Tax Season After Party Action Items

We Survived Another Tax Season

This was a tough tax season. You may not even have your return back yet.  Either way, you’ll likely find these steps quite timely. And now you have time to collect supplies for your tax season after party!

Step 1: Ride out the shock. If you are a new business owner, take it from us veterans that the shock will not feel as intense after a few years. It might be a great shock – “whoo-hooo, I get that big of a refund?!” Or it could be life shattering –  “I think I’m going to be sick…where will that much money come from?”

Step 2: Your CPA is your best friend. Have their back and look at the return. Hand a copy of the tax return to a trusted and savvy accounting team member who will compare the information to your financial statements. Typos happen!

Step 3: Get the following reports from your CPA: Adjusting Journal Entries, Adjusted Trial Balance, and the Detailed Depreciation Schedule. These are some magic accounting terms that you should know a few things about.

If you own a micro to small company and have more than 3-4 entries on your Adjusting Journal Entries report, you may need process or personnel changes. It’s worth asking your CPA when it’s not tax time “Hey, how are my books looking?  Could we do better?” Make sure your CPA has not given up and doesn’t assume all books are a mess.  You want bright shiny clean books not cobbled together sort-of-but-not-quite-books.

The Adjusted Trial Balance shows what the total was for each account in your books at tax time. The accounting team member you gave a copy of the tax return to will thank you.  If they don’t get excited, they may need training or have given up and think the books will always be bad.

Some stuff you buy is written off over time (deprecation) because it was kind of expensive and will last several years.  The list of those items is on the Detailed Depreciation Schedule. Having this list allows your accounting team to track what assets were sold or disposed of during the current year.

Step 4:  Step back and ask yourself if you have the most effective and knowledgeable accounting team. Is it time to switch CPAs? Does the bookkeeper need some professional development? Has anyone given up and decided the books will be a mess forever?

Step 5: Be hopeful (Move to step 6 if you are). Don’t get sucked into the black hole of “my books will be a mess forever.” Amazing accounting professionals exist and new ones are mentored into existence all the time. The financials tell the story of your business. That’s why they’re called ‘the books.’ No one can hide the good or the bad from the numbers forever. To truly understand your business, you must learn how to read your financial statements.

Step 6:  This step is mostly for the accounting team members out there. We have the data! Oh yes, I am suggesting we begin the next tax prep while sipping lemonade in our summer wear. Create a binder (or folder) called “Taxes 20xx” to store all the current documents you need for this coming tax season. Put the three documents from the CPA in the front of the binder (folder). Create tabs (sub-folders) in the binder (main folder) as follows: Reports, Bank, Assets, Liabilities, Payroll, and Equity (if ownership changes will occur during the year).

Step 7: Track property purchases, sales, and disposals with detailed descriptions in your accounting software and add copies of purchase documents for big purchases (cars for example) to your binder/folder*.  Inform/Remind all employees that they need to tell you if property is sold or disposed of. Some of us have to fill out property tax returns, so we’re tracking property even if it’s not an asset (monitor vs. server). If that’s the case, put a copy of last years property tax items list in the front of your binder/folder too.

*Ok can we decide here and now that a vessel, real or electronic, that we store work information in/on will be called a finder meaning (f)older or b(inder). After all, the whole purpose is to ensure you can find things. Apple has always been pro shareware, so there should not be any copy write infringement.

Step 8: Collect needful things. The owner and the accounting team need to be committed to collecting important documents like W-9s, statements, loan documents, and anything else that backs up the data on the company balance sheet. If the owner is not on board with the needs of the accounting department they need to go back to Step 5.

A few of my beloved clients have asked for an After-Tax SOP (standard operating procedure). Here it is!

May you be surrounded by an accounting team you like and trust. May your next year-end close be accurate, efficient, and low stress. And may the after party for the whirlwind that was tax season 2018 include hope and joy.

Tax Reform – Meals & Entertainment

Meals & Entertainment Changes

GO! does not give tax advice but we will share what we learned at QBConnect.

Always check with your CPA for tax advice since there are so many grey zones and your CPA is the person that will need to deal with the IRS if there is an audit.

Entertainment

No longer deductible so those country club dues, golf outings and baseball games can no longer be deducted on your taxes says Intuit’s Jim Buffington, CPA.

The IRS is doing a good job of clarifying this change (link below) but they are not providing a good summary of changes to meal rules.

Coffee, Food, Meals

In a bizarre, turn of events, coffee and related break room food and drink supplies are now only 50% deductible.

While coffee seems like a staple for an office since the dawn of the office, many companies have gone a bit overboard with meals and snacks kept at the office.

What about coffee and tea for clients that come onsite?

Well, it may be difficult to stop employees from using the supplies and since meals with clients are also 50% deductible, even coffee and tea supplies for onsite client meetings are 50% deductible.

Employee meals were the main focus in the discussion of meals at this training.

Convenience is the magic work for employee meals.  If the meeting is at the convenience of the employer, the meals are 50% deductible.  Think of this as mandatory meetings during the work day.  Note the word mandatory.

Employee Celebrations are still 100% deductible per the QBConnect training.  So if you have a celebration, all employees are invited and attendance is not mandatory it means that this not not at the convenience of the employer, it’s the convenience of the employee.

New Accounts for QuickBooks

The trainers at QB Connect suggest that all meal related accounts are noted with 50% or 100% to clarify account usage to your CPA.

Office Food & Bev 50% – Recode of transactions previously coded to office supplies.

All Staff Celebrations 100% – Rename All Staff Meals and recode all company meeting expenses to a new account.

Meals – 50% Deductible – This now includes all company meeting food, travel meals, and business meeting meals which include meetings with clients.  The rule is at least one employee must be present at the meal.  Remember, the names of all who attended meal, their title and reason for meeting must be written on the receipt.

Entertainment – Non-Deductible – Make sure this account is created as an Other Expense type so it is not included in Net Profit.

The IRS is still not providing very good guidance on this topic which means things are left up to interpretation.  Link to IRS page

 

iWire Directions for 2018

Oregon changed the iWire website and the rule about when you have to submit 1099s

W-2 iWire Filing with QuickBooks

“2013 was the first tax year where the Oregon Department of Revenue had the authority to assess

penalties for non-filing via the iWire system.  The Department is not assessing penalties for 2013 data, because they want to make sure that all businesses are aware of the requirement going forward. For tax year 2014, the Department will begin assessing penalties for non-filers and late filers.” – Oregon Dept of Rev Rep

QuickBooks E-file your State W-2s from QuickBooks article

What you will need:

Any documents needed to check the W-2 information

Third party preparers: Your EIN and contact information

Employers contact information

In QuickBooks:

Employees > Payroll Tax Forms & W-2s > create State W-2 E-file

Continue > Continue >ChooseState(if necessary) > Get QuickBooks Data > OK

Review Data as needed.

In Excel:

Choose Start Interview from QuickBooks Payroll State W-2 toolbar > Check the box > Next > Choose File location > Save > Next > Review Company Information > Next > Enter Submitter Type information (contract bookkeepers – you are a 3rd party) > Enter submitter and Employer contact information > Next > Create W-2 file.

Print directions as needed > OK > Save workbook now? Yes > Choose location and save.

Go to Oregon iWire

Take me to iWire (big blue button on right side) > File W2s and 1099s using iWire > Properly Formatted Text File > Enter Submitter’s contact information.  Do not enter EIN dash > Follow prmpts to upload and EFW2 file > Browse to text (txt) file > Submit.

Print page with confirmation number.

Archive confirmation page, Excel file and txt file.

You will receive an email confirmation as well.

1099 –Wire Filing

Companies that generated ANY TYPE of 1099 must submit information to iWire.  There is no longer a minimum threshold before you have to submit 1099s to iWire.  QuickBooks does not support E-Filing of 1099s to States.  You can add all your 1099 information into a pre-formatted spreadsheet located here.  On the right side bar you will find:

What you will need:

Completed 1099 forms

Third party preparers: Your EIN and contact information

Payer’s BIN, EIN, and contact information

Go to Oregon iWire

Take me to iWire (big blue button on right side) > File W2s and 1099s using iWire > Choose Manual Entry (or Spreadsheet from DOR Template) > Enter submitter’s contact information > Follow prompts to add all 1099 information manually or upload the excel document.

When you have entered all 1099 information, choose Review and Send your submission to the Oregon Department of Revenue > Review information – Compare Summary information with 1096 > Submit.

Print page with confirmation number.

Archive confirmation page.

You will receive an email confirmation as well.

Independent Contractor Tests

It is very important that you classify workers properly.  The mistake of classifying an employee as an independent contractor can be costly.

What is the definition of an Independent Contractor per the IRS?

20FactorTestforIndependentContractors

Here is an example of the type of form your company should have for Vendor On-boarding.

Example Independent Contractor Questionaire

And just for good measure, GO! is considered an Independent Contractor and here is our current W-9.

GO! W9 2017

Mileage and Travel Reimbursements

You cannot deduct commuting costs so make sure you understand what is considered commuting – See the image furnished by the IRS below.

Reimbursements are part of an Accountable Plan which requires:

Business Connection: Proof of business necessity

Substantiation: Original receipts, mileage log, reimbursement request form.

Return of Excess Amounts: Return of unused advances.

IRS Info

Non-Accountable Plans are defined as:

Fixed daily or monthly amounts

No documentation of miles or expenses

Any payment to employee that does not meet the Accountable Plan requirements i.e. is considered a Non-Accountable Plan must be taxed as wages. Employee will need to substantiate and deduct on personal return.

IRS Info

What about per diem?

Considered reimbursement only if employees return an expense report in a reasonable period.

Per Diem FAQs

4 Reasons to Review Your Tax Return

Do you or someone from your accounting team review the tax return each year?

Set of nine different vector check marks or ticks in circles conceptual of confirmation acceptance positive passed voting agreement true or completion of tasks on a list

Your tax return preparer expects you to and with good reason.  In the flurry of tax season, numbers get inverted.  Sometimes an extra zero or two gets added.  And beyond being a second set of eyes for errors, you and your staff know your business much more intimately than your tax preparer.  Did they misunderstand some data you provided?

Top 4 Reasons to Review Your Tax Return

1.  Compare your accounting data to the tax return to locate process changes:

What was reported differently on the return?

Are there things about your accounting system that you could change to save time for your preparer?

Are the numbers different?  If so, why?

2. Helps remind you to enter Journal Entries and Depreciation:

What journal entries did the tax preparer provide?  If none, ask for them.

If there are more than a couple journal entries, what needs to change so adjustments do not need to be made at tax time?

Ensure the depreciation expense is entered in your accounting system

Ask for the current year projected depreciation so you can write off 1/12 each month.

3. A great time to do a Fixed Assets Review:

Ask for the detailed depreciation schedule.

Review it for accuracy.  Are there assets on the books that you disposed of or sold years ago?

Keep a copy of the schedule on hand to note assets that are disposed of or sold in the current year.

4. Save time during next tax season by Locking the Period:

Did you lock the period after providing information to your preparer?

If not, users may have added or removed transactions from the prior year.

Are the numbers on the tax return different than what you have in your accounting system now?

If so, locate what has been changed, change it back as of 12/31 and then make the necessary change as of 1/1.

Then ensure you lock the books so changes cannot be made.

QuickBooks 2015 for Spring Term

QuickBooks 2015 for Spring Term

Classes are at the LBCC Albany campus.

Sign Up Here

QuickBooks Guided Tour

This course is great for people that need to brush up on computer skills before Level 1.

April 5, April 7 –  2 -4pm, $79

QuickBooks Level 1

We will cover lots of topics and processes in QuickBooks.  Students are encouraged to bring questions from their own experiences to class.

5 Clases – Tuesdays & Thursdays

April 14 – May 12 –  2-4pm, $219

Now is a great time to do a W-9 audit!

Most people know they have to give independent contractors a 1099. Here are some other expenses eligible for a 1099: Interest paid on loans, rent, and household employees. A W-9 should be collected before paying these expenses.

More information on Household Employees

Without a W-9 on file, you are obligated to retain 28% of payments to vendors and send the withholding to the Feds.

W-9 Audit

1.  Review all expense accounts that are likely to have 1099 eligible vendors.

2.  Ensure all eligible vendors are flagged for 1099s:  Go to Vendor Center > Edit vendor > See checkbox Eligible for 1099.

3.  Run a 1099 summary report for the current year.  Ignore thresholds.  If you do not have accounts mapped to 1099 boxes yet, choose show all accounts.  This report will show you which vendors are missing a tax ID number.  Request W-9s from these vendors.

4.  When you receive the W-9s back, follow the directions for 1099s for eligibility.  If a vendor is not eligible for a 1099 (corporations and non-profits for instance) uncheck the ‘eligible for 1099’ box in the vendor set up.  Create a vendor type called ‘Corp – No 1099’ or similar.

You can create a custom report in QuickBooks for Corp – No 1099 vendors.  This will help remind you why some vendors are not on the 1099 summary list.

You need the W-9 data on hand to create 1099s. If you have not collected W-9s before payment was made, make sure you collect them before year end.

Requesting W-9s

Send out requests for a completed W-9 to all vendors who are subject to 1099 rules. Remember to include a deadline in your request, such as 1 week from date of request, to ensure you collect all your W-9s before 1099s are due.

If you send requests via paper mail, you may want to include a self addressed stamped envelope to encourage quick replies.

If you send requests via email, ensure you provide vendors with the option to send forms back via paper mail.  Include your address in the email in an easy to cut & paste format.

Form W-9

Create Good Practices

Create an on-boarding process for vendors.  Ensure you do not have to work hard at the end of the year and/or in January.  Create a process to collect W-9s as soon as you start a relationship with a new vendor.  Do not pay until you have a W-9 in hand.

Work with your lawyer to create solid contractor agreements for your subcontractors.  Do they need liability insurance?  Certifications?  Confidentiality and non-disclosure agreements?  All of these things along with the W-9 should be part of your vendor on-boarding process.

QuickBooks Class – Fall Term

QuickBooks 2015 for Fall Term

Classes are at the LBCC Albany campus.

Sign Up Here

QuickBooks Guided Tour

This course is great for people that need to brush up on computer skills before Level 1.

September 29th, October 1st, 2 -4pm, $79

QuickBooks Level 1

We will cover lots of topics and processes in QuickBooks.  Students are encouraged to bring questions from their own experiences to class.

5 Clases – Tuesdays & Thursdays

October 6th – 20th, 2-4pm, $219

Affordable Care Act and Your Taxes

We all lived through 4/15!  Whoo hoo!

Some of you may have filed extensions for your personal and/or business taxes.  Others may have already received a refund or notice of tax due.  Lauren Wingert CPA offers a nice visual flow chart for anyone confused about how the Affordable Care Act (aka Obamacare) has impacted your tax return.

Here is Lauren’s Flow Chart

 

Click on it to see the full size version.

Contact Lauren if you have questions.

Lauren M Wingert CPA

1233 Main Street POB 102

Philomath, OR 97370-0102

ph: 541 952-4731

Lauren’s Website

There is lots of information online too…

About the ACA Law

Plain Language Benefits Information