Overview
In order to perform year-end adjustments to your books, Heard will request that you provide year-end documents for tax filing. This article will guide you through each type of document we request, explain why it's necessary, where to find it, and how to share it with Heard.
Assets >$2,500 Receipts
Fixed assets are tangible, long-term property or items purchased by your business. They are typically not consumed or readily converted into cash, and the benefit of the fixed asset extends beyond the initial purchase, providing value beyond the current accounting year. As a result, fixed assets are treated differently from other expenses, and the IRS requires businesses to capitalize the cost of fixed assets when the cost exceeds $2,500.
We will require a transaction receipt if your business has purchased a fixed asset valued at over $2,500. The receipt should include the purchase date, the amount, and a detailed description of the items purchased.
During the tax season, your tax preparer will use this receipt to help calculate the associated depreciation expense, which lowers your taxable business income.
Depreciation is a method for allocating the cost of fixed or tangible assets over the periods in which the assets generate revenue or sales, or over their useful lives. By recording depreciation expense, the business reduces the earnings on which taxes are based, thereby decreasing the tax owed. Depending on your type of filing, this will appear on your Schedule C (sole prop) or K-1 (S-Corp).
Contractor Payment Reports
The Contractor Report totals all payments made to your 1099 independent contractors. Heard will be able to complete a reconciliation of your books to ensure all contractor payments are reflected on your Profit and Loss Statement. To do so, Heard will request your Contractor Reports.
Payments to 1099 contractors are deductible for your business. Therefore, we aim to ensure that your Profit and Loss Statement accurately reflects all contractor payments.
Please note: these reports are only required if you pay your contractor via a payroll provider. Please disregard if you pay them via PayPal, Venmo, Zelle, or other similar services.
Where can I find these documents?
You will need to log in to your payroll provider account. Typically, there is a tab for "Reports" documents. This is likely where you will find the Contractor Payment Report.
If you are unable to find the correct report, please contact your payroll provider.
Please note: This is an automated process for Gusto users who have given us admin access, and you do not need to upload this document in that case.
- How to download Gusto Contractor Payment History Report
- How to download the QuickBooks Transaction List by Vendor Report
Form W-3
Heard requires payroll users to upload their W-3 forms, which summarize the business's total salary payments and withholding amounts.
To locate your W-3, you will need to log in to your payroll provider account. Typically, there is a "Tax" documents tab. This is where you will find the W-3.
Please note: This is an automated process for Heard Payroll customers.
Payment Processor Report
Why are these documents needed?
If you accept payment via a credit card payment processor (e.g., Stripe, Square, etc.), it automatically deducts their fees from your income. If you made $100 with $5 in fees, $95 of the income is automatically deposited into your bank account. The $95 in revenue is recorded in your books since we have a journal entry for the deposit. Still, the $5 in fees you paid aren't automatically recorded as an expense since they're deducted before the revenue hits your books.
To accurately reflect the fees you've paid in the year, we will need a report showing the processing fees withheld by your credit card payment processor during the tax year.
We will adjust your income and credit card merchant fees by the same amount. The net effect is $0, but your books more accurately reflect the income and expenses you paid in 2024.
Where can I find these documents?
These documents should become available in early January for the preceding year. We've included links to documentation for the common payment processors our customers use, but you'll need to provide similar documentation if you use a different payment processor.
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Stripe: Balance report and Payout reconciliation report
- Please note that both the Balance report and the Payout reconciliation report are needed
- Square: Sales Summary report
- SimplePractice: Annual Financial Activity Report for the preceding tax year
If you use another payment processor, ensure that the documentation you provide includes:
- The amount of credit card processing fees you paid in the tax year
- If you earned income in the last week of December, when it was deposited into your bank account
Important: Please look at these reports before sharing them with us. Your transactions may include your client's names, depending on how they are recorded. To remain HIPAA compliant, please review the reports and delete client information before sharing.
How can I upload these documents to Heard?
After downloading the reports from the appropriate source to your computer, you'll need to upload a copy to complete year-end bookkeeping in Taxes>Annual.