Reconcile Your Credit Card Statements

Properly accounting for and reconciling credit card statements are good accounting practices and part of a fraud prevention and detection program.

QuickBooks will keep track of your credit card purchases much the same way that it keeps track of activity for your bank statement.

The QuckBooks credit card register columns are even aptly labeled “Charge” and “Payment”.  After your activity is recorded, you can reconcile just like you do (or should) with your bank statement.  It also makes paying and coding the payment of the credit card very easy, especially for those who chose not to payoff the full balance each month.

To setup and use credit cards in QuickBooks:

  1. Add a new account to the chart of accounts named similar to your credit card, such as “Bank of the Month Credit Card x5248”.  It will be a [Credit Card] type of account.
  2. Using the credit card register or the [Enter Credit Card Charges] form, record all transactions from actual credit card receipts by date and vendor instead of recording transactions directly from the credit card statement.  This will help you better identify fraudulent transactions.
  3. Resist the urge to download activity from the credit card company unless you have already recorded the activity and you are using the download to “match” your transactions.
  4. Make payments on the credit card balance by simply coding the payment to the credit card account.  No other coding is necessary since the expenses are accounted for when the charge is recorded from the receipt.
  5. Reconcile the credit card statement using the QuickBooks reconcile credit card feature.  Question activity on the statement that you have not already recorded in terms of fraud or address poor bookkeeping practices or tweak policies to get credit card activity recorded in “near real time” instead of at the end of the month.

Credit card charges for cash basis taxpayers are deductible in the year they are charged, not the year they are paid for. Recording individual credit card charges in QuickBooks will properly report your deductions in the appropriate year and possibly accelerate a deduction that you would have inadvertently deferred a year.

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Excel Custom Lists

Using lists in Excel can be very efficient.  Just type the the first item in the list in a cell, such as “Jan” and then grab the fill handle and drag to the right to complete the rest of the months.  These built-in lists (e.g., day-of-the-week, month-of-the year) cannot edited or deleted. . 

However, you can also create your own custom lists, and use them to sort or fill, especially when you find yourself entering the same sequence of name or labels each time you start an Excel worksheet.  For example, if you want to sort or fill by the following lists, you need to create a custom list, because there is no natural order.

Custom list examples:

  • High, Medium, Low
  • Dr. Sure, Dr. Able, Dr. Bill, Dr. More
  • North, South, East, and West
  • Senior Sales Manager, Regional Sales Manager, Department Sales Manager, and Sales Representative

Note:   A custom list can only contain text or text mixed with numbers. Numbers must be formatted as text.

There are two ways to create a custom list. If your custom list is short, you can type the values directly in the dialog box. If your custom list is long, you can import it from a range of cells (not shown here).

  1. Click the Microsoft Office Button Button image, and then click [Excel Options].
  2. Click the [Popular] category, and then under Top options for working with Excel, click [Edit Custom Lists].
  3. In the Custom Lists box, click [NEW LIST], and then type the entries in the List entries box, beginning with the first entry. Press [ENTER] after each entry.
  4. When the list is complete, click [Add].  The items in the list that you selected are added to the Custom lists box.
  5. Click [OK] twice.
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Congress Votes to Repeal New 1099 Requirement

The Senate and House have approved a measure that would repeal the expanded Form 1099 reporting requirements that were part of last year’s health care law. The move has broad support because the Form 1099 rules, which are set to require businesses to report any purchases of more than $600 of goods and services from vendors in a year to the Internal Revenue Service, are expected to increase accounting costs for small businesses. The AICPA supports repeal of the expanded Form 1099 reporting requirements; however, it has asked the Treasury Department for guidance on several pressing issues if the rules are not repealed.

From CPA Lettter Daily

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Section 199 Manufacturing Deduction

If your business didn’t meet the requirements in the past to claim a manufacturing deduction or you determined that it wasn’t worth the time, maybe you should reconsider it.  One of the most compelling reasons is because the 9% deduction is now three time the original rate of 3%.

That percentage is applied to Qualified Production Activity Income or taxable income, whichever is less and limited to 50% of related W-2 wages The qualifying production activities, in general, must also be performed in the U.S.

The following lines of business may qualify:

  • Construction services, including related engineering and architectural services
  • Manufacture, production, growth or extraction of tangible personal property, computer software or sound recordings or qualified films
  • Production of electricity, natural gas or potable water

The calculation requires allocation of gross receipts between qualified and non-qualified production activities.  Then an allocation of expenses must be made.  In some circumstances, the taxpayer may qualify for the Simplified Deduction Method or the Small Business Simplified Method.

If you think you may qualify, please contact us for an in depth analysis.

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QuickBooks 2008 and Payroll Tax Expiration

After May 31, 2011, QuickBooks (QB) will stop providing payroll tax table updates for any users on QuickBooks 2008.  This means that tax withholding and match computations with go to zero on 06/01/11 if you don’t upgrade to QB 2011.

In general, QB only supports the 3 most current versions of QB (2011, 2010 & 2009).  2008 is currently in the grace period that began in October 2010 when 2011 was officially released.

If you are not using the payroll function, then you are not required to upgrade to 2011 and you can continue to use versions prior to 2009.  However, it is generally a good idea to upgrade every few years to take advantage of improvements to the programs functionality and new features the may enhance productivity.

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Medicare Part B Now Deductible as SE Health Ins.

According to page 29 of the 2010 Form 1040 Instructions, “Medicare Part B premiums can be used to figure the [Self-Employed Health Insurance] deduction”

That’s a change from 2009 Form 1040 instruction where on page 39, it stated “Medicare premiums cannot be used to figure the deduction.”

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IRS Agents Requesting QuickBooks Data File

IRS agents are being instructed to obtain a copy of the taxpayer’s QuickBooks data file for examinations. This will not be done in all examinations.  If the taxpayer refuses to provide the file, thier suspicion level would be raised and a summons to obtain the information may be issued. The agents are instructed to review only the information for the year under audit unless they decide to expand the examination to prior years.  

During a recent examination in December, the revenue agent requested a copy of the QB file and password. He told me that one of the things they will be specifically reviewing is the QB audit trail. He said they want to see if there were any significant changes to the transaction coding in the days leading up to the audit appointment (maybe beginning with the time period around the date of examination notification). Luckily for my client they had nothing to hide.  

The IRS has purchased 1,500 to 2,000 licenses from Intuit and will have one agent trained and licensed per group to assist others in the examination of taxpayers who use QuickBooks

So be reminded that beginning with QB 2006, the “audit trail is always on”. If you keep everything on the up and up, you shouldn’t have anything to worry about.

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Excel Quick Tip: =sum() Short Cut

If you ever work in Excel, you might occasionally need to use the =sum() formula to sum a column or row of numbers-without your 10-Key 😉  If so, you’ll love adding this shortcut to your repertoire.

  1. Highlight a cell where you need an =sum() formula (that’s translated @sum() for you Lotus veterans)
  2. Press and hold [Alt] then press [+] to start the =sum() formula
  3. Excel will try to guess the range you are trying to sum.  If it is right, then simply hit enter.  Excel is a better “guesser” when the cell is directly adjacent to the cells to be summed.
  4. If Excel doesn’t get it right, then use your mouse to paint the correct range and hit [Enter] OR use your arrow keys to navigate to the beginning of the range and then press and hold down the [Shift] key to paint the range, then release shift and hit [Enter].

I use this shortcut all the time and once you get used to the idiosyncrasies of making it work for you quickly, it can be very efficient.

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IRS Delay in Processing Tax Returns Until Feb 14th

The IRS announced a delay in its ability to process some tax returns affected by late-year changes to the tax law, which involve:

  • State and local sales tax deductions
  • The higher education tuition and fees
  • The educator expenses deductions
  • Schedule A itemized deductions

Expect to wait until February 14th before the IRS will accept tax returns from itemizers.

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One Year Payroll Tax Reduction

The biggest new tax break for individuals in the recently enacted “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010” is the one-year payroll tax reduction.  Under this new provision the payroll tax will be cut by two percentage points during 2011.

This newly enacted legislation will affect payroll checks issued beginning January 1, 2011 and ending December 31, 2011. If you have not already contacted your payroll provider regarding this change for 2011, we recommend you do so immediately.  

Important details to note:

  • The Social Security payroll tax withholding on individual wages will be lowered to 4.2% in 2011, from the usual 6.2% rate.
  • The employer’s share of Social Security tax is not affected; it stays at 6.2%.

Additional information to note:

  • Self-employed workers will also get the tax break. Their self-employment taxes will be cut from 12.4% to 10.4%.
  • There is no phase-out (i.e., gradual reduction) of the payroll tax reduction for higher income workers. It goes to everyone who works, regardless of income. However, since Social Security taxes apply only to the first $106,800 in earnings in 2011, the benefit for high earners tops out at $2,136.
  • The tax break only applies for one year, 2011—for now anyway. There will almost certainly be efforts to extend it beyond 2011, and we will keep you apprised of any developments in that regard.
  • The payroll tax reduction will not affect the worker’s future Social Security benefit, because benefits are based on lifetime earnings, not the amount of tax paid by the worker into the Social Security System.

If you would like more details about the payroll tax reduction or any other aspect of the new law, please do not hesitate to call.

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