Bank Deposits question

[jeffery1969]

So first of all im new to this forum and wanted some simple advice. This past winter I started up a side business to make some extra money. I didnt realize it would do as good as it did being its a seasonal business.
Anyhow ive done everything legal to get the business off the ground. One thing that I worry about is the IRS red flagging me but maybe im just a worrying for no reason.
When a client makes a check out to my business name im depositing it into my business checking. This is not my issue. What I want advice on is what is the best and proper way to do depisits on a small business?
Im not making thousands of deposits but for example this week I had 5 deposits under my business name for 300 each.
Now if each week im doing this and the deposits increase isnt that not good to be doing so I get taxed up the kazoo?
A friend told me to have clients write check out to me personally and cash it than put that cash into my business acct?

Whats best way to do these deposits? Its not a lot but enough to worry me

Thanks so much.

[MyITGuy]

A friend told me to have clients write check out to me personally and cash it than put that cash into my business acct?
I would absolutely avoid this method - It breaks any liability/protection that setting up the company in the first place offered you.

Personally, I perform deposits when I find myself in the area of my bank (Usually on Fridays) and they average 5-10K a piece and I haven't had any issues...but I'm not avoiding paying taxes either as I pay myself a reasonable payroll and my accountant takes care of the year end taxes and etc...

[tallen]

Here's how our small business does it: during our active season, we receive most of our payments from our customers on Saturdays. Then on Monday morning, we go to the bank and deposit them all. The next week, we do it over again.

If the deposits increase, that's good! It means you are doing more business, and making more money. Yes, you will have to pay more taxes -- that's usually how it works. The frequency, schedule, or manner in which you deposit the money into your business bank account really has no bearing on that.

[jeffery1969]

Ok thanks so much!!

[jamesray50]

Hi Jeffrey - Welcome to this forum. First of all, it doesn't matter what frequency you use to deposit your money. You can do it one a week, once a month, or several times a day. What the IRS is concerned with is that you report all your income. You can reduce your taxable income by keeping all your business related receipts so you can deduct them as business expenses.

Second - you don't say what type of entity you are. If you are a sole proprietor using a DBA, technically the checks should be made payable to you, if you are a corporation then the checks should be made payable to the corporation. But, customers will usually use the business name. I am a sole proprietor using a DBA. My invoices state to make the check payable to me. My business bank accounts have both my name and DBA on the account and my endorsement stamp has both my name and DBA name. Most of the time checks are made payable to my DBA name. I don't think it really matters as long as you record the income.

You may want to talk to a tax advisor to help you figure out ways you can reduce your tax liability. Hope this helps and Good Luck!

[jeffery1969]

Thanks very much JamesRay.
I started up a chimney sweep business

Now if I started up the business in Oct 2012 should I report the business on my taxes now or wait until the following year.
I do have my records for all my transactions, client invoices etc.

Its seasonal so its not this career that is taking over my normal employment.

Please let me know if I should report my small business on my 2012 taxes.

[jamesray50]

Hi Jeffery - Yes, you do need to report your 2012 income from your business. You can also take deductions for some of your business expenses. Even if you were doing this as a hobby, the IRS still requires you to report all your income. The IRS doesn't care how many businesses you have, or hobbies, or full time or part time jobs. They just want every single penny you received to be reported. That's why it's important to keep all business related expenses, so you can reduce your income and pay less in taxes.

Hope this helps and good luck with your chimney sweep business.

[jeffery1969]

Ok thanks im working on my expenses as I type this.

[jeffery1969]

I think I need to get an acct for next yr lol.

[jamesray50]

I think I need to get an acct for next yr lol.

That might be a good idea if you don't know how to do taxes, or don't like them. An EA (enrolled agent) would also be a good choice. They are specifically trained in taxes.

[jeffery1969]

I appreciate the advice.

[Business Attorney]

It's usually a good idea to have an accountant but it is also important for every business person to understand basic accounting principles, like revenues, expenses, marginal costs, fixed overhead, capitalized expenditures, depreciation and amortization, etc... Your accountant can set up your books, do the bookkeeping entries and prepare your tax return, but you need to understand basic accounting principles to make routine business decisions.

Your questions about reporting taxes in 2012 versus waiting for 2013 indicates to me that you don't have the basics down. While you might pick it up as you go, I suggest that you consider finding an entry-level accounting class at a local community college. It would be a very good investment.