USA How to report business income/expenses

[Business_Owner]

My wife and I "own" a small marketing company (approx $100k revenue a year, $10k-$20k expenses). DBA only, no LLC. We have always split the income and expenses down the middle and filed two Schedule C's, one for her and one for myself. Every project we work on together so there would be no easy way to determine who's revenue and expenses are who's. I believe the net tax burden for our family comes out the same no matter how we split it. Years ago I was told this is the right way to do it but I've seen some postings that say this is not correct. If it matters we are not in a community property state.

 

[Shcoll]

My wife and I "own" a small marketing company (approx $100k revenue a year, $10k-$20k expenses). DBA only, no LLC. We have always split the income and expenses down the middle and filed two Schedule C's, one for her and one for myself. Every project we work on together so there would be no easy way to determine who's revenue and expenses are who's. I believe the net tax burden for our family comes out the same no matter how we split it. Years ago I was told this is the right way to do it but I've seen some postings that say this is not correct. If it matters we are not in a community property state.

You could continue to do what you doing, however, you may use you 1040 software to find out if you will save taxes or not, then you can decide filing a joint or a separate returns.

 

[Jessymathew]

Reporting business income and expenses is a crucial aspect of running a business, and it's essential for tax compliance and financial management. Here are the general steps for reporting business income and expenses:

1. Maintain Accurate Records:
   • Keep detailed records of all financial transactions related to your business. This includes income, expenses, receipts, invoices, bank statements, and any other financial documents.
2. Choose an Accounting Method:
   • There are two common accounting methods: cash basis and accrual basis.
   • Cash Basis: You record income when you receive it and expenses when you pay them. This method is simpler and often used by small businesses.
   • Accrual Basis: You record income when it's earned and expenses when they're incurred, regardless of when money changes hands. This method provides a more accurate picture of your business's financial health but can be more complex.
3. Create Financial Statements:
   • Prepare financial statements, including an income statement (profit and loss statement) and a balance sheet. These documents summarize your business's financial performance and position.
4. Record Income:
   • Document all sources of business income. This may include sales revenue, fees, interest, and any other money your business receives.
   • Maintain separate records for different income sources, especially if you have multiple revenue streams.
5. Categorize Expenses:
   • Categorize your business expenses into different categories, such as rent, utilities, salaries, office supplies, marketing, and travel expenses.
   • Keep track of deductible expenses for tax purposes.
6. Keep Receipts and Documentation:
   • Retain receipts, invoices, and other supporting documents for your expenses. These serve as evidence in case of an audit or when filing taxes.
   • Use accounting software or apps to digitize and organize your receipts for easy access.
7. Record Depreciation and Amortization (if applicable):
   • For assets like equipment or vehicles, record depreciation (for tangible assets) or amortization (for intangible assets) over time to reflect their decreasing value.
8. Calculate Net Income:
   • Calculate your business's net income by subtracting total expenses from total income. This is your business's profit or loss for a given period.
9. File Taxes:
   • Depending on your business structure (e.g., sole proprietorship, LLC, corporation), you may need to file different tax forms (e.g., Schedule C for sole proprietors, Form 1120 for corporations).
   • Be aware of tax deadlines and make estimated tax payments throughout the year if required.
10. Consult a Tax Professional:
    • Tax laws and regulations can be complex and change over time. Consulting with a tax professional or accountant can ensure you're in compliance with tax laws and taking advantage of available deductions and credits.
11. Regularly Review and Update:
    • Make reporting income and expenses a routine part of your business operations. Regularly review your financial statements to track your business's financial health and make informed decisions.
12. Consider Accounting Software:
    • Accounting software like QuickBooks, Xero, or FreshBooks can simplify the process of tracking and reporting income and expenses. These tools can automate many aspects of financial management.

Remember that accurate and timely reporting of business income and expenses is not only necessary for tax compliance but also essential for making informed business decisions and understanding your company's financial performance.