We are a small engineering company with clients in several states, mostly in the northeastern US. We have recently switched from a fairly complicated project management/accounting software package (Deltek) back to Quickbooks, and are using another software program for time tracking and invoicing. (The Deltek system was in place when I was hired, so I've basically continued doing what my predecessors did.) Most of our projects involve making a one or two day site visit to a client's location, then an additional amount of time (may be one or two days, up to several weeks) back in our home office doing analysis, emailing clients, conference calls and preparing reports.
How should I be tracking income and expenses for tax purposes? Do I treat everything associated with a project for a client in another state (let's say, NY) as taxable in that state, or only the actual time spent there? In our old system, projects were identified by department (state) and I gave our accountant a P&L for those states we did business in during the year. He asked me for the number of days worked out of state, but that doesn't really tell him how many days were worked *here* so I don't know how he is calculating our tax obligation.
Ultimately, we're paying taxes to one state or another - I'm just curious about what the correct way to handle this is, as I've never thought about it until we changed our accounting system. I am an office manager who handles the bookkeeping, but I do not have an accounting background, so maybe this is a stupid question, or I am overthinking things. But if anyone can provide a simple explanation, I'd love to hear it so I can make sure that going forward we are tracking things correctly.
Thanks in advance for your help.
How should I be tracking income and expenses for tax purposes? Do I treat everything associated with a project for a client in another state (let's say, NY) as taxable in that state, or only the actual time spent there? In our old system, projects were identified by department (state) and I gave our accountant a P&L for those states we did business in during the year. He asked me for the number of days worked out of state, but that doesn't really tell him how many days were worked *here* so I don't know how he is calculating our tax obligation.
Ultimately, we're paying taxes to one state or another - I'm just curious about what the correct way to handle this is, as I've never thought about it until we changed our accounting system. I am an office manager who handles the bookkeeping, but I do not have an accounting background, so maybe this is a stupid question, or I am overthinking things. But if anyone can provide a simple explanation, I'd love to hear it so I can make sure that going forward we are tracking things correctly.
Thanks in advance for your help.