Advice on doing accounts myself

Hi all,

Im a self employed childminder. Only earning >15k per year. (If I earn below this I am tax exempt). Have been working since July 2010. Have kept track of all money coming in (generally paid cash from parents). Very few expenses, just childminding insurance and registration, plus PRSI. I would take it that accounts for this would be very simple to prepare? Is there any free software that would suit me? Or ones I pay for? Have no accounting experience. But dont want to have to pay a fortune to get accounts prepared when they would probably be very simple to do myself. Hoping to apply for a mortgage with my other half in a years time, so would like to get on top of things now. My uncle is an accountant so can sign off on accounts. (I think/hope). I do my tax returns myself since they are soo straight forward, just one figure goes in to the exempt income section, dont have to fill in any of the more difficult stuff. Any advice?

Hi

A simple set of accounts and tax return for a business this size should not cost more then €500 plus VAT. You will need a proper set of accou nts done up if you are going to go for a mortgage and a good accountant can pay for themselves in terms of the money they save for you and the time cost involved in preparing and reading up on things yourself.

The income is not "exempt". It may or may not be partially covered by tax credits but it is definately not exempt. There will be PSI and USC to pay on all this income and probably additional PAYE if it is not covered by tax credits.



Kind Regards

capnhand

missminder said:

Hi all,

Im a self employed childminder. Only earning >15k per year. (If I earn below this I am tax exempt). Have been working since July 2010. Have kept track of all money coming in (generally paid cash from parents). Very few expenses, just childminding insurance and registration, plus PRSI. I would take it that accounts for this would be very simple to prepare? Is there any free software that would suit me? Or ones I pay for? Have no accounting experience. But dont want to have to pay a fortune to get accounts prepared when they would probably be very simple to do myself. Hoping to apply for a mortgage with my other half in a years time, so would like to get on top of things now. My uncle is an accountant so can sign off on accounts. (I think/hope). I do my tax returns myself since they are soo straight forward, just one figure goes in to the exempt income section, dont have to fill in any of the more difficult stuff. Any advice?

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This exemption is only available where gross income does not exceed €15,000 per annum. You cannot deduct any expenses in arriving at the €15,000. If your gross income exceeds this the exemption doesn't apply and you'll be subject to self-assessment in the normal way. Presumably you meet all the other conditions?

So, do you really need a set of accounts? Even if you do, accountants don't "sign-off" on accounts and you don't necessarily need an accountant to prepare them.

The bank will be more interested in the cash-flows and proof that your income is what you say it is, eg a bank statements showing income lodged.

What PRSI do you pay - is it the minimum contribution? For the record, your own personal taxes, USC, PRSI etc are not business expenses.

Hi, thanks to both of you! Capnhand, there is a tax exemption for childminders who earn below 15k per year and have notified the childcare committee that they are childminding in their own home. My gross income comes in below 15,000. I earn about 300 per week and I dont get paid for any holiday days, so I qualify for the exemption. I prefer to keep my earnings under the 15000 to keep things easy for myself. I pay 253eu PRSI per year. I am exempt from USC under the childcare exemption.

Would be great if I didnt need accounts! Perhaps I should verify this with a bank?

Hi Missminder

Apologies you are correct.

Regards

Capnhand

just ask your uncle for advice.

I would consider €500 very expensive for a simple return like yours. Maybe pay an accountant on a one off basis an hourly rate to give you advice on what expenses etc you can charge and if you are familiar enough with doing your own tax returns over the years then this one should be well within your abilities. Check your local enterprise board in case they run courses on this, I did one on how to fill your form online run by enterprise board.

No need for software. Add up your income if this is less than 15k your income is exempt from tax. Add up your business expenses - include some light and heat, phone, travel (estimate amount used for business). Total expenses. Take net profit (total income minus total expenses) and put in the relevant box on the tax return and submit return. Keep the details as you will need an accountant to certify this income (usually 3 years)when you go for your mortgage. Your uncle should be able to do it. Banks will not take self-certified income.

wbbs said:

I would consider €500 very expensive for a simple return like yours. Maybe pay an accountant on a one off basis an hourly rate to give you advice on what expenses etc you can charge and if you are familiar enough with doing your own tax returns over the years then this one should be well within your abilities. Check your local enterprise board in case they run courses on this, I did one on how to fill your form online run by enterprise board.

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simplyjoe said:

No need for software. Add up your income if this is less than 15k your income is exempt from tax. Add up your business expenses - include some light and heat, phone, travel (estimate amount used for business). Total expenses. Take net profit (total income minus total expenses) and put in the relevant box on the tax return and submit return. Keep the details as you will need an accountant to certify this income (usually 3 years)when you go for your mortgage. Your uncle should be able to do it. Banks will not take self-certified income.

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You're both missing the point. There are 2 aspects of this: the tax treatment and record keeping for the purposes of securing a mortgage. OP is clearly comfortable and competent with the tax treatment and is asking about the later aspect.

To clarify the tax treatment: if OP's gross income (before deducting ANY expenses) from childminding does not exceed €15k then the income is exempt from tax (provided certain requirements are met). There's a box on the tax return for this. The gross income is entered and any expenses are irrelant (for tax purposes). There's no need for any advice on how to complete the return and what exenditure is allowable and what isn't.

The main accountancy bodies recommend that their members do not certify accounts. It much easier to falsify a set of accounts than a bank statement. Regardless of how or who prepares the accounts, I would like to think the bank would look for further documentary evidence to support the figures. It's not self-certification.

I would recommend a simple spreadsheet showing income, expenditure and profit. Ensure ALL business transaction go through a separate bank account; transfer money for personal use to a personal bank account.

Smeharg is right. You need only include the gross income on the tax return. Exempt income section. You should also do your simple set of accounts to see how your business is doing. In a self employed situation banks will not solely accept bank statements as proof of income.

First thing – start a spreadsheet like this


Date Description In Out Balance
Xx/xx/xx Income from Smith 100 0 100
Xx/xx/xx Expense (Chq No.) 0 50 50

Etc….


Make sure the Balance column agrees to your bank statement at the end of every month

You can do your returns based on this spreadsheet as long as it agrees to your bank statements.

For a simple business like yours the spreadsheet can act as your ‘accounts’.

Out to the right of ‘Balance’ you can add analysis columns so you can add up what types of expenses and income you had for the period.

AFAIK that should be sufficent (and simpler) than getting an accounts package.

I can't get the table above to format better... sorry

Think this is what Flattea was trying for!:

...

For a business earning less than 10k per year, is it necessary to have a bank account?

Separate Business Bank Account

clonney said:

For a business earning less than 10k per year, is it necessary to have a bank account?

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Absolutely. Unless you want Revenue asking questions about everything that goes through your personal account!

An update, PRSI is now 500€..

My question is in a childminding situation using 15k exemption, is a bank account necessary due to costs now involved...all cash payment, every week different, use a simple spreadsheet, the childcare bodies use the word MAY have a business account, while one meeting said no need but didnt offer a solution when asked...any cmers on here....will revenue audit a very small rural cm, well well under the 15k ...

You could use any separate account, doesn't need to be designated business account by the bank. Only reason you would need an actual official business account is if you are being given cheques made out to your business name which you need to lodge. Cash or online payments can go into any type of account. You could ask in your local credit union too, a lot of them do accounts suitable for business without charges.

There is no need to have a specific account but it does make keeping good records easier, keeps the audit trail more straightforward, it's easier to keep track of the costs and income relating to the business but any separate account will do, I use a bog standard savings account which I pretty much operate solely online with some cash lodgements, not childminding but a small home business with low turnover as well.

Thanks for your reply..its only income iv got but so hard get to the bank with babies n toddlers lol...going do it monthly...