How QuickBooks Can Help You Pay Less Taxes

….and pay for your next vacation

Income taxes, that is. The Queen has no control over payroll taxes paid to the federal and state governments – if she did, it would be different than it is now. Let’s face it, right now you are recovering from either filing your income tax returns and paying the government a lot of money, or filing an extension and paying a portion of what you will owe the government. If you’re lucky, that is what you have just done. If you are completely in denial, you didn’t file your tax return, you didn’t file your extension, and quite frankly, your next step should be to buy land in Central America and go away for a long time until the IRS stops trying to find you.

Here is how QuickBooks can help you with any of the above scenarios and pay for your vacations. QuickBooks is a very friendly accounting program. It is so friendly that you can install it on your computer, setup the basic structure, and begin writing checks immediately and never have to see the banned words “debit” or “credit” (The Queen loves debits and credits because the Queen is secretly an accountant and lives in the Land of Accounting).

The cost of QuickBooks is very low – in the old days in the Land of Accounting, an accounting program could be very expensive – anywhere from $1,000. to $10,000., depending on the size of your business. You can buy QuickBooks for about $250. and that is a good deal for a business owner. (You can also buy it on the Queen’s website and receive a discount for your purchase – just because you know the Queen).

First let’s talk about your decision to organize your finances, get control of what you make in income, what you spend in expenses and what profit you are going to have to pay taxes on and how you can reduce that net profit and reduce your taxes. You, the business owner, have to make the decision that this is your top priority. After that everything else will fall into place easily. If you are having trouble with this step, you may want to join one of the many support groups available – I recommend the “I don’t want to be M.C. Hammer” group highly. (Signup is on the Queen’s website).

After you buy QuickBooks the next step is easy. Decide how to setup your chart of accounts. What is a Chart of Accounts (is this more accounting babble – no it is not). The Chart of Accounts is a list in QuickBooks. It is one of several lists in QuickBooks and is the most important list which holds all of the money transactions in different categories – Income, Expenses, Checking and Savings Accounts, Accounts Payable, Accounts Receivable and many more categories that are necessary to run an efficient business and keep track of your money.

QuickBooks knows how scary this first step may be and they will walk you through it in the Setup. They even have existing chart of accounts for different types of businesses. For example, you are a contractor – you can choose the chart of accounts “template” for contractors and you will have all of the basic categories you need to run the business. From that template list, you can add or delete accounts you do not need to use.

The Introduction to QuickBooks at the College of Marin taught by the Queen herself thoroughly walks you through the choosing a chart of accounts step. The class also covers many more important QuickBooks steps (see catalog for Community Education classes at: College of Marin, IVC).

OK, now you have installed QuickBooks and setup your basic company with a chart of accounts. Now you are ready to write checks and when you write the check you will choose an account from the Chart of Accounts to keep track of the expense. For example, you write a check to pay your rent on your office or building for $1,000.

  • On the main Home page, on the right lower screen, you will see an icon for “Write Checks”. Click it. The window opens and you fill in the check just like you would hand write a check, filling in the person (vendor) you pay the rent to and the amount of $1,000. in the “$” field.
  • On the bottom half of the screen you will see a column marked “Account”. You cannot save and close the check window without filling in that field. When your cursor lands on that field, a drop down arrow will appear to the right. You can use that drop down arrow to look at the list of Chart of Accounts and choose the appropriate expense account “Rent”.
  • Or magically – you can type the word “Rent” in that field and QuickBooks will go find the correct account for you in the list.
  • When you print the check, or manually write it and save and close it, the rent amount of $1,000. will be posted to the category “Rent” in the expenses portion of the Chart of Accounts.

This is how QuickBooks keeps track of all transactions. Every time you issue an invoice from QuickBooks it knows to post the amount to an Income account, every check you write will be posted to an expense account.

At the end of the year, you can prepare a Profit and Loss to anticipate what your net profit will be for the year end and make appropriate business decisions about what to purchase before the year end. At the beginning of the next year, you print out a Profit and Loss and Balance Sheet for your tax preparer, send it off, and go on vacation.

Doesn’t that sound like a much better way to spend January than spending hours and hours pouring over you check register trying to gather together your tax information? Of course it does. And this is how QuickBooks can save you hundreds and maybe thousands of dollars that you will not have to pay in taxes.

The money you save will pay for the vacation you can take in January.

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