Even if you’ve been using QuickBooks Online for a long time, it’s good to step back and evaluate your actions.
“Best practices” aren’t enforceable rules. They’re simply guidelines businesses commonly follow in one area or another. If you’re in retail, for example, one best practice might be to always ask customers checking out if they found everything they were looking for. This serves two purposes: It conveys a feeling of concern for the customer’s shopping experience, and it may also lead to increased sales.
QuickBooks Online has many best practices, some of which may serve multiple purposes, including these:
- They keep your company data safe and clean.
- They provide insight on your financial status.
- They save time.
- They can lead you to better relationships with customers and vendors.
Are any or all the following common practices for your business?
Reconcile accounts regularly.
One of QuickBooks Online’s most useful features is its ability to connect to your financial institution’s websites and download cleared transactions. QuickBooks Online also offers tools to help you keep your accounts reconciled online, like you used to do every month when your paper statement came. Reconciling accounts can help you uncover errors. It gives you a truer picture of your cash flow, and it improves the accuracy and timeliness of some reports.
It’s not a particularly pleasant process, but you should be reconciling your accounts regularly in QuickBooks Online. We can help.
Clean up your lists.
Some lists in QuickBooks Online aren’t overly long. You don’t have to worry about, for example, Payment Methods, Terms, or Classes. Your lists of customers and vendors, products, and services, on the other hand, can grow unwieldy over the years. This means it can take more time than it should to scroll through lists when you’re using those entities in transactions. It also puts unnecessary stress on your company file. If you can’t delete any, at least make them inactive.
Never leave QuickBooks Online open when you leave your work area.
This goes for everyone, even people who work alone and don’t access their company files away from their work areas. The obvious reason is to keep someone else from getting in and authorizing payments, for example, or otherwise compromising your financial information. It also protects the integrity of your data file in case your internet connection suffers some kind of outage.
Keep track of 1099 vendors.
Whether your company uses 10 vendors or a hundred or more, you may have to supply at least some of them with an IRS Form 1099 at about the same time you’re preparing W-2s for employees. Your 1099-related tasks will be much easier if those individuals and/or companies are earmarked. If you think vendors might need 1099s when you create their records in QuickBooks Online, click in the box to the left of Track payments for 1099 in the lower right corner. Not sure? Ask us.
Classify everything with care.
Every time you have to create a record or transaction where categories are involved (i.e., Classes, Customers and Vendors, Territories), check and double-check that you’ve assigned them the correct classification. Errors here can result not only in problems with daily workflow, but your reports will not be accurate. A related best practice: Create a meaningful group of Classes, and use them faithfully. They’ll help you make better business decisions.
To create your list of Classes, click the gear icon in the upper right and select All Lists | Classes | New.
View reports on a regular basis.
There are some advanced financial reports in QuickBooks Online that we should be creating for you on a regular basis, either monthly or quarterly. These include Profit and Loss, Balance Sheet, and Statement of Cash Flows. The mechanics of creating them aren’t difficult, but analyzing them is. You should be running reports on your own at frequencies that you think would be helpful, like A/R Aging Detail, Unpaid Bills, and Sales by Class Detail.
If you’ve been using QuickBooks Online for a while, you could probably come up with your own list of best practices. If you’re new to the site, consider scheduling some time with us to go over more of them. Develop good habits from the start, and there won’t be nearly as much need for troubleshooting down the road.
Thinking about installing a renewable energy system in your residence? Uncle Sam offers individual taxpayers a federal income-tax credit equal to 30% of the cost of qualified residential energy-efficient property (REEP).
What Systems Can Qualify?
Credit-eligible property includes:
- Solar electric
- Solar water heating
- Geothermal heat pump (uses ground or ground water as a thermal energy source for heating or cooling)
- Small wind energy (generates electricity using a wind turbine)
- Fuel cell (generates electricity from hydrogen and oxygen through an electrochemical process)
The credit covers the cost of both the equipment and its installation, including labor and any piping or wiring necessary to connect it to your home.
The system must meet specified standards for energy efficiency. You should obtain a certification from the manufacturer that the component you are purchasing meets the relevant requirements for the REEP credit. Note that the manufacturer’s certification is different from the U.S. Department of Energy’s Energy Star label; not all products with the Energy Star label meet the credit requirements.
When available, the tax credit is quite generous. For example, let’s say you spend $6,000 on year on a home solar water heating system that meets all requirements for the REEP tax credit. After considering the $1,800 credit ($6,000 × 30%), the system costs you only $4,200.
The home you are installing the equipment in must be located in the United States and you must use it as your residence. The credit is not available for equipment used to heat a swimming pool or hot tub.
Solar, geothermal, or wind energy property can qualify for the credit whether it is installed in your principal residence or another residence. The credit for fuel cell property is limited to equipment installed in your principal residence.
As for cost, the tax law generally places no dollar limits on the credit. However, there is an exception for fuel cell property: The maximum credit is $500 for each 0.5 kilowatt of capacity.
Some states and public utilities offer incentives to encourage the purchase of energy-efficient property. Certain types of incentives may require an adjustment to your purchase price or cost for credit calculation purposes.
Connect with our team today for all the latest and most current tax rules and regulations.
The IRS has thwarted some identity theft attempts, but thieves are still stealing billions of dollars every year from taxpayers.
Another annual income tax deadline has come and gone. Maybe you had to pay in, but perhaps you were owed a refund. If the latter is true, did you receive it?
A lot of taxpayers didn’t because hackers swooped in and stole their sensitive tax-related information. Tax identity theft is a serious problem, despite the IRS’s efforts to stop it.
But there are steps you can take to keep from being a victim, some of which are simply a matter of common sense. For example, consider the security of any wireless network you use when you’re working on your taxes. Don’t ever do so on a public network, and make sure your home or office wireless is password protected.
You don’t have to be online to be at risk for tax identity theft. Hackers can grab your personal information in other ways. For example, do you ever carry your tax-related papers back and forth to work or some other location? Know where they are at all times; don’t ever leave them laying around where someone can copy your Social Security number and other details.
Always be aware of your surroundings. If there are other people around when you’re working on your taxes—if you’re in a coffee shop or library, for example—make sure no one is reading over your shoulder.
Phone calls can be risky. A good rule of thumb is never provide someone who calls you with any sensitive personal data – unless you can verify it was a call you were expecting, like one from your bank or a medical office. When you place a call to a legitimate number, it’s generally okay.
You’d think that a call from the IRS would be safe. In reality, the IRS doesn’t ask for personal information over the phone. They send letters through the U.S. Mail. If you ever get a phone call from someone who claims to be from the agency and is demanding some sort of payment immediately, hang up. This is a popular phone scam. You can always contact the IRS directly to see if there is some sort of issue.
Don’t make a practice of carrying your Social Security card with you. Keep it in a safe place unless you absolutely need it away from home for some reason. Also:
- File your return early to keep a hacker from getting in line for your refund in front of you.
- Reduce your refund by adjusting your withholdings at work. It’s nice to get that big payment after you file, but couldn’t you use that money throughout the year?
- Request direct deposit of your refund. That way, no one can steal your check out of your mailbox or somehow re-route a paper payment.
Be especially careful if you’re preparing your taxes on a website. Before you even begin, investigate the publisher’s security protocols to ensure that your very sensitive tax-related data will be treated with great care. Also, update any applications that will be involved, including your browser and antivirus/anti-malware tools.
The IRS will never send you an email out of the blue asking you to click a link or download an attachment or fill in fields to update personal information. In fact, it’s a good idea to avoid taking those actions anytime unless you’re expecting an email and can verify the sender’s address.
Finally, use a very strong, unique password, one you don’t use anywhere else. You’re probably tired of hearing that piece of advice, but it’s absolutely critical when you’re working with a tax preparation application.
Take Action Quickly
It’s possible to get stung by a tax identity thief even if you’re being careful. If it happens to you, you’ll need to complete and submit IRS Form 14039, Identity Theft Affidavit, and watch for responses from the agency. Contact your credit bureaus and financial institutions to apprise them of the situation. Tax identity thieves sometimes try to open new credit cards, for example. You should also file a report with the FTC.
Recovering from tax identity theft isn’t a quick process nor an easy one. If you have questions about it or simply want to talk to us about your year-round tax planning and preparation process, be sure to contact us.
How would you like Uncle Sam to pay for part of your vacation? Sound unlikely? If you combine your vacation with a business trip, you may be able to deduct some of your expenses. Pay attention to the rules, though. Expenses must meet certain requirements before they’re tax deductible.
As long as your primary reason for making the trip is business, you generally can deduct the cost of your transportation to and from your destination. You’ll generally be able to deduct food (within limits) and lodging costs only for the days you actually spend on business.
Bring the Family
You can bring your family along, too. While you can’t deduct their food, lodging, or airfare, you can write off your own expenses, including the single-occupancy rate for lodging on days when you’re conducting business. If you and your family travel by car, you can also deduct the full cost of transportation. Just be sure to keep detailed records.
To learn more about tax rules and regulations, give us a call today. Our knowledgeable and trained staff is here to help.
The IRS may remove tax penalties if the taxpayer has reasonable cause (e.g., serious illness) for failing to comply with tax filing and payment requirements. This penalty relief is not automatic and may require filing with the IRS Appeals Office before it succeeds. In effect, the IRS rewards typically compliant taxpayers with one-time penalty amnesty, which can save the taxpayer hundreds—sometimes thousands—of dollars.
There is a hidden gem in the IRS penalty abatement policy known as the First Time Abatement (FTA) policy. This provision allows normally compliant taxpayers a chance to escape penalties.
The FTA provision applies if:
- No penalties have been added to or removed from the taxpayer’s account for the previous 3 years, or the taxpayer was not previously required to file a return.
- The taxpayer is current in filing all required tax returns (including extensions)
- The client has paid or made payment arrangements to pay any outstanding tax due (including being current on an installment agreement).
FTA applies to the following penalties:
- Failure to file
- Failure to pay (income tax)
- Failure to deposit (payroll tax)
The taxpayer will not be disqualified from receiving an FTA based on lack of a clean penalty history if the client:
- Had a penalty assessed more than three tax years prior to the tax return in question.
- Had an estimated tax penalty assessed in the past three years.
- Received reasonable-cause relief from penalties at any point in the past.
- Received an FTA more than three tax years prior to the tax return in question.
- Has penalties on subsequent tax years.
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Buzzkill Disclaimer: This post contains general tax information that may or may not apply in your specific tax situation. Please consult a tax professional before relying on any information contained in this post.
Even after you’ve filed your income-tax return, you’ll want to keep thinking about your tax situation. For example, if you experience any of the “life events” listed below in the past year, it may be a good time for some tax planning.
A job change. If you are eligible for a distribution from your former employer’s retirement savings plan, consider rolling the money into another tax-favored plan or an individual retirement account (IRA) to avoid the receipt of currently taxable income.
A home sale. You may exclude profit — within limits — on the sale of your principal residence from your taxable income if you meet the tax law’s requirements.
A marriage or divorce. File a new W-4 withholding allowance certificate with your employer or, if you pay quarterly estimated taxes, review the amount you are paying.
A new child arrives. As a parent, you may be eligible for various tax breaks. Ask us for details.
To learn more about how life events affect your taxes, give us a call today. Our staff of professionals are always happy to help.
The IRS announced the 2018 cost-of-living adjustments to retirement plan limits. The following plan limits are increased effective January 1, 2018:
- Employee Contributions to 401(k) and 403(b) Plans: the contribution limit is increased from $18,000 to $18,500.
- Defined Contribution Plans: the limit on annual additions to a participant’s defined contribution account increases from $54,000 to $55,000.
- Defined Benefit Plans: the limitation on the annual benefit under a defined benefit plan increases from $215,000 to $220,000.
- Annual Compensation Limit: the maximum amount of annual compensation that can be taken into account for various qualified plan purposes increases from $270,000 to $275,000.
- Government Deferred Compensation Plans: the limit on deferrals under Section 457 (concerning deferred compensation plans of state and local governments and tax-exempt organizations) increases from $18,000 to $18,500.
Some limitations are not increased for 2018, including:
- The limitation for catch-up contributions to an applicable employer plan other than a SIMPLE 401(k) plan or SIMPLE IRA for individuals age 50 and over remains unchanged at $6,000.
- SIMPLE Plans: the maximum amount of compensation an employee may elect to defer remains at $12,500.
- IRS and Roth IRA Limits: the deductible amount for an individual making a deductible IRA contribution remains at $5,500. The Roth IRA limit of $5,500 remains unchanged as well.
If you have any questions on how these rules apply to give, please give us a call.
Tax planning is an important step in finalizing a divorce agreement. Here are some issues divorcing couples may want to consider.
What’s in a Name?
Alimony and child support both involve one spouse making payments to the other, but that’s where the similarity ends. Alimony payments are tax deductible to the payer and taxable to the recipient. Child support is not deductible and can be received tax free.
Dependent — or Not?
Generally, the custodial parent claims the dependency exemption, although couples can make other arrangements. Parents with more than one child may decide to split the exemptions between them. Parents might also decide to alternate claiming the exemption.
Who Gets the Credit?
The parent who claims the child as a dependent typically is entitled to claim tax credits such as the child tax credit and the credit for higher education expenses. However, a custodial parent paying work-related child care expenses can claim the child care tax credit even if the other parent claims the dependency exemption.
Assets To Transfer?
No taxes are owed on the transfer of assets between spouses. However, when dividing assets, it’s important to consider how taxes, such as capital gains, may come into play in the future.
How About Retirement Benefits?
Where retirement plan benefits have been made payable to a former spouse under a court-issued qualified domestic relations order (QDRO), subsequent distributions will be taxable to the former spouse.
For more information about divorce and taxes, give us a call today.
The tax deduction available for making a charitable donation of property may be no more than the fair market value of the property on the date of the gift. Fair market value is the price that a willing buyer and seller would agree to when neither is required to act and both have reasonable knowledge of the relevant facts.
The IRS lists several factors that may be considered in determining fair market value.*
Cost or selling price can be an accurate measure of fair market value when the transaction and the donation dates are close and there has been no change that would affect the item’s value.
Sales of comparable properties may be useful for determining value where the properties sold and the property donated are similar and the sales occurred reasonably close in time to the date of the donation.
Replacement cost may be a good indicator of value in some situations, provided that depreciation is subtracted from the cost to reflect the property’s physical condition and obsolescence.
Expert opinion is relevant to the extent the expert has the appropriate education and experience and has thoroughly analyzed the transaction.
Who Qualifies as an Appraiser?
Generally, where a charitable deduction of more than $5,000 is claimed for donated property, the IRS requires a qualified appraisal by a qualified appraiser. A qualified appraiser is someone who:
- Has earned an appraisal designation from a recognized professional organization or has met certain education and experience requirements
- Regularly prepares appraisals for a fee
- Is not an “excluded individual,” such as the donor, the donee, or a party to the transaction in which the donor acquired the property being appraised (Other exclusions apply.)
The qualified appraisal must be signed and dated and can be made no earlier than 60 days before the valued property is donated.
To learn more about tax rules and regulations for donations, give us a call today. Our knowledgeable and trained staff is here to help.
What if disaster strikes your business? An estimated 25% of businesses don’t reopen after a major disaster strikes.* Having a business continuity plan can help improve your odds of recovering.
The basic plan
The strategy behind a business continuity (or disaster recovery) plan is straightforward: Identify the various risks that could disrupt your business, look at how each operation could be affected and identify appropriate recovery actions.
Make sure you have a list of employees ready with phone numbers, e-mail addresses and emergency family contacts for communication purposes. If any of your employees can work from home, include that information in your personnel list. You’ll need a similar list of customers, suppliers and other vendors. Social networking tools may be especially helpful for keeping in touch during and after a disaster.
Having the proper insurance is key to protecting your business — at all times. In addition to property and casualty insurance, most small businesses carry disability, key-person life insurance and business interruption insurance. And make sure your buy-sell agreement is up to date, including the life insurance policies that fund it. Meet with your financial professional for a complete review.
If your building has to be evacuated, you’ll need an alternative site. Talk with other business owners in your vicinity about locating and equipping a facility that can be shared in case of an emergency. You may be able to limit physical damage by taking some preemptive steps (e.g., having a generator and a pump on hand).
A disaster could damage or destroy your computer equipment and wipe out your data, so take precautions. Invest in surge protectors and arrange for secure storage by transmitting data to a remote server or backing up daily to storage media that can be kept off site.
Protecting your business
If you think your business is too small to need a plan or that it will take too long to create one, just think about how much you stand to lose by not having one. Meet with your financial professional for a full review.
For more tips on how to keep business best practices front and center for your company, give us a call today. We can’t wait to hear from you.