, where does the money come from to put into my personal account?=> That is self employment income. You might get a 1099Misc for the income from your client and need to report it on your Sch Cof 1040 and of course you deposit 1099MISCs in your bank biz account.


Do I take it out of the business account or do I take some of the unreported cash I get and put it into the personal account? ===> you must track your business income separately from your personal income for tax purposes. Never deposit biz related cash /checks into your personal bank account I mean you need yur bank biz account to report your biz related income on your return.As said aslongas you get paid $600 or more than $600 then your clients must issue you 1099MISC and you need to report it on your SchC however if you get paid less than $600 , then you simply deposit a check or cash into your bank biz account.

Do they audit your personal account and ask where that money came from?===>I should say it depends; it is up to them so nobody knows it;in general, The IRS does not monitor your bank accounts. However, they can easily gain access to your bank account info under certain circumstances. The IRS expects you to honestly and accurately disclose your bank account information when necessary. If you choose not to provide the info, the IRS can force you to comply. If you are being audited by the IRS, be prepared. Almost every IRS auditor is going to want to investigate whether you have reported all of your income on your tax return.
To do this, an IRS audit will conduct what is known as a bank deposit analysis. A bank deposit analysis involves the IRS adding up every deposit in your bank account and comparing it to the income you reported on your tax return.
The IRS will request you to provide the bank statements for the audit; if you do not, they will issue a subpoena to your bank to acquire them.If your bank deposits are greater than what you reported on your return, the IRS will automatically presume the difference was earned by you and is taxable.The burden will then shift to you to prove to the IRS that the difference between what is in your bank statements and on your tax return is not taxable. Nontaxable forms of income can ALSO include cash


? Do you recommend quickbooks self employed? =====>If you are familiar with the software then it;d be OK.However QB software is not necessarily needed to report /record your self employment income and expenses to report it to IRS/ your state; tyou may simply use your MS excel SS or etc whatever is convenient for you If your self-employment income is higher than your business expenses, you report this net income.If your business expenses are higher than your income, you report a net loss.Aslongas the amount on SCh C of 1040 line 29/ 31 is $400 or higher than $400 you must file yourr eturn and aslongas the amt on Sch Se of 1040 line 2/ 3 is also $400 or higher than $400 you must pay self employment tax.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #3 (permalink)  
Old 10-20-2016, 07:51 AM
Junior Member
 
Join Date: Oct 2016
Posts: 4
Thanks for the quick response, tons of quality information!



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #4 (permalink)  
Old 10-20-2016, 08:08 AM
Junior Member
 
Join Date: Oct 2016
Posts: 4
Thanks for the quick response, tons of quality information!



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #5 (permalink)  
Old 10-20-2016, 08:11 AM
Junior Member
 
Join Date: Oct 2016
Posts: 4
Thanks for the quick response, tons of quality info!



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply



Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
How to record sales Chernandez1230 Income 3 09-25-2016 08:42 AM
How to record Sec 179 on 1120S and K-1 fencewalker7 S-Corporation 6 03-14-2014 02:15 PM
2 LLCs, transfer money to the other for business expense - how to record for tax purposes? olimits7 For 2013 0 03-11-2014 11:47 AM
Five Tips for Great Record-Keeping Samatg For 2009 0 04-12-2010 05:17 PM
Help With 1099 Sole Proprietor Tax Deductions and Record Keeping Keezee Income 1 09-28-2007 09:22 AM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning
 
 
 

» Recent Tax Q&A
No Threads to Display.