Common Questions
Questions business owners ask about taxes, deductions, and accounting. Have another? We encourage them.
How do I track job costs for my construction business?
Job costing means tracking every expense by project so you know which jobs actually make money. The key is coding expenses to projects in your accounting software when they happen, not weeks later when you're guessing.
Read answerWhat is the best accounting method for contractors?
Cash basis accounting works best for most contractors. It aligns your tax bill with actual money collected and avoids paying taxes on receivables you haven't received yet, which matters a lot when dealing with retainage and slow-paying customers.
Read answerHow do I handle retainage in my construction bookkeeping?
Set up separate accounts for retainage receivable and retainage payable. Track both at the job level so you know exactly what's held back on each project. Record the full invoice amount as revenue when the work is done, even though part of the payment is withheld.
Read answerCan a contractor use cash basis accounting?
Yes, most contractors can. The IRS allows cash basis accounting for businesses with average annual gross receipts under $29 million. The bigger question is whether cash basis gives you useful financial information for running your business.
Read answerWhat tax deductions can construction companies claim?
Construction companies can deduct equipment and vehicle costs, materials, labor, insurance, bonding, job site expenses, and administrative overhead. The key is tracking expenses by job and maintaining documentation throughout the year.
Read answerHow do I set up QuickBooks for a construction business?
Start by enabling job costing and building a chart of accounts designed for construction. Configure customers as jobs, set up items for labor and materials, and structure everything to track profitability by project.
Read answerWhat is progress billing and how do I track it?
Progress billing lets contractors invoice customers incrementally as work gets completed instead of waiting until project end. Track it by setting up jobs in your accounting software with the total contract value and generating invoices against that estimate as milestones are reached.
Read answerHow do I handle change orders in my accounting?
Record change orders as soon as they're approved, tracking both the additional revenue and the associated costs separately from the original contract. This lets you see whether change orders are actually profitable.
Read answerShould I hire a bookkeeper who understands construction accounting?
Yes. Construction accounting requires job costing, progress billing, retainage tracking, and subcontractor management that generic bookkeepers typically don't handle well. Without industry expertise, your books might balance but won't tell you which jobs actually made money.
Read answerWhat records do I need to keep for construction projects?
Keep contracts, change orders, invoices, material receipts, labor records, subcontractor agreements, permits, and inspection reports. These records support tax deductions, protect you in disputes, and help you understand job profitability.
Read answerHow do I track equipment depreciation for my contracting business?
Maintain a fixed asset register that lists every piece of equipment, its purchase date, cost, and depreciation method. This schedule feeds directly into your tax return and needs to be updated whenever you buy, sell, or dispose of equipment.
Read answerWhat are the payroll requirements for construction workers in Idaho?
Idaho construction payroll requires state tax registration, workers' compensation insurance, and proper employee classification. Public works projects add certified payroll and prevailing wage requirements.
Read answerHow do I account for materials on job sites?
Materials should be expensed when used on a job, not when purchased. Code every purchase to a specific job immediately, document transfers between jobs, and track returns carefully so your job cost reports show true profitability.
Read answerCan I deduct tools and equipment as a contractor?
Yes. Small tools under $2,500 can be expensed immediately, while larger equipment qualifies for Section 179 or bonus depreciation. The key is documenting business use and keeping good records.
Read answerWhat is the difference between completed contract and percentage of completion accounting?
Completed contract recognizes all revenue when a project finishes. Percentage of completion recognizes revenue as work progresses. The method you use affects when you pay taxes and how your financial statements look to banks and bonding companies.
Read answerHow do subcontractors report income and expenses?
Subcontractors report income and expenses on Schedule C as part of their personal tax return. All income is taxable whether you receive a 1099 or not, and deductible expenses reduce your taxable profit.
Read answerDo I need workers compensation insurance as a contractor in Idaho?
Idaho requires workers' compensation if you have employees. Sole proprietors can opt out, but most general contractors and commercial clients require proof of coverage before they'll hire subs.
Read answerHow do I handle 1099s for subcontractors?
Collect a W-9 from every subcontractor before their first payment, track total payments throughout the year, and issue a 1099-NEC to anyone you paid $600 or more for services by January 31.
Read answerWhat are common IRS audit triggers for construction companies?
Worker misclassification, 1099 compliance issues, and unreported cash payments are among the most common triggers. Large vehicle and equipment deductions without proper documentation also draw IRS attention.
Read answerShould my construction business be an LLC or S-corp?
It's not really either/or. An LLC can elect to be taxed as an S-corp, which is often the best of both worlds. The decision comes down to your profit level and whether the tax savings justify the added payroll requirements.
Read answerHow do electricians track business expenses for taxes?
Use a dedicated business bank account and credit card, capture receipts daily with an app, and categorize expenses as you go. The goal is clean records that show exactly what you spent on materials, tools, vehicle costs, and job-related expenses.
Read answerWhat bookkeeping software works best for plumbers and HVAC contractors?
Most plumbers and HVAC contractors use QuickBooks for accounting and separate field service software for scheduling and invoicing. The right combination depends on your business size and whether you need job costing, inventory tracking, and mobile invoicing from the field.
Read answerHow do I calculate overhead rates for bidding construction jobs?
Add up all costs not tied to specific jobs, divide by your expected billable labor hours for the year, and multiply that rate by estimated hours for each job you bid.
Read answerCan I deduct my work truck as a business expense?
Yes, if you use the truck for business. You can deduct either actual expenses or use the standard mileage rate. For trucks used heavily in construction or trades, the actual expense method with Section 179 depreciation often saves more.
Read answerWhat is job costing and why is it important for contractors?
Job costing tracks every expense, labor hour, and material cost to individual projects instead of lumping them together. It shows contractors which jobs actually made money and which lost, so you can bid better and stop taking unprofitable work.
Read answerHow do I track tip income for my restaurant employees?
Credit card tips track automatically through your POS system. Cash tips require employees to report daily. Both need to flow into payroll so you withhold taxes correctly and stay compliant.
Read answerWhat is the best POS system for restaurant bookkeeping?
The best POS depends on how well it integrates with your accounting software and fits your operation. Toast, Square, Clover, and TouchBistro all work when configured correctly. Setup and consistent use matter more than the brand you choose.
Read answerHow do restaurants handle sales tax on food and beverages?
In Idaho, prepared food and most beverages sold at restaurants are taxable at 6%. You collect it at the point of sale, track it separately from revenue, and remit it to the state on your filing schedule.
Read answerWhat tax deductions are available for restaurant owners?
Nearly all restaurant operating expenses are tax deductible. Food costs, labor, rent, equipment, supplies, marketing, and licensing fees all reduce your taxable income when tracked and categorized properly.
Read answerHow do I calculate food cost percentage?
Divide your cost of goods sold by your food sales, then multiply by 100. The key is getting an accurate COGS figure, which requires regular inventory counts.
Read answerShould I use accrual or cash accounting for my restaurant?
Most restaurants use cash accounting because it's simpler and matches how the business actually operates. Accrual becomes necessary when you grow past IRS thresholds or need financial statements for investors and lenders.
Read answerHow do I track inventory for a restaurant?
Count inventory weekly at minimum, track by category, and compare actual usage to what your sales say you should have used. The gap between those numbers tells you where food is walking out the door.
Read answerWhat payroll taxes apply to restaurant employees in Idaho?
Restaurant employees in Idaho are subject to federal Social Security, Medicare, and unemployment taxes, plus Idaho state income tax withholding and SUTA. Tipped employees add complexity with tip credit rules and reporting requirements.
Read answerHow do I handle credit card processing fees in my bookkeeping?
Record credit card processing fees as a separate expense category using the gross sales method. This gives you cleaner financial statements and ensures you claim the full deduction for fees paid to processors like Square, Stripe, or PayPal.
Read answerCan I deduct food waste as a business expense?
Food waste is deductible, but not as a separate line item. It's captured through your cost of goods sold calculation. When you throw out spoiled inventory, that cost is already reducing your taxable income.
Read answerWhat records should restaurants keep for tax purposes?
Restaurants need to keep income records including POS reports and tip documentation, expense receipts and invoices, payroll records, and inventory counts. The IRS typically wants three to seven years of documentation depending on the record type.
Read answerHow do I set up QuickBooks for a restaurant?
Restaurant QuickBooks setup requires customizing your chart of accounts for food costs, tip reporting, and POS integration. Generic settings won't track what you need to know about profitability.
Read answerWhat is prime cost and how do I track it?
Prime cost is your cost of goods sold plus total labor costs, expressed as a percentage of sales. For restaurants, it's the single most important number for understanding profitability. Track it weekly by monitoring food costs and all-in labor expenses.
Read answerHow do coffee shops handle bookkeeping differently than restaurants?
Coffee shops deal with higher transaction volumes at lower ticket prices and simpler inventory than full-service restaurants. The bookkeeping fundamentals are the same, but the complexity around food cost tracking and menu analysis differs significantly.
Read answerCan restaurant owners deduct employee meals?
Yes, meals provided to employees during their shifts are generally 100% deductible when furnished for the employer's convenience. For restaurants, this test is typically easy to meet since staff need to stay on-site during service.
Read answerWhat are the Idaho sales tax requirements for restaurants?
Idaho restaurants must collect 6% sales tax on all food and beverage sales, including prepared meals and most drinks. Registration with the Idaho State Tax Commission is required before opening, and filing frequency depends on your monthly tax liability.
Read answerHow do I account for catering and events separately?
Use classes in QuickBooks or separate income accounts to track each revenue stream. The key is capturing both revenue and direct costs by segment so you can see true profitability.
Read answerShould my restaurant be an LLC or corporation?
Most restaurants start as LLCs and that's usually the right call. An LLC provides liability protection with less paperwork, and you can elect S-Corp tax treatment later when profits justify the extra requirements.
Read answerWhat equipment can restaurants depreciate on taxes?
Most equipment you purchase for your restaurant can be depreciated. Kitchen appliances, refrigeration, dining furniture, POS systems, and HVAC all qualify. You can often deduct the full cost in year one using Section 179.
Read answerHow do food trucks handle bookkeeping and taxes?
Food trucks need daily sales tracking, separate business accounts, weekly inventory counts, and careful attention to quarterly estimated taxes. The mobile nature and cash-heavy transactions require disciplined systems that work on the go.
Read answerWhat can real estate agents write off on taxes?
Real estate agents can deduct vehicle expenses, marketing costs, MLS and licensing fees, home office, technology, professional development, and client gifts. The key is tracking these expenses throughout the year.
Read answerHow do I track mileage for my real estate business?
Use a mileage tracking app that runs in the background and log every trip immediately. Record the date, destination, business purpose, and miles for each drive. Know what qualifies as deductible business driving versus commuting.
Read answerShould real estate agents use QuickBooks or other software?
QuickBooks Online works well for most real estate agents. It handles commission-based income, tracks expenses by category, and integrates with banking and mileage apps. The setup matters more than the software choice.
Read answerHow do I handle commission splits in my bookkeeping?
Record the full gross commission as income, then record the portion paid out as an expense. This keeps your books accurate and ensures you have proper documentation for 1099 reporting at year end.
Read answerWhat is the home office deduction for real estate agents?
Real estate agents can deduct home office expenses using either the simplified method ($5 per square foot up to $1,500) or the regular method based on actual expenses. The key is exclusive and regular business use of the space, which most agents meet if their home serves as their administrative base.
Read answerCan I deduct MLS fees and association dues?
Yes. MLS fees, NAR dues, state and local association dues, and lockbox subscriptions are deductible business expenses for real estate agents and brokers. The only portion you can't deduct is any amount that goes toward lobbying or political activities.
Read answerHow do I track marketing and advertising expenses as a realtor?
Use a dedicated business card for all marketing spend and set up subcategories in your accounting software. Breaking expenses into digital ads, print, signage, and photography helps with tax deductions and shows you where your marketing dollars actually go.
Read answerShould I form an LLC for my real estate business?
In most cases, yes. An LLC separates your personal assets from business liabilities and offers tax flexibility. The right structure depends on whether you're an agent, investor, landlord, or property manager.
Read answerWhat quarterly tax payments do real estate agents need to make?
Real estate agents need to make quarterly estimated tax payments for both federal income tax and self-employment tax, plus Idaho state income tax. Payments are due April 15, June 15, September 15, and January 15.
Read answerHow do I deduct staging and photography expenses?
Staging and photography are ordinary business expenses for real estate professionals. Deduct them in the year you pay, typically under advertising or marketing expenses on your tax return.
Read answerWhat records should real estate agents keep for tax purposes?
Keep mileage logs, commission statements, marketing receipts, client meal documentation, licensing fees, and home office records. Vehicle expenses and marketing costs are typically the biggest deductions for agents.
Read answerCan real estate agents deduct client gifts?
Yes, but only up to $25 per person per year. That's a federal limit that applies to all business gifts, which means your $200 closing gift only yields a $25 tax deduction.
Read answerHow do I handle self-employment taxes as a realtor?
Realtors pay 15.3% self-employment tax on net commission income. Make quarterly estimated payments to avoid penalties, maximize deductions to reduce taxable income, and consider S Corp election once earnings exceed $50,000 annually.
Read answerWhat is the QBI deduction for real estate professionals?
The QBI deduction allows up to a 20% deduction on qualified business income from rental properties or real estate commissions. Rental income requires meeting safe harbor rules, while agents and brokers qualify without additional limitations.
Read answerShould I elect S-corp status for my real estate business?
It depends on how much you're earning and what type of real estate work you do. S-corp election typically makes sense for agents and brokers with net profits above $40,000 to $50,000, but rental income usually doesn't benefit from the structure.
Read answerHow do law firms handle trust accounting and bookkeeping?
Law firms must keep client funds in separate IOLTA trust accounts, completely apart from operating money. You track individual client ledgers within the trust account and run three-way reconciliations to ensure every dollar is accounted for.
Read answerWhat tax deductions can consultants claim?
Consultants can deduct home office expenses, technology and software, professional development, travel, marketing costs, and professional services like accounting. The key is proper documentation and categorization.
Read answerHow do I track billable hours for my professional services firm?
Track time in real-time, not at the end of the day. Set up client and matter codes that match your billing structure, pick a tool that fits your firm size, and review entries weekly before they become invoices.
Read answerShould my consulting business be an LLC or S-corp?
The question isn't really either/or. LLC is a legal structure while S-corp is a tax election. Most consultants start as LLCs, then elect S-corp taxation once profits consistently exceed $40,000 to $50,000.
Read answerWhat bookkeeping software works best for service businesses?
QuickBooks Online is the standard choice for most service businesses. It handles invoicing, time tracking, and project organization while integrating with almost everything. FreshBooks and Xero are solid alternatives depending on your specific needs.
Read answerHow do accountants handle their own business bookkeeping?
The same way we tell clients to do it. Dedicated business accounts, consistent categorization, weekly reconciliation, and no shortcuts. The difference is we've already made the mistakes and know what causes problems.
Read answerCan I deduct professional development and continuing education?
Yes, if you're a business owner or self-employed and the education maintains or improves skills in your current trade or business. Education that qualifies you for a new profession doesn't count.
Read answerWhat is the best way to invoice clients for professional services?
Set clear payment terms before work begins, invoice promptly after delivering value, and make it easy for clients to pay. Track every invoice in your accounting system so you always know what's outstanding.
Read answerHow do I separate personal and business expenses as a consultant?
Open a dedicated business bank account and credit card, then run all business income and expenses through those accounts. Pay yourself through owner draws or a set salary, and keep personal purchases off the business card entirely.
Read answerWhat insurance premiums can professional service businesses deduct?
Most insurance premiums paid to protect your professional service business are fully deductible. This includes professional liability, general liability, cyber coverage, health insurance, and workers' compensation.
Read answerHow do manufacturers track inventory and cost of goods sold?
Manufacturers track inventory through three stages: raw materials, work-in-progress, and finished goods. Cost of goods sold captures all production costs when products are sold, requiring accurate tracking systems and regular reconciliation.
Read answerWhat is the best accounting method for manufacturing businesses?
Accrual accounting is almost always the right choice for manufacturers. The IRS requires it above certain revenue thresholds, and even when cash basis is allowed, accrual gives you meaningful insight into production costs and margins.
Read answerHow do I calculate production costs for pricing?
Add up direct materials, direct labor, and manufacturing overhead allocated per unit. This total cost is your floor for pricing. Apply a markup that covers selling expenses and profit margin.
Read answerCan manufacturers use Section 179 to deduct equipment?
Yes, manufacturers can use Section 179 to deduct qualifying equipment purchases in the year they're placed in service. The 2024 limit is $1,160,000, with phase-outs starting at $2,890,000 in total purchases.
Read answerWhat are the Idaho tax requirements for manufacturing companies?
Manufacturing companies in Idaho face corporate income tax, sales tax obligations, property tax on equipment, and payroll withholding. The biggest opportunity most manufacturers miss is the production exemption, which allows tax-free purchases on equipment and materials used directly in manufacturing.
Read answerHow do I track raw materials and finished goods inventory?
Set up separate inventory accounts for raw materials and finished goods in your chart of accounts. Track the flow of costs from material purchase through production and into finished inventory using bills of materials that define what goes into each product.
Read answerWhat is job order costing vs process costing?
Job order costing tracks costs by individual project or customer order. Process costing averages costs across continuous production of identical products. Which one fits depends on whether you make unique items or produce in bulk.
Read answerHow do food producers handle COGS calculations?
Food producers track COGS by capturing direct materials, direct labor, and production overhead. Unlike retail, you're transforming raw ingredients into finished products, which requires recipe costing and accurate inventory tracking.
Read answerShould my manufacturing business hire a bookkeeper or accountant?
Most manufacturers need both. Bookkeepers handle ongoing recordkeeping like inventory tracking and cost of goods sold. Accountants handle tax preparation, compliance, and financial strategy. They serve different purposes.
Read answerWhat R&D tax credits are available for manufacturers?
The federal Research and Development tax credit is the main incentive available, rewarding manufacturers for developing new products, improving existing ones, or creating better production processes. Most manufacturers qualify for activities they're already doing.
Read answerWhat is the difference between bookkeeping and accounting?
Bookkeeping is recording what happened. Accounting is figuring out what it means and what to do about it. Both are necessary, and they work best when handled together.
Read answerHow often should I reconcile my business bank accounts?
Monthly is the minimum for most businesses. High-volume operations like restaurants or retail should reconcile weekly to catch errors before they compound and keep the task manageable.
Read answerWhat financial reports should small business owners review monthly?
At minimum, review your profit and loss statement, balance sheet, and cash position every month. These three reports tell you whether you're making money, what you own and owe, and whether you can cover upcoming expenses.
Read answerHow do I categorize business expenses correctly?
Use your accounting software's standard expense categories as a starting point and stay consistent throughout the year. Proper categorization helps you understand your spending patterns and ensures you capture every legitimate tax deduction.
Read answerShould I hire a bookkeeper or do it myself?
It depends on your business complexity, your skills, and how you value your time. DIY works for simple businesses with few transactions. Most owners find the time cost exceeds what professional help would cost.
Read answerWhat is the difference between cash and accrual accounting?
Cash accounting records transactions when money actually moves. Accrual accounting records them when they're earned or owed, regardless of payment. The method you choose affects what your financial statements show and how you manage taxes.
Read answerHow much does a bookkeeper cost for a small business?
Most small businesses pay between $150 and $500 per month for professional bookkeeping. Pricing depends on transaction volume, industry complexity, and what services are included.
Read answerWhat records do I need to keep for my business?
Keep all income documentation, expense receipts, bank statements, tax returns, payroll records, and legal documents. The IRS can audit up to seven years back in some cases, so retention matters as much as collection.
Read answerHow do I set up a chart of accounts for my business?
Your chart of accounts organizes every transaction into categories that match how your business operates. Start with the five main account types, then customize with specific accounts for your industry and the financial information you need to make decisions.
Read answerWhat is accounts receivable vs accounts payable?
Accounts receivable is money customers owe you for work you've completed. Accounts payable is money you owe vendors for goods or services you've received. Both directly impact your cash flow and show up on opposite sides of your balance sheet.
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