Friday, April 27, 2012

Tax time is over…well for most. I can't say that I am not glad. I did have a couple of clients this year with some, let's say, peculiar looking financial statements from QuickBooks. I'd like to focus on one in particular. This one had a balance sheet that did not balance. It is very difficult to achieve this in QuickBooks. It took some deep investigating for me to determine what had happened.

So given that event, I thought it would be a good time to make sure everyone understands the need for a regular "QuickBooks Checkup". This service will allow me to do a thorough data file analysis which can uncover many different issues. With a data file analysis, I can determine if you are using the software correctly, if there are any technical issues to be concerned with and to if any corrections are necessary - both to the data and your processes.

Have this done now and uncover any problems now rather than at tax time when it is more difficult to address.

Tuesday, April 17, 2012

The IRS wants you to know how to avoid penalties - so courtesy of the IRS, here are some facts to know:

The number of electronic filing and payment options increases every year, which helps reduce your burden and also improves the timeliness and accuracy of tax returns. When it comes to filing your tax return, however, the law provides that the IRS can assess a penalty if you fail to file, fail to pay or both.

Here are eight important points about the two different penalties you may face if you file or pay late.

So, beware - this issue is not going away. In fact, congress has even introduced legislation to make some professional services firm's profits subject to FICA taxes. Fortunately for now, it died in the Senate.

1. If you do not file by the deadline, you might face a failure-to-file penalty. If you do not pay by the due date, you could face a failure-to-pay penalty.

2. The failure-to-file penalty is generally more than the failure-to-pay penalty. So if you cannot pay all the taxes you owe, you should still file your tax return on time and pay as much as you can, then explore other payment options. The IRS will work with you.

3. The penalty for filing late is usually 5 percent of the unpaid taxes for each month or part of a month that a return is late. This penalty will not exceed 25 percent of your unpaid taxes.

4. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.

5. If you do not pay your taxes by the due date, you will generally have to pay a failure-to-pay penalty of ˝ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25 percent of your unpaid taxes.

6. If you request an extension of time to file by the tax deadline and you paid at least 90 percent of your actual tax liability by the original due date, you will not face a failure-to-pay penalty if the remaining balance is paid by the extended due date.

7. If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty. However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.

8. You will not have to pay a failure-to-file or failure-to-pay penalty if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect.

Friday, March 2, 2012

Here is a true story. I helped a client setup a new installation of QuickBooks. It was a challenging environment. There were at least 5 users most of the time and a very busy office network. Once we were complete, I have to admit it was a very nice job. They were humming along and very pleased. However, a week later I got a call from them with a bit of desperation. Suddenly, the system's performance had slowed to a snails pace. I did a bit of phone work and determined that I should go visit them and see what was up.

So I showed up and got in the driver's seat. I logged in using the main bookkeeper's login. And I could see what she meant. It was painfully slow. I adjusted the view a bit like I always do when doing consulting or training. One of the things I always do is to turn on the Open Windows List. This shows what windows are open behind the ones you see on the surface. Boom - the list filled the screen. There were tons of windows open. I started closing them - reports, registers, etc. I must have closed over 50.

Success. Now the system hummed along again. You see, with all those windows open it put such a demand on her system that it could not work fast enough.

So, use the Open Window List. It will prevent problems like this and better yet, it is a more efficient way of working. You can flip from one window to another by clicking the window in the list. Give it a try. It can be turned on and off from the View menu.

Tuesday, January 24, 2012

Yes the IRS has made it clear that if you own an S-corporation and work in it too, you need to pay yourself a reasonable salary. Why? The profits of an S-corporation flow through to the owners without self-employment or FICA taxes. So there is an inclination for those who want to be tax-aggressive, to minimize or eliminate paying a salary, which is subject to FICA taxes times two, and just take profit distributions. This can add up to considerable savings.

Take for example the case of David E. Watson P.C. v. U.S. This case revolved around Mr. Watson's low $24,000 salary. Mr. Watson has a graduate degree and his firm for these years in question paid him profit distributions over $150,000 each year. The IRS figured that his salary should be over $90,000 each year instead and he owed payroll taxes on the difference.

So, beware - this issue is not going away. In fact, congress has even introduced legislation to make some professional services firm's profits subject to FICA taxes. Fortunately for now, it died in the Senate.

So the moral of the story is that owners of S-corporations don't get a free ride - they must make their salary reasonable. I always recommend taking the perspective to pay them what they would pay a non-owner to do their job. It is best if they choose a method to calculate owner's pay that is reasonable, can be measured and takes into account the time and effort you put into the job.

Monday, December 13, 2010

While it is substantially complete and ready for the public, it will get better. I have included a few tools for my clients and potential clients to take note of.

There is a tax center with links to a variety of information. I have included PDF copies of many of my favorite brochures. Please peruse them and use as many as you like. There are also links to important tax figures and to the "Where's My Refund" search tools.

I have also created some quick, but not necessarily easy, QuickBooks tests. These are designed to test QuickBooks skills for bookkeepers and others potential employees. Feel free to share use it in your business.

And finally, for my current clients, I have included a "File Upload" tool. This way you can securely and easily send me your QuickBooks and other tax related files and I can do the same. We should get a lot of use out of this in 2011.

Please enjoy and let me know if I can be of assistance to you.

Thank you for your time,