Taxes & Accounting Software

Crafting for Profit: Tax & Accounting Consequences

Records and Accounting Software

One key to keeping the IRS satisfied is maintaining good business records. As I said before you must truly be crafting for profit.

If any of these deductions are challenged you have to prove you were trying to run a profitable home business, even if you wind up losing money. And you have to substantiate your deductions with good records.

You need to keep your receipts and other paper records. However a good way to organize these and prepare for your tax returns is to use a personal finance or small business accounting software package.

Easy to Use Personal Accounting Software

Microsoft’s Money and Intuit’s Quicken are the major competitors in the individual and small business accounting software field. If you aren’t already using one of these, you should consider it, even if you don’t plan to use it for business.

Once you get hooked on paying bills online, you may never go back to writing out checks, addressing envelopes and licking stamps. The time you’ll save is substantial. The postage savings alone can pay for the accounting software!

Each company sells various grades of their accounting software packages from regular through deluxe and premier.

Each has a different set of features, with the higher grades usually having more financial planning, investing and accounting tools.

Each also sells a small business package: Microsoft Business and Quicken Premier Home & Business. These packages offer tools specifically oriented to small & home business needs, such as invoicing, inventory control and customer management as well as the individual finance tools their other programs offer. Since they are not terribly difficult to use, they are great for a small home business.

Money Premium and Quicken Premier do pretty much the same things. Both are easy to set up and use. Both give you the tools you need to download and pay your bills on-line, manage your investments and plan for your retirement.

If you are making some money selling crafts, they both allow you to categorize the income and expenses involved. This then allows you to prepare reports or your tax returns with ease.

Software Recommendations

Money Premium used to include a lot of extras that Quicken charged extra for, like two years of online bill paying. But that is no longer the case. Money still includes a year of tax preparation and a free credit report and credit monitoring. This would cost extra if you use Quicken.

If you don’t want to pay for online bill paying through these programs there are some options to explore. The bank where you maintain your checking account might offer this service for free or at a reduced rate.

Most credit card companies have there own websites which you can register to use. You can pay that company’s bill there (some allow you to schedule payments in advance). You might also be able to pay all your bills on some of these sites. It’s a hassle to go to every site every month, but it saves you a bit of money and also gives you the opportunity to see if any unauthorized charges are taking place.

You’ll soon be able to get credit reports for free from each of the major credit bureaus once a year (in some parts of the country this program is already in effect), So, the only real extra Money provides is the tax return, which would cost you $20 using Quicken’s Turbo Tax.

Since reviewers of Money have given it poor marks for some of the same problems I experienced when I tried to use it, mainly having to do with the initial setup, I would recommend Quicken Premier .

I have used Quicken Premier for years and have been very happy with it. It is a full featured, but easy to use personal accounting program. Once tax time comes, you can export the necessary numbers directly into Quicken´s popular Turbo Tax Federal & State tax preparation software packages.

Incidentally you are supposed to be able to transfer your data between Money and Quicken using the import or export feature. But I have found that something always gets lost in the translation. So I would recommend you pick one of these programs and stay with it if you should decide to upgrade. Both are excellent and I don't think there is anything to gain by switching back and forth.

Home & Small Business Accounting Software

Money Small Business and Quicken Premier Home & Business are fairly new. They seem to be ideal for a small home business since they combine the features of the personal finance program with a small business module.

I have read good reviews of the Quicken program. Again Money Business offers hundreds of dollars worth of services that Quicken charges for.

For bigger or more complex businesses, you might want to consider a real accounting program. You should consult your accountant first. He might suggest or even give (or sell) you a program compatible with his. This makes preparation of your tax returns quicker and less expensive.

There are hundreds of accounting programs available with various degrees of complexity.

The only one I have used is Quickbooks. This is a full featured accounting program, but is easy to set up and use. Everything from cost of production, to inventory control, invoicing, bill paying and payroll are handled in an intuitive way.

Many happy returns!