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 walk you through each type of document we ask for, why it's needed, where you can 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 typically are not consumed or easily converted into cash, and the benefit of the fixed asset extends beyond the initial purchase, providing value beyond the current accounting year. Because of this, fixed assets are treated differently from other expenses, and the IRS requires businesses to capitalize the purchase of fixed assets if the cost of the asset exceeds $2,500.
We will require a transaction receipt if your business has purchased a fixed asset over the $2,500 fixed asset threshold. The receipt should include the date of the purchase, the amount, and a description of what was 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 where the cost of fixed or tangible assets are allocated over the years in which the assets helped generate revenues, sales, or their useful life. By creating a depreciation expense, the business reduces the number of earnings on which taxes are based, thus 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 made to 1099 contractors are a deduction for your business. So, we want to ensure that your Profit and Loss Statement encompasses 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, etc.
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 get in touch with your payroll provider.
Please note: This is an automated process for the Gusto users who gave 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 Quickbooks Transaction List by Vendor Report
Form W-3
Heard requires payroll users to upload their W-3, which summarizes 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 tab for "Tax" documents. 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 therapy income. If you made $100 with $5 in fees, $95 of therapy 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 your credit card payment processor withheld during the tax year.
We will adjust your therapy income and credit card merchant fees by the same amount. The net effect is $0, but your books more accurately reflect the therapy 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 common payment processors our customers use, but you'll need to provide similar documentation if you use another 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
- Simple Practice: Tax 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 might include your client's names, depending on how your transactions 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 to your computer from the appropriate source, you'll need to upload a copy to complete year-end bookkeeping in Taxes>Annual.