Private Practice Bookkeeping Archives - Therapeutic Bookkeeping

Which QuickBooks Software Subscription Is Best for My Practice?

QuickBooks Online is an excellent tool to keep on top of your bookkeeping for your private practice. But which QBO subscription is the best choice?

The short answer: The Quickbooks Online ‘Essentials’ subscription.

It’s almost always the best fit for my clients because it has all the features you’ll need, including:

Connect your business bank accounts to the software to automatically sync your transactions
Enhanced reporting so you can create beautifully customized financial reports (something you don’t get with the Simple Start or Self-Employed plans.)
It supports up to 3 users on the account; so you, your bookkeeper, and your tax professional #DreamTeam (plus you have total control on what users ‘see’ and ‘access’ with the ability to set access levels!)

For therapists and private practice owners that are serious about their bookkeeping, keeping that income and those expenses organized, and making tax time a breeze, QuickBooks Online Essentials is a great fit!

I also need to say one thing. If you’re thinking about QuickBooks Self-Employed, DON’T DO IT! I know it’s cheap, but it’s not for you. QBSE is designed for ‘side gigs and freelancers’. Even if you’re just seeing clients on the side, it still doesn’t have the full-blown accounting functions you need. And if you ever decide to upgrade to the better subscription levels, you cannot migrate ANY of your data over to your upgraded account! (Just to name a few cons!)

If you’re not quite ready for a full blown accounting software, a spreadsheet can work great, too! I created one specifically for therapists in private practice and you can find it in The Bookkeeping Cure™️ for Therapists!

If you’d rather not even deal with the headache of choosing and setting the software up or managing your bookkeeping, we at Therapeutic Bookkeeping can do all of those things for you! Therapeutic Bookkeeping is a virtual accounting firm working exclusively with therapists all across the United States!

Can I be on payroll if I’m an LLC filing as an LLC?

Apr 13 by Alicia Bishop

Despite all your hard work, there’s something you need to know about an LLC having employees and being on payroll.

Not all LLCs are created equal! And depending on the filing status of your LLC, will determine how/if you should have payroll.

And you need to decide which one you need to be taxed as. So let me break down the different filing statuses of an LLC:

Sole proprietorship (single-member LLC) – cannot have employees, only members.
Partnership (multi-member LLC) – same as above.
Corporation (single or multi-member LLC) – these can have employees.

Sole proprietorship and partnership LLCs are pass-through business entities and the business members will benefit from pass-through taxation: (taxation that enables the profits and losses to be passed on to the members.)

With me still?

Once profits/losses are passed through, they must be reported to the IRS in the following ways:

For a single-member LLC, it goes on the owner’s personal federal tax returns on Schedule C to Tax Income Form 1040.
For a partnership LLC, it means filing an information return on Form 1065 and then a Schedule K-1 that shows the share of the profit/loss of the partnership for each partner. This K-1 is filed with each partner’s individual return and shown on Form 1040.

Since these two filing statuses can’t have employees, there are no wages for LLC members and owners and no contributions for health insurance systems or social security that are withheld.

So basically, you can’t be on payroll in this type of LLC and you must pay the so-called “self-employment taxes” on your share of profits directly to an IRS.

However, if you decide to file Form 8832, you can request the LLC be treated as a corporation. That way you can be treated as an employee, be on payroll and receive W-2 income.

What’s the Difference Between a Bookkeeper and an Accountant?

Mar 23 by Alicia Bishop

Bookkeepers vs. accountants, it’s all numbers at the end of the day right?!

Unfortunately, nothing is ever that easy. Think of it like a line cook and a pastry chef, it’s all food but drastically different principles.

As a private practice owner (and business owner in general), you’ll need both a bookkeeper and an accountant/tax professional (You could also have a cook and a pastry chef too, I’m not judging!) so it’s important to understand the differences.

Here’s what you need to know:

Bookkeepers vs. Accountants? The Simple Answer:

Bookkeepers = day to day recording of income, expenses, liabilities, equity, assets, etc, in a business. (The keeper of the records!)

Accountants = AKA a tax professional/tax preparer/CPA. They use the Financial Reports that come from your bookkeeping to complete your private practice tax return and provide additional tax services which we’ll get into below.

But naturally, there’s a little more to it than that, so here’s the long answer too:

The Role of A Bookkeeper

A bookkeeper handles ALL of the day-to-day organizing and record-keeping of your business finances. When a client makes a payment to your private practice, you give gifts to your employees or contractors, you have payroll taxes, or you purchase a bunch of office furniture, those all have to be recorded, categorized, and reconciled on your books to ensure your data and numbers are accurately captured for tax time. A bookkeeper ensures the recording, categorizing, and reconciling are done correctly, and in alignment with how your business is formed as well (LLC, Corporation, etc). And a great bookkeeper will be able to turn that day to day data into killer financial reports for you that show you exactly how much you’re making, spending, and have left over each week, month, quarter, year, etc (whatever you’d like). And an amazing bookkeeper is going to be able to help you evaluate those financial reports so you can really learn about the financial health of your business and make sound business decisions.

The Role of An Accountant

Now, an accountant takes all of that data and work the bookkeeper has compiled for you on the books, and prepares your annual business and personal taxes, without pulling their hair out with a messy stack of papers! A great accountant will be well-versed in your industry, state, and filing status (LLC, Corporation, etc), so that they can help you with any tax planning for your private practice (and even your personal taxes). An amazing accountant will always be on top of the ever changing tax rules and regulations, and be proactive about making sure you’re doing what’s best for your business, tax wise – even if that means changing things to align with new tax rules & regulations.

Another point to note is that bookkeepers and accountants are both financial professionals and have very different skill-sets. Sometimes there is an overlap but they generally handle two drastically different parts of your private practice! More often than not, I’ve found that my colleagues who are strictly tax preparers loathe any type of bookkeeping and have no desire in handling it because they just love preparing taxes! The day to day, nitty-gritty work though? Not so much!

Can A Bookkeeper File My Taxes For Me?

Unless they have the qualifications and licenses to prepare taxes, then no. A bookkeeper also can’t give you tax advice (unless licensed) – so you need to consult a licensed tax professional for this. Taxes are complicated and there can be serious consequences for filing incorrectly (read: lots of fines).

So, bookkeepers or accountants. Which does your private practice need?

So, I mentioned earlier it’s a good idea to have both a bookkeeper and an accountant. There’s a reason for this! When you have a great bookkeeper making sure your finances are in order, correctly, then they can provide you and your accountant with beautiful financial reports that tell your financial story and the accountant then uses those financial reports to seamlessly prepare your taxes. This organization saves you time and money on tax prep services and gives you the peace of mind that you have everything covered, plus keeps your financial story clear throughout the entire year because you always know how much you make, how much you spend, where the money was spent, and what was left over!

You can focus on what’s important in your private practice to you, plus have financial control!

Therapeutic Bookkeeping is a virtual accounting firm working exclusively with therapists all across the United States providing professional bookkeeping and accounting services!

Why do I need to save my receipts?

Feb 24 by Alicia Bishop

Ah, saving receipts! It might seem old school but these little buggers are actually really important for your bookkeeping (and the IRS!).

Basically they prove to the IRS that you had the expenditure you say you did. Otherwise less than honest people would charge expenditures that make the business look like it’s in debt when it’s not (avoiding a bunch of taxes.)

I hear you saying ‘But I don’t even have that many expense and my overhead is low and these are all true biz expenses”…. and I’m here to tell you that the IRS doesn’t care… because not everyone is honest like you and there really are a LOT of dishonest people they have to deal with… so save your receipts!!

Receipts & Auditing

If you’re still not convinced about saving receipts, know that if you’re audited you need to be able to produce your receipts for the last 3 years. OR if you’ve claimed a loss in your business you need to keep your receipts for 7 years.

If you can’t produce them, you’ll have the IRS breathing down your neck, and the IRS could deem that expense non-deductible or not a legitimate business expense.

HOW do I save all these receipts?

Well, I’ve seen everything from a shoebox to a ‘floor filing cabinet’ but I find going paperless a lot more useful! Particularly if you’re swimming in receipts. I don’t know about you, but I like a paperless office and don’t want to keep 3 – 7 years of paper receipts piled up in my office. So I recommend Dext because it allows you to snap a pic of your receipt from your phone (or forward it from an email). Dext keeps the receipts backed up into the system as well so you have your thorough audit trail in your account. The best part about Dext? It’s totally cloud-based, so if your computer crashes, you won’t ever lose all of that data and audit trail of receipts! I also really like how easily you can filter and search for receipts based on vendors.

If you don’t want to invest in a monthly subscription for something like Dext, then you could simply create a folder in your email, and file all receipts into that folder by year. Or you could create a Google Drive ‘Receipts’ folder and create sub-folders by year and file your receipts into the sub-folders. For both of these methods, you’ll still have to scan any paper receipts into your email and/or Drive folder, which will be more cumbersome than the ease of the Dext app, but at least you’ll still be maintaining a paperless office!

FAQ About Saving Receipts:

“Why do I need to save my receipts when I have bank statements?”

Simply put, your bank statements won’t suffice as proof of an expense if presented in front of a court or IRS. The reason being, your bank statements just show a ‘brief description’ of the purchase.

For example, if you purchase office supplies from Amazon for $200 for your private practice, all that shows up on the bank statement is “Amazon” followed by a bunch of random numbers and the amount of the purchase ($200). But the bank detail doesn’t list out the itemized items you purchased, which could have been a number of different things, right? (Pens, pencils, books, etc) So there is literally no way someone would be able to look at the bank description to “Amazon for $200” and possibly know that you truly spent $200 on office supplies for your private practice.

Therefore, to prove that the $200 was truly for office supplies for your private practice, you’ll need to be able to show that itemized receipt that lists out all the things you purchased for $200, and how much each one cost.

Best Practices for Saving Receipts:

Always write a little note on the top of the receipt about what the expense was for, if you can (if you’re using Dext, the note feature is built in so you don’t have to hand write this onto the receipt). I have a really good memory, but if I was asked to explain a receipt’s purchase and how it was business related from 3 years ago, I can’t promise I’d have a darn clue!!
You need itemized receipts for your private practice expenditures: So make sure you can clearly see the date, vendor name (where you purchased from like Amazon or Target), amount paid, items purchased, and payment method on each receipt.
If you have a lot of purchases in one day, or multiple team members who make business purchases on behalf of your private practice, get everyone and yourself one of those ‘bank/money’ bags where you can store all of your daily receipts into. Then, at the end of each day, store/scan them into your receipt management system of choice!
I know saving receipts can be kind of a pain…ok a really big pain… but just keep telling yourself “Every penny counts when it comes to taxes and I want to be able to prove this is a business expense for my private practice if I ever need too!”

If you need help with taxes, setting up accounting software, or managing your bookkeeping, we at Therapeutic Bookkeeping can do all of those things for you! Therapeutic Bookkeeping is a virtual accounting firm working exclusively with therapists all across the United States!