Ask Your Bookkeeper

The Most Common Mistake I See With New Quickbooks Users

2011-09-22T09:05:00.000-07:00

It's a cute little commercial...

One thing I try to explain to new Quickbooks users is that the software IS user friendly but you still need basic knowledge of the software to avoid making mistakes, and basic bookkeeping knowledge to be sure your recording entries correctly.

The most common mistake I have seen in my freelance bookkeeping practice is with Customer payments & Bank deposits. Quite often a new user will use Quickbooks to create an invoice to a customer and then enter a customer's payment to them as a bank deposit without applying the payment to the outstanding invoice. This will result in an ever-growing Accounts Receivable balance on the customers Balance Sheet as well as over-stated income on the Profit & Loss Statement.

On the other hand, they may properly record the customers' payment using the "Receive Payment" feature, but again, they record the deposit as income rather than linking the deposit entry to the received payment. The clear indicator of this will be a balance in the Undeposited Funds account on the Balance Sheet, that continues to grow, and a duplication of Income reflected on the Profit and Loss statement.

A simple way to be sure that you are not double posting income is to use the Sales by Customer Summary report and compare the total on this report to the income on the Profit & Loss Statement for the sale time period. These numbers should be the same.

This assumes that all revenues are posted to customers in the company file either by invoice or sales receipt.. If you "deposit" a portion of your sales (for example small dollar cash sales at an event) directly to an income account without using the invoice or sales receipt option, this double-check will not work.

For basics on how to use Quickbooks software, the classes offered by Intuit are a good investment. A local Quickbooks Proadvisor can offer individualized training that allows for questions specific to your situation and business.

If you think you have made these errors, DON'T PANIC!. Quickbooks can be easy to mess-up but it is just as easy to fix. Your Proadvisor can show you how.

Summer Day Camp Expenses May Qualify for a Tax Credit

2011-07-06T07:56:00.001-07:00

Along with the lazy, hazy days of summer come some extra expenses, including summer day camp. But, the IRS has some good news for parents: those added expenses may help you qualify for a tax credit.

Many parents who work or are looking for work must arrange for care of their children under 13 years of age during the school vacation.
Here are five facts the IRS wants you to know about a tax credit available for child care expenses. The Child and Dependent Care Credit is available for expenses incurred during the summer and throughout the rest of the year.

The cost of day camp may count as an expense towards the child and dependent care credit.
Expenses for overnight camps do not qualify.
Whether your childcare provider is a sitter at your home or a daycare facility outside the home, you'll get some tax benefit if you qualify for the credit.
The credit can be up to 35 percent of your qualifying expenses, depending on your income.
You may use up to $3,000 of the unreimbursed expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.

For more information check out IRS Publication 503, Child and Dependent Care Expenses. This publication is available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

Links:
IRS Publication 503, Child and Dependent Care Expenses

I need to convert a Peachtree PC file on a remote service to a Quickbooks file on my Mac...

2011-06-01T18:39:00.000-07:00

Wow! One of the more complicated conversions I have done for a client came my way the other day. Not only was my client switching from Peachtree to Quickbooks, not only were they switching from PC to Mac, but they also had their Peachtree files located on a remote server out-of-state.

Intuit offers a free conversion tool that can easily be downloaded onto your pc to convert a Peachtree file into a Quickbooks file. The client had already purchased Quickbooks for MAC. (You must have Quickbooks for MAC 2007 or newer) In addition he had to purchase the Quickbooks PC license and installed it on the Windows 7 platform that was already installed on his MAC.

The big complication in this particular conversion was that the Peachtree and Quickbooks software as well as the conversion tool have to be installed on the same computer and that computer has to be a local computer. Because his Peachtree files were located out of state on another computer we had to send the file to Intuit tech-support for conversion. The conversion was completed quickly and we had our new file back in less then 48 business hours. And, because my client went through a ProAdvisor his conversion was free.

We restored this converted file to Quickbooks using the PC version of the software. The next step was to open this company file and use the feature in Quickbooks to prepare the file for a MAC conversion. (This is found under the "File" drop down menu on the top menu bar, and the "Utilties" feature. Select "Copy company file for Quickbooks MAC". Save the prepared file to your Desktop if your are already working on your MAC or to a flash drive if you are moving it to another computer.) Once complete we were able to open the company file in the MAC version and the training commenced.

One thing to NOTE if you are considering using Quickbooks for MAC and you have a Proadvisor or Accountant that regularly accesses you Quickbooks file. The remote access feature built-in to Quickbooks does not work with the MAC platform. Therefore, you can either allow access through Remote Desktop Connection, or run your Quickbooks on the Windows 7 parallel platform with your MAC.

The client I worked with in this incident actually used the PC version to create a file for his personal bookkeeping. He wanted to have a handle on his personal spending and was able to download several years worth of transactions from his bank. This gave him the opportunity to become more familiar with Quickbooks software before tackling his multiple company files in the Mac version. I have a feeling he may end up sticking with the PC version now that he has experience with all of the extra features, and consequently the increased ease, that the PC version provides.

With the outside services provided intuit this project took several visits. Now that everything is complete this client should be making great progress with minimal follow-ups.

Eight Tips for Deducting Charitable Contributions

2011-03-22T18:37:00.000-07:00

Charitable contributions made to qualified organizations may help lower your tax bill. The IRS has put together the following eight tips to help ensure your contributions pay off on your tax return.

If your goal is a legitimate tax deduction, then you must be giving to a qualified organization. Also, you cannot deduct contributions made to specific individuals, political organizations and candidates. See IRS Publication 526, Charitable Contributions, for rules on what constitutes a qualified organization.
To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A.
If you receive a benefit because of your contribution such as merchandise, tickets to a ball game or other goods and services, then you can deduct only the amount that exceeds the fair market value of the benefit received.
Donations of stock or other non-cash property are usually valued at the fair market value of the property. Clothing and household items must generally be in good used condition or better to be deductible. Special rules apply to vehicle donations.
Fair market value is generally the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.
Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record, payroll deduction records or a written communication from the organization containing the name of the organization, the date of the contribution and amount of the contribution. For text message donations, a telephone bill will meet the record-keeping requirement if it shows the name of the receiving organization, the date of the contribution, and the amount given.
To claim a deduction for contributions of cash or property equaling $250 or more you must have a bank record, payroll deduction records or a written acknowledgment from the qualified organization showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. One document may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more. If your total deduction for all noncash contributions for the year is over $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return.
Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which generally requires an appraisal by a qualified appraiser.

For more information on charitable contributions, refer to Form 8283 and its instructions, as well as Publication 526, Charitable Contributions. For information on determining value, refer to Publication 561, Determining the Value of Donated Property. These forms and publications are available at http://www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

Search for Charities or download Publication 78, Cumulative List of Organizations
Publication 526, Charitable Contributions (PDF 178K)
Publication 561, Determining the Value of Donated Property (PDF 101K)
Form 1040, U.S. Individual Income Tax Return (PDF 176K)
Schedule A, Itemized Deductions (PDF)
Form 8283, Noncash Charitable Contributions (PDF)
Instructions for Form 8283, Noncash Charitable Contributions (PDF)

Open Purchase Order Report Shows PO's That Are Received In Full

2011-01-27T08:02:00.000-08:00

In Quickbooks Pro Manufacturing Edition are you seeing Purchase Orders on your Open PO report in Quickbooks that have been received in full. Are you seeing the "Received In Full" stamp on these PO's when you open them to try to determine the cause of the error.

Here is a little trick that I have found works well for me. Open the purchase order that is in question (be sure to keep track of the PO number), change the date of the PO to the year 2030 and save and close it. Use the "Find" feature with the PO number or locate it in the Customer center if you no longer see it on the report. Re-open the PO and change the date back to the correct year and save and close it.

Give this a try and please comment on whether or not it has fixed your problem. It has worked well for me and I am curious to find out if others have the same result. Yes, I admit, it's just a treatment and doesn't really diagnose why this is happening.

Tax Tips for Self-employed Individuals

2011-01-24T18:57:00.000-08:00

If you are in business for yourself, or carry on a trade or business as a sole proprietor or an independent contractor, you generally would consider yourself self-employed and you would file IRS Schedule C, Profit or Loss From Business or Schedule C-EZ, Net Profit From Business with your Form 1040.

Here are six things the IRS wants you to know about self-employment:

Self-employment can include work in addition to your regular full-time business activities, such as part-time work you do at home or in addition to your regular job.
If you are self-employed you generally have to pay Self-employment Tax. Self-employment tax is a social security and Medicare tax primarily for individuals who work for themselves. It is similar to the social security and Medicare taxes withheld from the pay of most wage earners. You figure SE tax yourself using a Form 1040 Schedule SE. Also, you can deduct half of your self-employment tax in figuring your adjusted gross income.
If you are self-employed you generally have to make estimated tax payments. This applies even if you also have a full-time or part-time job and your employer withholds taxes from your wages. Estimated tax is the method used to pay tax on income that is not subject to withholding. If you don’t make quarterly payments you may be penalized for underpayment at the end of the tax year.
You can deduct the costs of running your business. These costs are known as business expenses. These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year.
To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary.
For more information see IRS Publication 334, Tax Guide for Small Business, IRS Publication 535, Business Expenses and Publication 505, Tax Withholding and Estimated Tax, available at http://www.irs.gov or by calling the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).

Links:

Publication 334, Tax Guide for Small Business (PDF)
Publication 535, Business Expenses (PDF)
Publication 505, Tax Withholding and Estimated Tax (PDF)

Eight Facts About Filing Status

2011-01-13T18:33:00.000-08:00

The first step to filing your federal income tax return is to determine which filing status to use. Your filing status is used to determine your filing requirements, standard deduction, eligibility for certain credits and deductions, and your correct tax. There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household and Qualifying Widow(er) with Dependent Child.

Here are eight facts about the five filing status options the IRS wants you to know so that you can choose the best option for your situation.

Your marital status on the last day of the year determines your marital status for the entire year.
If more than one filing status applies to you, choose the one that gives you the lowest tax obligation.
Single filing status generally applies to anyone who is unmarried, divorced or legally separated according to state law.
A married couple may file a joint return together. The couple’s filing status would be Married Filing Jointly.
If your spouse died during the year and you did not remarry during 2010, usually you may still file a joint return with that spouse for the year of death.
A married couple may elect to file their returns separately. Each person’s filing status would generally be Married Filing Separately.
Head of Household generally applies to taxpayers who are unmarried. You must also have paid more than half the cost of maintaining a home for you and a qualifying person to qualify for this filing status.
You may be able to choose Qualifying Widow(er) with Dependent Child as your filing status if your spouse died during 2008 or 2009, you have a dependent child and you meet certain other conditions.

There’s much more information about determining your filing status in IRS Publication 501, Exemptions, Standard Deduction, and Filing Information. Publication 501 is available at http://www.irs.gov or by calling 800-TAX-FORM (800-829-3676). You can also use the Interactive Tax Assistant on the IRS website to determine your filing status. The ITA tool is a tax law resource on the IRS website that takes you through a series of questions and provides you with responses to tax law questions.

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Reconciling Your Credit Card - How To Post The Finance Charge

2011-01-12T08:31:00.000-08:00

I worked with a client recently who contacted me because they were having issues in Quickbooks for Mac. After a brief online conversation I quickly determined that they obviously knew the basics of what they were doing and that we probably just needed to do a little bit of detective work to solve the problem.

The problem resolved around the fact that every time they entered the finance charge amount from their credit card statement into the reconciliation page, that same amount was showing up as a payment made on the account. Not only were these "payment" entries continuing to pile up without being reconciled, but the book balance of the account grew more and more inaccurate.

The process, in both the Mac and PC version of Quickbooks, involves entering the finance charge amount in the appropriate box of the reconciliation screen, and choosing the correct expense account to assess this charge to.

So the simplest questions to ask were, are you choosing the correct expense account and is it properly set-up as an Expense account "Type". The answer to both was yes.

Everything the client was doing was correct, so I asked them to send me a copy of the screen shot from their reconciliation screen. Quickbooks retains the expense account information applied to the previous reconciliation so this screen shot would confirm the proper entry (or not). The screen shot gave us the answer to the clients dilemma. Even though they knew where the finance charge should have been expensed to, the screen shot revealed that they were actually posting this charge right back to the credit card. And since the finance charge journal is a debit to the expense account it was appearing as a payment, as a credit card payment is also a debit posting.

New versions of Quickbooks will catch this error and not allow you to post the finance charge to the same account you are reconciling. This clients version did not have that protection.

I would strongly recommend that you consider upgrading your software if your version is at least 4 years old. There are many great features that each new version brings on board and you may be missing out on changes that can make your bookkeeping easier and more accurate.

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The advantage of downloading from your bank regularly - Fraud Prevention

2010-07-16T17:14:00.000-07:00

Many of my clients download their bank transactions directly from their banks online system. Some, however, only do this once a month when they are ready to reconcile all of their accounts. There is one very strong reason I recommend completing the bank download feature in Quickbooks at least once a week.

Fraud!

I have experienced this personally, and I have seen it happen to my clients.

You could be in for a very rude awaking as you trod along during the month keeping track of your account register as you enter each transaction that you complete. Then one day you get a phone call from the bank saying you are overdrawn. Or, perhaps you are out in the field and attempt to use your credit or debit card only to have the charge declined.

Downloading regularly can bring fraudulent charges to your attention immediately and allow you to dispute those charges before overdraft and/or over limit charges start to pile up on your account. It's much easier to get credit for these charges with your bank as soon as the fraud is detected then it might be a few weeks or even months later.

You may think that you have nothing to worry about. You take every possible precaution you can think of to prevent identity theft. You shred every paper, pay monthly fees to a credit monitoring service, and more. But a stolen debit card number can wipe out your cash on hand in one day!

Consider keeping your personal records on Quickbooks (in a separate "company file") so that you can use the bank download feature for these accounts as well. Being diligent, and monitoring for yourself is your best defense.

Can I use Quickbooks to do this?

2010-04-02T08:39:00.000-07:00

Q.) Im working in a Multinational Pharmaceutical company that operate in the Gulfas in many other countries, and my Region role is to market the productswe don't keep inventory ,we don't sell, we don't collect payments, even we don't prepare balance sheets. We forward our expenses (allocated by account) to HQ's and they do the rest. Our expenses are as follows

1 payroll
2 office related ( rent, courier,telephone,etc)
3 marketing related (meetings,gifts,,, etc)

My role is to prepare expenses formats, make payment to suppliers, control expenditures and prepare a lot of reports shows how much we spend and on which products are alikeand prepare expense formats to be sent to HQ's as well.

I dont have a tool to manage all of these , so i use excel which in fact very poor tool to manages all of these tasks. Can Quickbooks help me to prepare monthly statements per account to be sent to HQ's and also help me to prepare internal reports that can help the team to wisly spend on marketing actvites and give me control over spendings against budgets?

A) Even though you don't generate any financial statements you can use Quickbooks to create a budget for your spending, track how your spending compares with your budget, create spending reports by sales rep, location, etc.

Since you are paying vendors you can use Quickbooks to track what you expense and owe. In addition, it sounds like you have a checking account that Quickbooks can assist you in balancing.

I agree, Excel is probably a very time consuming way to track all of this. Even so, Quickbooks allows you to export just about every transaction and report into Excel so you can easily manipulate it, while having accurate numbers. Most of the reports can be modified extensively and run in many different ways to include a lot of different information.

I think with some time, and experimentation you would find it very useful.

Q) Can I set up cost centers , like for Every Product a seprate cost centerwhere i can charge them for any marketing actvitiesand generate the reports to show how much each product (cost center) is spending against budgets for its own?

In case this is possible, which edition of QB's i should use,Non profit ,pro?

A) Use the "Class" feature in Quickbooks to create your Cost Centers. Quickbooks Pro should work for you. I don't think the non-profit edition applies but you can use it and make changes to suit your reporting needs.

With the class feature you can create a separate budget and track all of your expenses. Each transaction you enter will give you a "class" column. Remember this one important thing...you have to enter the information correctly to get it reported back to your correctly. You can turn on a "reminder" in Quickbooks that will let you know if you forgot to enter the Class(Cost Center) in a transaction.

Response) Thank you So Much You were Very hepful. I really appreciate it.

This material is for informationalpurposes only and not intended and financial, legal or tax advice.Please consult your finance, legal or tax professional to confirm theaccuracy of all information. Quickbooks is a registered product ofIntuit.

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Help with setting up accounts for a non-profit. (follow up)

2010-03-31T19:19:00.000-07:00

Q. Currently, our donations from individuals are going into the main "Undesignated Funds" account, and the donations from churches are going into separate sub-accounts for each church. Sometimes individuals will request that their donation go towards the building fund, scholarships, etc, and those are put into their own separate income accounts. Churches rarely designate where the funds should go, they just go into the general funds.

Should all the donations go in the same "Donations" income account? Or should we do "Individual Donations" and "Church Donations" accounts? Should we do a sub account for designated funds, or leave those funds in their separate accounts as they are currently? Or should we set up the building fund, scholarships, etc, as classes within the individual donations account? We would be needing the easiest way to see the total amount of funds received.

A. Your un-designated funds would be the General Fund Account. Each donor does not need their own income account, nor does the donor type need it's own account because you will be able to generate future reports for any income account, and limit them to a Donor (Church, individual, etc) name and or/ by Donor type, which you have already created.

Your income accounts might look like this...

Camp Income
General Donations

I recommend creating the restricted funds income accounts using the "Other Income" account type. Such as...

Building Donations
Scholarship Donations

This way they will still appear on your annual P&L but will appear separately from general income & expenses at the bottom of the report.

Create expense accounts for the restricted funds as well. You can also create sub accounts for more detail. For example, you might create Architect, Permits & Plans, Build-out, etc. as sub accounts under a Building Project expense account. Create these using the "Other Expense" account type so that these expenses will appear at the lower part of the report along with the restricted income.

You also want to create liability accounts for items like the Building Fund and Scholarship Fund, etc.

At the end of the fiscal year the income total for the year will need to be moved out of Retained Earnings and into these restricted liability accounts with a single journal entry. Create these accounts as "Equity" type accounts.

Under these Equity accounts create sub-accounts called "Funds Distributed". This is where you will move the expense total for the year out of retained earnings, again using a journal entry.

This will allow the balance of the restricted funds to appear on your balance sheet in the equity section. Recording transactions in the income and expense accounts first will also allow you to pull detailed reports of the income and expenses at any given point later on.

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Ten Tips for Deducting Charitable Contributions

2010-03-26T09:54:00.000-07:00

When preparing to file your federal tax return, don’t forget your contributions to charitable organizations. If you made qualified donations last year, you may be able to take a tax deduction if you itemize on IRS Form 1040, Schedule A.
The IRS has put together the following 10 tips to help ensure your contributions pay off on your tax return.

Contributions must be made to qualified organizations to be deductible. You cannot deduct contributions made to specific individuals, political organizations and candidates.
You cannot deduct the value of your time or services. Nor can you deduct the cost of raffles, bingo or other games of chance.
If your contributions entitle you to merchandise, goods or services, including admission to a charity ball, banquet, theatrical performance or sporting event, you can deduct only the amount that exceeds the fair market value of the benefit received.
Donations of stock or other property are usually valued at the fair market value of the property. Special rules apply to donation of vehicles.
Clothing and household items donated must generally be in good used condition or better to be deductible.
Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record, payroll deduction records or a written communication from the organization containing the name of the organization, the date of the contribution and amount of the contribution. For donations by text message, a telephone bill will meet the record-keeping requirement if it shows the name of the organization receiving your donation, the date of the contribution, and the amount given.
To claim a deduction for contributions of cash or property equaling $250 or more you must have a bank record, payroll deduction records or a written acknowledgment from the qualified organization showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. One document may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more.
If your total deduction for all noncash contributions for the year is over $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return.
Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which requires an appraisal by a qualified appraiser.
To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A.

For more information on charitable contributions, refer to Form 8283 and its instructions, as well as Publication 526, Charitable Contributions. For information on determining value, refer to Publication 561, Determining the Value of Donated Property. These forms and publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

Search for Charities or download Publication 78, Cumulative List of Organizations
Publication 526, Charitable Contributions (PDF 178K)
Publication 561, Determining the Value of Donated Property (PDF 101K)
Form 1040, U.S. Individual Income Tax Return (PDF 176K)
Schedule A, Itemized Deductions (PDF)
Form 8283, Noncash Charitable Contributions (PDF)
Instructions for Form 8283, Noncash Charitable Contributions (PDF)

YouTube Videos:
Charitable Contributions: English | Spanish | ASL
Haiti Earthquake Donations: English | Spanish | ASL

This material is for informationalpurposes only and not intended and financial, legal or tax advice.Please consult your finance, legal or tax professional to confirm theaccuracy of all information.

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How Do I Record A Pre-Payment From My Customer In Quickbooks

2010-03-25T10:03:00.000-07:00

You have two options depending on how you wish to have the information appear on your balance sheet.

Method #1

The simplest way is to enter the payment in the Customer menu under "Receive Payments". If there are invoices already entered for this customer and you do not want to apply this prepayment to those invoices, just un-check the invoice that Quickbooks auto-applied the payment to.

After you uncheck this option the Overpayment note at the bottom of the screen will disappear. Click Save & Close and an option box will pop up on the screen. Since this is a prepayment will want to the select OK which will save the payment to the Customers account as an un-applied payment.

Entering the pre-payment using this method will have the effect of reducing the accounts receivable balance in the Assets portion of your balance sheet.

If you need to see which customers have un-applied payments posted to their accounts you can run the A/R Aging Detail report under the Customers & Receivables section of the Reports menu. Any un-applied payments will appear as credits (minus) on the report.

In addition, by using this method you can apply the prepayment to any Job associated with this customer by double clicking on the payment in the Customer Center and selecting the invoice(s) to apply it to. All Jobs for a Customer will appear for a payment posted just to the Customer and not to a specific job.

Method #2

If you wish to post your Customer's prepayments to a liability account that will appear in the liabilities sections of your Balance Sheet you can do this using a Sales Receipt to record this transaction.

Step one is to create an account on your chart of accounts for the liability such as Customer Deposits. Use the Other Current Liability account type when setting this up. Next you will need to create an Item in the Item list to direct to pre-payment to this liability.

From the Item button on the Item list select New. Choose the "Other Charge" Item type.

Enter the appropriate name and description for the item, choose the non-taxable tax code and select the account the you created in the chart of accounts for this liability.

Create a sales receipt for the customer using the Sales Receipt form. Use the Item that you created in the item list and enter the amount of the payment.

In this way you can record the payment number the payment method, and because you are using a Sales Receipt and not an invoice the funds appear as a balance in the liabilities section of the balance sheet rather than reducing the Accounts Receivable balance on the balance sheet. Once this Sales Receipt is created you can see the transaction on various Customer reports. However, it will not appear in any Accounts Receivable reports.

When you are ready to apply this prepayment to a customer invoice you will need to do a journal entry to move this amount into accounts receivable. Simply debit the Customer Deposits account and credit Accounts Receivable. Include this Customer name in the Customer/Job column of the journal entry. If you use Jobs under your Customer register, the journal entry to credit accounts receivable must be attached to the "Job" (in the Customer/Job column) that is being invoiced.

To apply this prepayment to an invoice, open the invoice by double clicking on it in the Customer Center and click the Apply Credits button. Once the available credit has been selected choose Done.

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Paying A Bill UsingTwo Separate Forms of Payment

2010-03-23T08:30:00.000-07:00

"I have entered a bill that now needs to be paid. The bill however is made up of two payments. One being petty cash and the other from the business bank account. On the pay bills screen I can't seem to see a way to enter the two amounts seperatly, it only has the option to pay the whole bill as one payment. Which will cause problems when I come to reconile."

In Quickbooks you'll have to enter each payment separately. First create the payment from the Pay Bills screen for the check. After you select the bill you are paying you can change the Amount To Pay column to reflect how much the check is for. Either print the check, or assign the check number if you have already written it. Then repeat the process if your Petty Cash is set up in the Chart of Accounts as a "Bank" account, and choose the the PC bank account for your payment method.

Or use a journal entry to debit Accounts Payable (attach this debit to the Vendor name) and credit Petty Cash for the amount of the payment. Once you do this journal entry you will have an available credit to apply to the bill in the Pay Bills window.

Return to the Pay bills window, select the bill you are applying the payment to and you will see an amount equal to the Petty Cash payment in the Available Credit section of the Pay Bills window. You will not the this amount until you have actually marked the Bill to pay.

Then simply select the Set Credits button and you can apply the payment in the Apply Credits window. If there is only one credit available to use, Quickbooks will select it automatically, then check Done.

You will be returned to the Pay Bills window. Choose Pay Selected Bills then Done in the Payment Summary window.

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Five Tips to Avoid Tax Time Stress

2010-03-12T11:42:00.000-08:00

Filing your tax return doesn’t have to be stressful. The IRS has put together five stress-relieving tips to help you.
1. Don’t Procrastinate Resist the temptation to put off your taxes until the very last minute. Rushing to meet the filing deadline may cause you to overlook potential sources of tax savings and will likely increase your risk of making an error.
2,. Visit the IRS Website In 2009, more than 296 million visits were made to IRS.gov. Make 1040 Central your first stop to learn the latest news and find answers to your questions.
3. File Your Return Electronically Last year, two out of three tax returns were filed electronically. More than 800 million tax returns have been processed safely and securely over the past 20 years. Use e-file and direct deposit to get your refund in as few as10 days. E-filed returns have a much lower error rate. Taxpayers receive a fast acknowledgement that the IRS received the return, a service not available to paper filers. You can e-file through your tax preparer or commercial software. Or, you can use Free File, a service offered by the IRS and private sector partners to prepare and e-file your federal return for free. Again, see IRS.gov for more information.
4. Don’t Panic if You Can’t Pay If you cannot pay the full amount of taxes you owe by the April 15th deadline, you should still file your return by the deadline and pay as much as you can to avoid penalties and interest. You should also contact the IRS to discuss your payment options at 1-800-829-1040. The agency may be able to provide some relief such as a short-term extension to pay, an installment agreement or an offer in compromise.
More than 75 percent of taxpayers eligible for an Installment Agreement can apply using the Web-based Online Payment Agreement application available on IRS.gov. To find out more about this simple and convenient process type “Online Payment Agreement” in the search box on the IRS.gov homepage.
5. Request an Extension of Time to File – But Pay on Time If the April 15 clock runs out, you can get an automatic six-month extension of time to file until October 15. However, this extension of time to file does not give you more time to pay any taxes due. If you have not paid at least 90 percent of the total tax due by the April deadline you may also be subject to an Estimated Tax Penalty. To obtain an extension, just file Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. The easiest way to file a Form 4868 is through Free File at www.irs.gov/freefile. Form 4868 is also available at IRS.gov or you can call 800-TAX-FORM (800-829-3676) and have a paper form mailed to you.

Links:

Official Payments Corporation
Link2Gov Corporation
Electronic filing
Free File
Electronic payment options
Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return (PDF)

This material is for informationalpurposes only and not intended and financial, legal or tax advice.Please consult your finance, legal or tax professional to confirm theaccuracy of all information.

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TITLE MATTERS: Who Owns the Car?

2010-03-04T13:24:00.000-08:00

If your company is paying for a car, make sure you title the car in the company's name. I the company makes the payment but the title is in your own name, the IRS may deny the business depreciation deduction. Your company may also lose deductions for other auto expenses such as insurance, gas & maintenance.

If you are a sole proprietor this does not apply. You and your business aren't separate entities.

Even if the car is in the company's name, if you use it for personal driving of any kind you still have to keep track of your mileage to determine what portion of the vehicles expenses will be deductible on your taxes. Keep accurate records that can be physically presented if you are audited.

Take the first step with your vehicle title, as well as other business assets, or or you may have an uphill battle.

This material is for informationalpurposes only and not intended and financial, legal or tax advice.Please consult your finance, legal or tax professional to confirm theaccuracy of all information.

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Five Important Tax Credits

2010-03-04T07:56:00.000-08:00

You might be eligible for a valuable tax credit. A tax credit is a dollar-for-dollar reduction of taxes owed. Some credits are even refundable, which means you might receive a refund rather than owe any taxes at all. Here are five popular tax credits you should consider before filing your 2009 Federal Income Tax Return:

The Earned Income Tax Credit is a refundable credit for certain people who work and have earned income from wages, self-employment or farming. Income, age and the number of qualifying children determine the amount of the credit. EITC reduces the amount of tax you owe and may also give you a refund. For more information see IRS Publication 596, Earned Income Credit.
The Child and Dependent Care Credit is for expenses paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent, to enable you to work or look for work. For more information, see IRS Publication 503, Child and Dependent Care Expenses.
The Child Tax Credit is for people who have a qualifying child. The maximum amount of the credit is $1,000 for each qualifying child. This credit can be claimed in addition to the credit for child and dependent care expenses. For more information on the Child Tax Credit, see IRS Publication 972, Child Tax Credit.
The Retirement Savings Contributions Credit, also known as the Saver’s Credit, is designed to help low-to-moderate income workers save for retirement. You may qualify if your income is below a certain limit and you contribute to an IRA or workplace retirement plan, such as a 401(k) plan. The Saver’s Credit is available in addition to any other tax savings that apply. For more information, see IRS Publication 590, Individual Retirement Arrangements (IRAs).
The Health Coverage Tax Credit pays up to 80% of the health insurance premiums for eligible Trade Adjustment Assistance recipients and Pension Benefit Guaranty Corporation payees. You can complete IRS Form 8885, Health Coverage Tax Credit to claim the credit on your tax return. To determine if you’re qualified, or to find out how to receive the HCTC each month, visit IRS.gov and search for “HCTC.”

There are other credits available to eligible taxpayers. Since many qualifications and limitations apply to the various tax credits, taxpayers should carefully check their tax form instructions, the listed publications and additional information available at IRS.gov. IRS forms and publications are also available by calling 800-TAX-FORM (800-829-3676).
Links:

1040 Central
Publication 596, Earned Income Credit (EIC) (PDF 281K)
Publication 972, Child Tax Credit (PDF 128K)
Publication 503, Child and Dependent Care Expenses (PDF 167K)
Saver's Credit
Health Coverage Tax Credit
Form 1040 Instructions (PDF 1,101K)

YouTube Videos:
Earned Income Tax Credit - English | Spanish | ASL

This material is for informationalpurposes only and not intended and financial, legal or tax advice.Please consult your finance, legal or tax professional to confirm theaccuracy of all information.

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Ten Facts about Mortgage Debt Forgiveness

2010-03-04T07:49:00.000-08:00

If your mortgage debt is partly or entirely forgiven during tax years 2007 through 2012, you may be able to claim special tax relief and exclude the debt forgiven from your income. Here are 10 facts the IRS wants you to know about Mortgage Debt Forgiveness.

Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.
The limit is $1 million for a married person filing a separate return.
You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.
To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.
Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.
Proceeds of refinanced debt used for other purposes – for example, to pay off credit card debt – do not qualify for the exclusion.
If you qualify, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.
Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax relief provision. In some cases, however, other tax relief provisions – such as insolvency – may be applicable. IRS Form 982 provides more details about these provisions.
If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.
Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.

For more information about the Mortgage Forgiveness Debt Relief Act of 2007, visit IRS.gov. A good resource is IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments. Taxpayers may obtain a copy of this publication and Form 982 either by downloading them from IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

This material is for informationalpurposes only and not intended and financial, legal or tax advice.Please consult your finance, legal or tax professional to confirm theaccuracy of all information.

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Eight Facts about the New Vehicle Sales and Excise Tax Deduction

2010-02-08T14:17:00.000-08:00

Ifyou bought a new vehicle in 2009, you may be entitled to a special taxdeduction for the sales and excise taxes on your purchase.
Here are eight important facts the Internal Revenue Service wants you to know about this deduction:

Stateand local sales and excise taxes paid on up to $49,500 of the purchaseprice of each qualifying vehicle are deductible.
Qualified motor vehicles generally include new cars, light trucks, motor homes and motorcycles.
Toqualify for the deduction, the new cars, light trucks and motorcyclesmust weigh 8,500 pounds or less. New motor homes are not subject to theweight limit.
Purchases must occur after Feb. 16, 2009, and before Jan. 1, 2010.
Purchasesmade in states without a sales tax — such as Alaska, Delaware, Hawaii,Montana, New Hampshire and Oregon — may also qualify for the deduction.Taxpayers in these states may be entitled to deduct other qualifyingfees or taxes imposed by the state or local government. The fees ortaxes that qualify must be assessed on the purchase of the vehicle andmust be based on the vehicle’s sales price or as a per unit fee.
Thisdeduction can be taken regardless of whether the buyers itemize theirdeductions or choose the standard deduction. Taxpayers who do notitemize will add this additional amount to the standard deduction ontheir 2009 tax return.
The amount of the deductionis phased out for taxpayers whose modified adjusted gross income isbetween $125,000 and $135,000 for individual filers and between$250,000 and $260,000 for joint filers.
Taxpayers who do not itemize must complete Schedule L, Standard Deduction for Certain Filers to claim the deduction.

For more information about these rules and other eligibility requirements visit IRS.gov/recovery.

Links:

The American Recovery and Reinvestment Act of 2009: Information Center

YouTube Video:

Vehicle Tax Deduction-Claim It: English | Spanish | ASL

This material is for informationalpurposes only and not intended and financial, legal or tax advice.Please consult your finance, legal or tax professional to confirm theaccuracy of all information.

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Ten Things You Should Know about the Making Work Pay Tax Credit

2010-01-22T16:34:00.000-08:00

Manyworking taxpayers are eligible for the Making Work Pay Tax Credit, aprovision created by the American Recovery and Reinvestment Act inearly 2009.
Here are 10 things the IRS wants you toknow about this tax credit to ensure you receive the entire amount forwhich you are eligible.
1. In 2009 and 2010, the MakingWork Pay provision provides a refundable tax credit of up to $400 forindividuals and up to $800 for married taxpayers filing joint returns.
2.For taxpayers who receive a paycheck and are subject to withholding,the credit will typically be handled by their employers throughautomated withholding changes.
3. Taxpayers receivingless than the full amount of the allowable credit through reducedwithholding will be entitled to claim any remaining credit when theyfile their tax return.
4. The amount of the creditactually received during 2009 in the form of reduced withholding willbe reported on your 2009 tax return. Taxpayers who do not have taxeswithheld by an employer during the year can claim the credit on their2009 tax return filed in 2010.
5. Taxpayers who fileForm 1040 or 1040A will use Schedule M, Making Work Pay and GovernmentRetiree Credits to figure the Making Work Pay Tax Credit. CompletingSchedule M will help taxpayers determine whether they have alreadyreceived the full credit in their paycheck or are due more money as aresult of the credit.
6. Taxpayers who file Form1040-EZ will use the worksheet for Line 8 on the back of the 1040-EZ tofigure their Making Work Pay Tax Credit.
7. In 2010,you may notice that your paychecks are slightly lower than in 2009. Theslight decrease may be because of the Making Work Pay Credit. Most ofthe credit for wage earners is distributed through reducedwithholding. The credit – which was spread out over nine months lastyear – is being spread over 12 months this year. A little less creditin each paycheck means slightly higher withholding. But don’t worry, in the end it all adds up.
8. Certain taxpayers shouldreview their tax withholding to ensure enough tax is being withheld in2010. Those who should pay particular attention to their withholdinginclude: married couples with two incomes, individuals with multiplejobs, dependents, pensioners, Social Security recipients who also work,and workers without valid Social Security numbers.
Havingtoo little tax withheld could result in potentially smaller refunds or– in limited instances – small balance due rather than an expectedrefund.
9. To ensure your current withholding isappropriate for your individual situation, you can review Publication919, How Do I Adjust My Tax Withholding? You can also perform a quickcheck of your withholding using the interactive IRS WithholdingCalculator on IRS.gov.
10. If you find you need toadjust your withholding, submit a revised Form W-4, Employee'sWithholding Allowance Certificate to your employer.
VisitIRS.gov for more information about the making Work Pay Tax Credit,Schedule M, Form W-4 or Publication 919. You can also call 800-TAX-FORM(800-829-3676) to order forms and publications.
Links:

The American Recovery and Reinvestment Act of 2009: Information Center
Publication 919, How Do I Adjust My Withholding?

This material is for informationalpurposes only and not intended and financial, legal or tax advice.Please consult your finance, legal or tax professional to confirm theaccuracy of all information.

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Five Ways to Obtain IRS Forms and Publications

2010-01-22T07:41:00.000-08:00

TheInternal Revenue Service has free tax forms and publications on a widevariety of topics. If you need IRS forms, here are five easy methodsfor getting the information you need.

Onthe Internet You can access forms and publications on the IRS Web site24 hours a day, seven days a week, at IRS.gov.
ByPhone You can call 1-800-TAX-FORM (800-829-3676) Monday through Friday7:00 am to 10:00 pm local time – except Alaska and Hawaii which arePacific time – to order current year forms, instructions andpublications as well as prior year forms and instructions. You shouldreceive your order within 10 days.
At ConvenientLocations in Your Community During the tax filing season, manylibraries and post offices offer free tax forms to taxpayers. Somelibraries also have copies of commonly requested publications. Manylarge grocery stores, copy centers and office supply stores have formsyou can photocopy or print from a CD.
By MailOrder your tax forms and publications from the IRS NationalDistribution Center at 1201 N. Mitsubishi Motorway, Bloomington, IL,61705-6613. You should receive your products 10 days after receipt ofyour order.
Taxpayer Assistance Centers There are401 TACs across the country where IRS offers face-to-face assistance totaxpayers, and where taxpayers can pick up many IRS forms andpublications. Visit IRS.gov and go to Contact My Local Office on theIndividuals page to find a list of TAC locations by state. On theContact My Local Office page, you can also select TAC Site Search andenter your zip code to find the IRS walk-in office nearest you as wellas a list of the services available at specific offices.

Links:

Publication 910, Guide to Free Tax Services (PDF 636K)
Publication 2053A, Quick and Easy Access to IRS Tax Help and Forms (PDF 40K)
Order Publication 1796, Federal Tax Products on CD-ROM, from NTIS — the National Technical Information Service.
State tax forms

This material is for informationalpurposes only and not intended and financial, legal or tax advice.Please consult your finance, legal or tax professional to confirm theaccuracy of all information.

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Tax Credit Helps Pay for Higher Education Expenses

2010-01-19T14:39:00.000-08:00

From the IRS

TheAmerican Recovery and Reinvestment Act was passed in early 2009 andcreated the American Opportunity Credit. This educational tax credit –which expanded the existing Hope credit – helps parents and studentspay for college and college-related expenses.

Here arethe top nine things the Internal Revenue Service wants you to knowabout this valuable credit and how you can benefit from it when youfile your 2009 taxes.

The credit can be claimed for tuition and certain fees paid for higher education in 2009 and 2010.
TheAmerican Opportunity Credit can be claimed for expenses paid for any ofthe first four years of post-secondary education.
Thecredit is worth up to $2,500 and is based on a percentage of the costof qualified tuition and related expenses paid during the taxable yearfor each eligible student. This is a $700 increase from the HopeCredit.
The term "qualified tuition and relatedexpenses" has been expanded to include expenditures for required coursematerials. For this purpose, the term "course materials" means books,supplies and equipment required for a course of study.
Taxpayerswill receive a tax credit based on 100 percent of the first $2,000 oftuition, fees and course materials paid during the taxable year, plus25 percent of the next $2,000 of tuition, fees and course materialspaid during the taxable year.
Forty percent of thecredit is refundable, so even those who owe no tax can get up to $1,000of the credit for each eligible student as cash back.
Tobe eligible for the full credit, your modified adjusted gross incomemust be $80,000 or less -- $160,000 or less for joint filers.
Thecredit begins to decrease for individuals with incomes above $80,000 or$160,000 for joint filers and is not available for individuals who makemore than $90,000 or $180,000 for joint filers.
Thecredit is claimed using Form 8863, Education Credits, (AmericanOpportunity, Hope, and Lifetime Learning Credits), and is attached toForm 1040 or 1040A.

For more information about the American Opportunity Tax Credit visit the IRS Web site at IRS.gov/recovery.

Links

The American Recovery and Reinvestment Act of 2009: Information Center
American Opportunity Credit
Form 8863, Education Credits

This material is for informationalpurposes only and not intended and financial, legal or tax advice.Please consult your finance, legal or tax professional to confirm theaccuracy of all information.

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My Business Bought a vehicle and we have a loan. How do I record this in Quickbooks?

2010-01-18T15:18:00.000-08:00

To record the entry for the purchase of a vehicle you will need two things, your vehicle purchase contract and your loan documents.

Your vehicle purchase statement will reflect the true "cost" of the vehicle including taxes and document fees as well as additional equipment you added to the vehicle. In addition, if you received any rebate on the vehicle and this was applied to reduce the price of the vehicle this, in effect, reduces your cost. The total cost, to put the vehicle into service is the cost prior to any cash "down-payment" you make from your personal funds. If your "down-payment" is the rebate this must be applied to reduce the total cost.

For our example lets assume the vehicle cost $35,000 and the dealer offered a 5,000 rebate. This puts the "price" of the vehicle at $30,000. Assuming tax and doc fees of $2750 and no additional equipment, the total cost to put this vehicle into service is $32,750. You write a company check for a 10% down payment of $3,275 and take out a loan for the balance of 29,475. Here is how the entry should be recorded in Quickbooks using the Write Checks feature under the Banking tab on the top menu bar.

Enter the check for amount written. In the Expense portion of the check debit into your Vehicles Fixed Asset account the total true cost to put the vehicle into service. Create a new Loan account for this loan. Do not combine loan accounts in Quickbooks. Your reconciliation will be difficult and this is basically not the proper way to track your loans. Create a minus entry for the total amount of the loan. The difference between the two must be the amount of your down payment. If it is not, then the cost of the vehicle or the balance of the loan entered are incorrect.

When you make a payment on this loan, your expense entry will go against the new loan account. Reconcile this loan account each month. If the lender does not provide a statement, we recommend that you request the balance of the loan with the amount of interest applied from the payment in some form that can be printed, such as an email. You will record the difference between the interest and principle portion of each payment when you reconcile the account against the statement, or lender provided balance.

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2010 Is The Year To Start A Budget?

2010-01-18T14:16:00.000-08:00

If you have finally decided to take on the task of creating a personal or business budget and aren't sure where to start, consider using this free Excel spreadsheet.

Simply add your estimated numbers to Column C (Estimated Budget), and enter the actual amounts that you spend for each by month under the "Actual" columns. You don't need to enter anything else. The spreadsheet will do overage and shortage and average calculations for you.

DON'T CHEAT!

I simple way to track your expenses would be to use your Debit card instead of cash for all of your expenses. Avoid using credit.

Send an email and we'll send the spreadsheet along with brief instructions on how to use and interpret the information it will provide you with. Let us know if you have any questions.

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I bought inventory at "buy one get one free". How do I enter this in Quickbooks?

2010-01-18T08:51:00.000-08:00

Sometimes a down economy can create unique opportunities. One of my clients received a great offer from their supplier recently. Basically, if they placed an order from the supplier for items they had never ordered before they would receive double the quantity at no additional charge. If was a great opportunity they couldn't refuse. However, considering all the mistakes that had been made with inventory entries in Quickbooks, they wanted to know exactly how to record the entry so the quantities and cost would be recorded correctly.

Since Quickbooks uses the "average" method to calculate the cost of your inventory, the entry can be completed as it truly is. In other words, record 500 items received at the actual cost and record 500 items received at zero cost.

Let's assume that you order from your supplier using a Quickbooks purchase order. You would create a PO for 500 pieces and send this off to your vendor.

Your generous vendor would then send you 1000 pieces. When you have received the inventory and the bill in house you can use the Receive Items and Enter Bill in the Vendor Center to fill the Purchase Order as well as record the additional "free" inventory received at zero cost. Simply add an additional line onto the existing PO reflecting the added pieces.

Quickbooks will average the cost of these 1000 pieces. In the sample screen below you can see that even though your PO said the price of the doorknobs was $15.00 each, Quickbooks has averaged the cost out over various purchases at $9.64. In addition, note that the available quantity reflects the full 1000 pieces received.

This method will insure that both your physical quantity and your actual cost are recorded correctly.

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New late filing fees from the IRS for S Corps

2010-01-15T15:28:00.000-08:00

Effective this year the IRS will charge $89 per month per shareholderlate filing fees, (if filed after 3/15) even if you filed anextension...to a maximum of 12 months.

The late filing penalty for returns required to befiled after 2008 increased to $89 for each month or part of a month (upto 12 months) the return is late or does not include the requiredinformation, multiplied by the total number of persons who wereshareholders in the corporation during any part of the corporation'stax year.

In addition, the minimum additional late filingpenalty for returns required to be filed after 2008 that are more than60 days late increased to $135 or the balance of the tax due on thereturn, whichever is smaller

This material is for informationalpurposes only and not intended and financial, legal or tax advice.Please consult your finance, legal or tax professional to confirm theaccuracy of all information.

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Three Reasons to Prepare and File Your Taxes Electronically

2010-01-15T08:28:00.000-08:00

Lastyear, 2 out of 3 tax returns were filed electronically. Was yours? Ifnot, here are three important reasons to e-file your return.

It’s fastYour tax return will get processed more quickly if you use e-file. Ifthere is an error on your return, it will typically be identified andcan be corrected right away. If you file electronically and choose tohave your tax refund deposited directly into your bank account, youwill have your money in as few as 10 days.
It’s safeThe IRS is fully committed to protecting your tax information ande-filed returns are protected by the latest technology. In 20 years,nearly 800 million e-filed returns have been processed safely andsecurely by the IRS.
It’s time Don’t miss out on the benefits of e-file, 2 out of 3 taxpayers, 95 million, already get the benefits of e-file.

E-filesoftware reduces the chance of making errors when you prepare yourreturn. However, some people still print the computer generatedreturn and mail it to the IRS instead of hitting the “Send” button. Bymailing the return, taxpayers miss out on some important benefits ofIRS e-file.

With e-file, you get thepeace of mind that comes with the electronic receipt you’ll receivenotifying you that the IRS received your tax return.
Virtuallyeveryone can prepare a return and file it for free. For the secondyear, the IRS and its partners are offering the option of Free FileFillable Forms. Another option is Traditional Free File. About 98million taxpayers – 70% of all taxpayers – are eligible for the IRSTraditional Free File. Traditional Free File is a service offered bysoftware companies and the IRS in partnership to provide free taxpreparation software and free filing.
E-file is available 24 hours a day, seven days a week, from the convenience of your own home.
Ifyou owe money to the IRS, e-file also allows you to file your taxreturn early and delay payment up until the due date.
In 37 states and the District of Columbia, you can simultaneously e-file your federal and state tax returns.

Find out more about E-file at IRS.gov.

This material is for informationalpurposes only and not intended and financial, legal or tax advice.Please consult your finance, legal or tax professional to confirm theaccuracy of all information.

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Section 179 - Year-end Decisions

2010-01-13T13:56:00.000-08:00

I general, it makes sense to write off (deduct) eligible equipment using the IRS Tax code Section 179 expense option in the year of purchase of said equipment. You'll get the tax deduction faster than if you took depreciation over time. However, expensing may not make sense if you're in a low tax bracket the year you purchase the equipment but expect to be in a higher bracket in the future, or if your new sole proprietorship is not making enough to trigger self-employment tax (FICA).

While the depreciation deductions may be spread out over tiem, if you're in a higher tax bracket or paying self-employment tax, the deductions will be worth more if you elect not to take a higher Section 179 deduction in the year of purchase. You'll have to crunch the numbers and consider the time-value of money. Keep in mind that you don't have to write off the entire asset. If a machine cost $10,000, you can claim the Section 179 expense option on $4,000 and take regular depreciation over time on the remainder.

Consult you professional tax advisor on the best way to take advantage of this deduction, if at all, for the 2009 tax year.

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Ten Tax Topics for Taxpayers with Tots and Teens

2010-01-13T10:35:00.000-08:00

GotKids? They may have an impact on your tax situation. Listed below arethe top 10 things the IRS wants you to consider if you have children.

DependentsIn most cases, a child can be claimed as a dependent in the year theywere born. For more information see IRS Publication 501, Exemptions,Standard Deduction, and Filing Information.
Child Tax CreditYou may be able to take this credit on your tax return for each of yourchildren under age 17. If you do not benefit from the full amount ofthe Child Tax Credit, you may be eligible for the Additional Child TaxCredit. The Additional Child Tax Credit is a refundable credit and maygive you a refund even if you do not owe any tax. For more informationsee IRS Publication 972, Child Tax Credit.
Child and Dependent Care CreditYou may be able to claim the credit if you pay someone to care for yourchild under age 13 so that you can work or look for work. For moreinformation see IRS Publication 503, Child and Dependent Care Expenses.
Earned Income Tax Credit The EITCis a benefit for certain people who work and have earned income fromwages, self-employment or farming. EITC reduces the amount of tax youowe and may also give you a refund. For more information see IRSPublication 596, Earned Income Credit.
Adoption CreditYou may be able to take a tax credit for qualifying expenses paid toadopt an eligible child. For more information see the instructions forIRS Form 8839, Qualified Adoption Expenses.
Children with Earned IncomeIf your child has income earned from working they may be required tofile a tax return. For more information see IRS Publication 501.
Children with Investment IncomeUnder certain circumstances a child’s investment income may be taxed atthe parent’s tax rate. For more information see IRS Publication 929,Tax Rules for Children and Dependents.
Coverdell Education Savings AccountThis savings account is used to pay qualified educational expenses atan eligible educational institution. Contributions are not deductible,however, qualified distributions generally are tax-free. For moreinformation see IRS Publication 970, Tax Benefits for Education.
Higher Education CreditsEducation tax credits can help offset the costs of education. TheAmerican Opportunity and the Lifetime Learning Credit are educationcredits that reduce your federal income tax dollar-for-dollar, unlike adeduction, which reduces your taxable income. For more information seeIRS Publication 970.
Student Loan InterestYou may be able to deduct interest you pay on a qualified student loan.The deduction is claimed as an adjustment to income so you do not needto itemize your deductions. For more information see IRS Publication970.

The forms and publications on these topics can be found on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

This material is for informationalpurposes only and not intended and financial, legal or tax advice.Please consult your finance, legal or tax professional to confirm theaccuracy of all information.

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Email the Bookkeeper

2010-01-12T18:47:00.000-08:00

Contact me by email. I will not share your information with anyone, and I can let you know when your answer has been posted.

We are a church and i was wondering how do we recieve offerings in quick books. we currently recieve them as payments but they dont show on the a/r reports.

2010-01-09T09:47:00.000-08:00

You question prompts me to address a problem that I sometimes see. Ido not know if this is what you mean when you say "receive them aspayments", but you don't ever want to Receive A Payment if you have notinvoiced a "Customer". Posting payments alone using the "Receive APayment" in the customer activities will create a negative balance inyour Accounts Receivable account. This may just be a terminology thatuse chose to use. Please comment with specifics.

As a non-profit I am assuming you would like to send year end statements to your givers. This is easy to do with Quickbooks as long as the information is entered per giver. Of course, some of your gifts will be in cash wiith no indentification of the giver, and those must simply be recorded in the Deposit window to the appropriate income account.

For those contributions you receive by check or in your church's giving envelopes you need to do three things in Quickbooks. Set your sales tax preference to "No" (see Setting Sales Tax Preference blog posting), add an Item in your Item List (see Adding an Item to Your Item List) to properly record and code the gift and create a separate customer account (see Adding a Customer...) for each single giver or household. Once you have set these up your can enter your givers contribution as a Sales Receipt.

Create an "Item" in your Item List for "General Giving", using the Other Charge type. Enter a default description (this description can be changed within a single transaction without changing the default). Set the income default to the same account you have been posting the deposits to. In the sample below, I have used a General Contributions Income account. If you receive dedicated gifts, such as for a building fund or youth program you should create separate Items and Income Accounts for those contributions, so that they can be tracked on you financial reports in the proper manner.

To create the entry to record a contribution from an individual giver, enter the gift through the Sales Receipt transaction under the Customer tab in the top menu bar. In the Non-profit version of Quickbooks you can find the "Intuit Standard Donation" sales receipt. Click on the drop down menu in the upper right corner of the Sales Receipt screen to choose this form. If you do not have the Non-profit version of QB you can create your own customized Sales Receipt. This will be addressed in another blog.

Choose the Giver from the drop down list in the Customer:Job field. Enter the date of the donation. Quickbooks will automatically assign a sequential Donation No. or you can enter your own. Enter the payment information including a check number if applicable.

In the Item field choose the General Giving item and press tab. The default description will be entered into the Description field. You can leave this as is, change it or add to it without changing the default.

Enter the amount of this particular donation.

If you wish, you can enter a message to your giver. Use that you have already set-up or create a new one.

Once your sales receipt is complete you can select a send option. Choose To Be Printed or To Be Emailed at the bottom of the Sales Receipt screen to send at a later time with a group of receipts, or choose Email or Print at the top of the screen to send immediately.

By creating these receipts in Quickbooks you will also be able to generate a Customer Statement at the end of the year to send to your donors for their tax records. This How-to will be addressed in another blog.

With regards to A/R reports these are generally completed in order to track invoices that are created and then payments that are made at a later date. By recording the donations as Sales Receipts you can create "Sales" reports to provide information. For example, you can create the Sales by Customer report to see who made donations in a specific period. Using the Item feature you can also generate Sales reports by Item. Create separate items for your various fund raising programs and see who gave for each program.

Please post additional comments if further information or clarification is required.

Adding A New Customer to Quickbooks

2010-01-09T09:05:00.000-08:00

To add a new Customer to your Quickbooks company file, chose "Customer" on the top menu bar in Quickbooks, then "Customer Center" in the drop down menu.

(Pressing tab will move you from field to field and pressing enter will move you to the next line within a field)

The Customer Address Screen

In the Address Info tab enter your customer by individual or by company name in the Customer Name field. If entering and individual use the Last Name, First Name format. This will ensure that your Customer List will be properly sorted alphabeticallly.

Do not enter an Opening Balance if this is a new customer. If it is and existing customer that has a balance due that is owed to you, and you do not plan to record the individual transactions that make up that balance you can enter an opening balance. Do not use this field to enter the customers "history", only what is still outstanding.

Enter the first and last name of the owner or the person you will be addressing in your mailings.

In the Address field you will already see that the name of the company as well as the individual name were automatically copied in when you entered them in the field above. You can leave this as is, or change it as desired. Continue by entered the street address and city, state and zip code.

The contact name automatically copied into the Contact field when you entered into the First Name and Last Name fields. You can change this name or leave as is. Add the appropriate phone and fax information into the correct fields. I've always found it quite useful to include this and have everything I need about my Customers/Clients in this one location in Quickbooks.

Include an email if you have one. You will then be able to email invoices, statements and more directly to your Customer/Client from Quickbooks. You can also include an additional email address to copy to. This would enable you to email your contact and the Accounts Payable department of their company at the same time.

The Additional Info Tab

In Quickbooks you can create Customer "Types" and you can use to sort reports. These can be created simply by entering the name of the Type you want into the Customer Type field. If Quickbooks does not find that type the software will ask you if you wish to create it.

If you are going to invoice your customer enter the "Terms" upon which you will expect payment (i.e. 30 days, Upon Receipt).

If there is a specific sales rep within your company who works with this Customer, enter their initials.

For the Preferred Send method choose either Email, Mail or None.

If you are a wholesaler and this Customer buys product from you to re-sell you can enter their approved resale number in the appropriate field.

Indicate if this Customer receives specific pricing that may be different then your standard pricing in the Price Level field.

Below that you can create up to 15 custom fields to use for sorting and reporting.

The Payment Info tab

Here you can store your preferred payment information for each customer. If you use account numbers for your Customers enter the number in the first field. This can also be left blank.

Use the Credit Limit field if you invoice this customer and have a maximum allowable amount that can be outstanding at any given point in time.

If the customer pays by credit card you can enter their card information. Anyone viewing this screen at a later date will only see the last 4 digits of the Customers card number for security purposes. Quickbooks will also not provide a field to enter the CCD code on the back of a credit card, again for the protection of your Customer.

The Job Info Tab

If you are a contractor or other service provider and you perform specific "jobs" for your Customers, you can create multiple jobs under a Customer. We will address this in another blog.

Remember, not every field needs to have information entered. Include only what you need and/or what is applicable to your Customer/client. When you are finished entering, hit "OK".

Adding an Item to Your Item list in Quickbooks

2010-01-08T22:57:00.000-08:00

The "Item" feature in Quickbooks sets up default income and expense accounts for transactions that your regularly do. Items can be Inventory, Service Charges, Sales Tax codes, and more. Each item will always default to the same income and/or expense account that you set as the default.

To add an item to your item list chose "Lists" on the top menu bar in Quickbooks, and "Item List" in the drop down menu.

From the Item List window select the "Item" tab on the bottom menu bar, then select "New" from the pop-up list.

In your New Item entry screen you will be able to create your entire Item list. We will address specifics about what types and coding should be used in other blogs.

This is the basic step for creating your Items. Please submit a comment for more details, or to see a post with the solution for your specific situation.

Setting Sales Tax default to "No" if you never charge sales tax.

2010-01-08T22:41:00.000-08:00

Certain organizations, such as non-profits, are not required to collect or remit sales tax. In some states service based companies are also exempt from paying sales tax. If you do not charge sales tax, ever, you can set your Quickbooks preferences so that your invoices and receipts do not reflect any possible tax charges. The process for this very simple.

Chose "Edit" on the top menu bar of Quickbooks, and "Preferences".

Then chose "Sales Tax" from the preference list and click on the Company Preferences tab.

Click on the "No" box and all sales tax options will be grayed out, then click "OK". Quickbooks will prompt you that it will close all other screens that my be open in order to make this change.

Once this change is complete you will not longer see a sales tax box at the bottom of your customer forms.

If you have a sales tax license, please check with your accountant and local revenue department to see if in fact you may, on occasion, be required to remit sales tax. If that is the case, do not make this change.

Who are my dependents and what are exemptions?

2010-01-07T07:22:00.000-08:00

Five Important Facts about Dependents and Exemptions

Whenyou prepare to file your tax return, there are two things that willfactor into your tax situation: dependents and exemptions. Here arefive important facts the IRS wants you to know about dependents andexemptions before you file your 2009 tax return.

If someone else claims you as a dependent, you may still be required to file your own tax return.Whether or not you must file a return depends on several factors,including the amount of your unearned, earned or gross income, yourmarital status, any special taxes you owe and, any advance EarnedIncome Tax Credit payments you received.
Exemptions reduce your taxable income.There are two types of exemptions: personal exemptions and exemptionsfor dependents. For each exemption you can deduct $3,650 on your 2009tax return. Exemption amounts are reduced for taxpayers whose adjustedgross income is above certain levels, depending on your filing status.
If you are a dependent, you may not claim an exemption.If someone else – such as your parent – claims you as a dependent, youmay not claim your personal exemption on your own tax return.
Your spouse is never considered your dependent.On a joint return, you may claim one exemption for yourself and one foryour spouse. If you’re filing a separate return, you may claim theexemption for your spouse only if they had no gross income, are notfiling a joint return, and were not the dependent of another taxpayer.
Some people cannot be claimed as your dependent.Generally, you may not claim a married person as a dependent if theyfile a joint return with their spouse. Also, to claim someone as adependent, that person must be a U.S. citizen, U.S. resident alien,U.S. national or resident of Canada or Mexico for some part of theyear. There is an exception to this rule for certain adopted children.See IRS Publication 501, Exemptions, Standard Deduction, and FilingInformation for additional tests to determine who can be claimed as adependent.

For more information onexemptions, dependents and whether or not you or your dependent needsto file a tax return, see IRS Publication 501. The publication isavailable on IRS.gov or can be ordered by calling 800-TAX-FORM(800-829-3676).

Links:

IRS Publication 501, Exemptions, Standard Deduction, and Filing Information

This material is for informationalpurposes only and not intended and financial, legal or tax advice.Please consult your finance, legal or tax professional to confirm theaccuracy of all information.

What are Estimated Tax Payments?

2010-01-06T17:11:00.000-08:00

Many individuals with income not subject to withholding need to make estimated tax payments. Estimated tax includes both income tax and self-employment tax (FICA)

Estimatedtax is the method used to pay tax on income that is not subject towithholding. This includes income from self-employment, interest,dividends, alimony, rent, gains from the sale of assets, prizes andawards. You also may have to pay estimated tax if the amount of incometax being withheld from your salary, pension, or other income is notenough.

Estimated tax is used to pay both income tax and self-employmenttax, as well as other taxes and amounts reported on your tax return. Ifyou do not pay enough through withholding or estimated tax payments,you may be charged a penalty. If you do not pay enough by the due dateof each payment period you may be charged a penalty even if you are duea refund when you file your tax return.

Sole proprietors, partners, and S corporation shareholders -You generally have to make estimated tax payments if you expect to owetax of $1,000 or more when you file your return. Use Form 1040-ES,Estimated Tax for Individuals, to figure and pay your estimated tax.For additional information, refer to Publication 505, Tax Withholding and Estimated Tax.

Corporations - You generally have to make estimatedtax payments for your corporation if you expect it to owe tax of $500or more when you file its return. Use Form 1120-W, Estimated Tax for Corporations (PDF), to figure the estimated tax. You must deposit the payments. For additional information, refer to Publication 542, Corporations..

Ifyou do not pay enough tax, either through withholding, estimated tax,or a combination of both you may have to pay a penalty.

Generally, the last payment for the 2009 tax year is Jan. 15.

Related Link:

Publication 505, Tax Withholding and Estimated Tax

This material is for informationalpurposes only and not intended and financial, legal or tax advice.Please consult your finance, legal or tax professional to confirm theaccuracy of all information.

Eight Facts About Filing Status from the IRS

2010-01-06T08:27:00.000-08:00

Eight Facts About Filing Status

Everyonewho files a federal tax return must determine which filing statusapplies to them. It’s important you choose your correct filing statusas it determines your standard deduction, the amount of tax you owe andultimately, any refund owed to you.

Here are eightfacts about the five filing status options the IRS wants you to know inorder to choose the correct filing status for your situation.

Your marital status on the last day of the year determines your marital status for the entire year.
If more than one filing status applies to you, choose the one that gives you the lowest tax obligation.
Singlefiling status generally applies to anyone who is unmarried, divorced orlegally separated according to state law.
A married couple may file a joint return together. The couple’s filing status would be Married Filing Jointly.
Ifyour spouse died during the year and you did not remarry during 2009,you may still file a joint return with that spouse for the year ofdeath, provided the joint return election is not revoked by a personalrepresentative for the deceased spouse.
A marriedcouple may elect to file their returns separately. Each person’s filingstatus would generally be Married Filing Separately.
Headof Household generally applies to taxpayers who are unmarried. You mustalso have paid more than half the cost of maintaining a home for youand a qualifying person to qualify for this filing status.
Youmay be able to choose Qualifying Widow(er) with Dependent Child as yourfiling status if your spouse died during 2007 or 2008, you have adependent child and you meet certain other conditions.

There’smuch more information about determining your filing status inPublication 501, Exemptions, Standard Deduction, and FilingInformation. Publication 501 is available on IRS.gov or by calling800-TAX-FORM (800-829-3676).

This material is for informationalpurposes only and not intended and financial, legal or tax advice.Please consult your finance, legal or tax professional to confirm theaccuracy of all information.

My customer paid me but I am not sure how to record it because it's the end of the year.

2010-01-05T13:30:00.000-08:00

Again, another great teaching opportunity. A payment from a customer should always be recorded when it is received.

As a business owner, whether you are going to record your income for tax purposes on an accrual basis (when it is earned) or a cash basis (when it is received), you simply record the payment when it was received. If you are using Quickbooks you will be able to generate your year-end Profit Loss report for either method. If the payment was for an invoice already billed or entered as a Sales Receipt at the time the service was provided QB will know how and where to include it on either report.

You can review both versions of your P&L in Quickbooks and then review the information with your tax accountant to determine which method you should use. Keep in mind that if you have been filing based on the accrual method for prior years, you should not switch to the cash method now. Do not assume that you should simply pick the method that shows the least reported income each year. Doing so will under report your income from year to year, and could result in some very nasty tax penalties.

To view your P&L choose Reports from the top menu bar, then Company & Financial, then Profit & Loss Standard. You can view this report in either cash or accrual without closing the report. Simply click on the Modify Report button on the menu at the top of the report window. From here you can select either the Accrual or Cash method of reporting.

When you are viewing this report, be sure to change the dates to the fiscal year that you will be reporting. The report automatically defaults to the current month in Quickbooks. You will be able to read the dates and which method is currently displayed.

The date that you deposit the payment into your bank account is immaterial with either method. Uncle Sam does not care if you hold that check for 6 months, he wants the taxes on it right away. Honesty is always the best policy. If you don't try to fudge any numbers or information, you won't ever have to worry about an audit.

IRS changes mileage rates for 2010

2010-01-01T20:42:00.000-08:00

The IRS has changed the maximum allowable deductions for mileage in 2010.

Beginning on Jan. 1, 2010, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

50 cents per mile for business miles driven
16.5 cents per mile driven for medical or moving purposes
14 cents per mile driven in service of charitable organizations

These are the "allowable" deductions that can be claimed for tax purposes. They do not represent any kind of required reimbursement amount or maximum amount that can be given to an employee.

The new rates for business, medical and moving purposes are slightlylower than last year’s. The mileage rates for 2010 reflect generallylower transportation costs compared to a year ago.

The standard mileage rate for business is based on an annual studyof the fixed and variable costs of operating an automobile. The ratefor medical and moving purposes is based on the variable costs asdetermined by the same study. Independent contractor RunzheimerInternational conducted the study.

Taxpayers always have the option of calculating the actual costs ofusing their vehicle rather than using the standard mileage rates. However, you cannot claim both mileage and vehicle expenses in the same tax year. If your claim insurance, gasoline, repairs & maintenance for any vehicle you cannot claim mileage for that same vehicle.

A taxpayer may not use the business standard mileage rate for a vehicleafter using any depreciation method under the Modified Accelerated CostRecovery System (MACRS) or after claiming a Section 179 deduction forthat vehicle. In addition, the business standard mileage rate cannot beused for any vehicle used for hire or for more than four vehicles usedsimultaneously.

Revenue Procedure 2009-54 contains additional details regarding the standard mileage rates.

This material is for informationalpurposes only and not intended and financial, legal or tax advice.Please consult your finance, legal or tax professional to confirm theaccuracy of all information.

How can I streamline Quickbooks?

2010-01-01T20:30:00.000-08:00

Great Question. I found this one on Twitter.

There are several things that will make the software work much better for you, if you are not already doing them.

The first thing you can do is use Quickbooks compatible checks and bank deposit forms. These can be ordered directly from Intuit or with various online companies that guarantee QB compatibility. Once you print a check in QB it is automatically recorded. After you enter customer payments you can select the payments by check or cash that you are going to deposit and print a bank-coded deposit slip and take it to your bank with the checks. Once printed the deposit is recorded in QB.

These both work in direct conjunction with the automatic bank download application. Most banks and credit unions offer a Quickbooks download option free of charge. Many credit card companies also offer this download option as well. The download will match any transactions such as checks written and deposits made once they have cleared. If you use a debit card with your checking account, these transactions will download into Quickbooks quickly so you don't have to enter each one as a manual check, and you will still be able to track where you spend your money. The software will also recognize repeating transactions and recall the vendor and expense account from prior transactions. All you will have to do is confirm the information. The longer you use this application, the more transactions are recognized and the quicker the posting becomes.

Using this application also makes your monthly reconciliation a breeze. If you use this application regularly, all applicable transactions are recorded. Completing the bank reconciliation can be done in a matter of a few minutes, when you are regularly recording the transactions.

If you use Paypal or an a merchant services to receive payments by credit card, consider switching to a Quickbooks Merchant account. The rates are usually very competitive. I've had credit card companies try to solicit my clients and then tell me they can't even compete when they find out the merchant account is through Quickbooks. You can process your payments directly through the QB software and your credit card payments deposit into your bank automatically. There are no buttons to push on a machine or batches to send at the end of the day. They also offer a very reasonably priced card reader that plugs into your computer via USB and reads the card information directly into your Quickbooks file when your customers are on site.

Here is another cool feature. You can print form letters, envelopes and more, directly through Quickbooks in your Customer or Vendor Center. Microsoft Word is required for this feature. Highlight a customer or vendor, click on the Word button on the Customer or Vendor Center menu bar, choose prepare letter for XYZ customer and choose the letter or envelope. You can create your own letters and forms to add to this feature.

These few features will do a lot to make your Quickbooks software work more for you. Try them out and you may find that you want to learn more about what it can do for you.

Quickboooks Entreprise 2010 - Add Docs

2009-12-31T10:45:00.000-08:00

I've just started playing around with the Document Manager feature in Quickbooks Enterprise. This can be a great way to make you look really good to your customers.

If the feature works they way I assume it will I can attach documents that I have completed for my clients, such as salestax returns, to the invoice for their services.

After I have had an opportunity to work with this application further I will post a blog on what I have been able to accomplish.

Things To Do To End the Year

2009-12-30T16:19:00.000-08:00

Time to start thinking about taxes. Time to make those last minute contributions, and last minute spending decisions. Are you showing a profit and need an additional expense to lower your tax bill? If you bought major equipment during the year first check with your accountant to see what portion of that purchase can be deducted for this tax year. If you have no major purchase but are showing a lot of profit, consider purchasing a large, high-dollar item for your business. Even if it is financed you may still be able to claim a huge first year deduction under section 179.

Reconcile all of your accounts, checking, savings, credit cards, lines of credit, personal loans, 401k or insurance loans, etc. Many people don't realize that they need to reconcile loan accounts as well as bank accounts. Be sure that the interest portion of your loan payments has been properly recorded by showing a "book" principle balance that matches the year end loan balance statement provided by your bank or lender. Do this for private loans as well. If you receive a 1099 showing the interest paid on a loan for the year, verify this against your expense total for the year. If you use Quickbooks, you can reconcile both asset and liability accounts the same way.

Be sure that you have properly recorded all of your accountants changes for the prior tax year. If they did not give you a list of journal entries to make, ask for it. Most of the accountants my clients use do not automatically send journal entries, and some are surprised when we call and ask for them. But they are not surprised when the tax return process goes smoothly because the book Balance Sheet matches the tax Balance Sheet for the prior year.

Most importantly, review your work. I'm not suggesting that you read every single transaction line of every entry, but look at your Profit & Loss statement and your Balance Sheet diligently. If you don't know what the numbers mean, pay a bookkeeper for a days worth of review work. They may just save you a tremendous amount of money.

I remember when I first went to work for one of my current clients and I found out that they had recorded a deposit into their bank account as income, when the money had actually come from a personal loan. (Yes, I used this as one of my examples in a previous blog) Their accountant would have no way of knowing that money had been a loan and the loan was also not recorded on the books. Had the error not been discovered they would have paid taxes on that $5000 and their financial statements would have been incorrectly elevated.

Don't be in a hurry. Take the time to finish things, review things, and then consult with your tax adviser about possible tax deferred investments you should consider. Give the government what is due, only what is due and on the date that it is due.

American Express Changes Deposit Method for Some Merchants-Quickbooks affected.

2009-12-29T22:15:00.000-08:00

If your credit card merchant account is through Quickbooks Merchant Services their is an issue you should be aware of. American Express is now batching with Visa and Matercard transactions in a single deposit for some of it's merchants. As a result of this change, Quickbooks Merchant services has started submitting joint Visa, Mastercard and American Express transactions as a single bank deposit to the Quickbooks software when you use the automatic "Make Merchant Deposit" feature.

This AMEX change does not apply across the board for all merchants, so the Merchant service processing that is submitted to Quickbooks may not apply to you, as a QB merchant. If your bank deposits for AMEX transactions still deposit to your bank separately from your VISA/MC transactions you will not be able to use the "Make Merchant Deposit" feature to record your funded batches. Quickbooks merchant services is aware of this problem and they are working on a fix to be made sometime in 2010.

Use the Online Banking receive to download your bank transactions from your bank and then group your recorded credit card transactions based on the totals of the deposits.

Again, the problem only applies if Quickbooks Merchant Services is your credit card processing service.

"Why didn't my accountant catch this?"

2009-12-29T21:17:00.000-08:00

"Why didn't my Accountant catch this?" I hear this statement from my clients more often than not. Don't get me wrong, I am not saying that Accountants don't know what they are doing. I will be the first to tell you than I am not an accountant, I don't do taxes, I don't know how to and I don't want to do taxes, and your accountant will do a much better job of doing your taxes then I will.

What I am saying is that bookkeepers make lousy accountants and accountants make lousy bookkeepers. I have ver 20 years of experience with the day-to-day aspects a keeping "books". I know most of what I know because of trial and error, or because I have had the pleasure of working with some accountants who have taught me much. With their knowledge of how things are supposed to be in the financial statements, and with college level education, I have learned the nuts and bolts that I have found some actually don't understand down to the transaction entry level.

When my clients ask that question, I usually respond by saying that unless their accountant does their ongoing bookkeeping the accountant can only assume that the financial statements they are given are correct. For example, their accountant wouldn't know a $5,000 deposit into a bank account was recorded to income when it should have been recorded as a loan, unless they see the actual transaction. Yes, it's possible for someone to actually pay taxes on money received as a loan if it is not recorded properly, and no your accountant would not "catch it". If you want to pay your accountant to look at every transaction you have recorded for an entire year to make sure everything was done properly, I am sure they would be happy to charge you to do that.

An accountant should always catch the obvious. Liabilities on the Balance Sheet with a negative (debit) balance: a negative inventory balance: Cost of Goods Sold on the Profit & Loss statement that exceeds the Gross sales, etc.

That being said, I have seen educated and tested accountants put transactionsinto a "suspense" account because they don't know how to record acompany owners' personal expense, or they aren't sure how to record atransaction between two companies owned by the same entity. That DOESmake me suggest to my clients that they might want to consider gettinga different accountant.

Where Quickbooks is concerned, I have stopped counting the number of times I have found entries that accountants have made to my clients Quickbooks file that may have made sense to the accountant, but are either unnecessary in Quickbooks or create a false sense of "correctness" because the accountant does not understand how Quickbooks works.

The Quickbooks Inventory feature is where I have seen this become most apparent. Inventory quantities in Quickbooks are directly tied to the behind the scenes transactions that the software records when everyday entries are made. When a journal entry is done to change the Inventory value after a physical count and manual valuation is done, but the quantities of the Inventory Items are not verified, the problems that have created the incorrect value will continue. The ultimate problem is that the year end financials, and ultimately the tax return may be incorrect.

I've also scene journal entries made to change the balance in "Sales Tax Payable". While the entry may correct the dollar figure on the Balance Sheet, the Sales Tax Liability statement will not be correct. The correction may also be made against what is due and applied to a single collection entity when it actually is a balance that involves both a state and local entities.

I believe it would behoove all Accountants to consider having a relationship with a Quickbooks expert. This should be a very experienced Quickbooks user or someone certified by Intuit, not an entry level employee who just graduated from college. They should find a contact that they would feel confident referring to their clients prior to actually needing their services. For the benefit of the client this will best ensure that the software is being correctly incorporated into the full accounting picture.

When do I send a 1099 Misc and who do I send them to?

2009-12-29T17:33:00.000-08:00

When you own or operate a trade or business and have made certain payments during the year that constituteincome to the persons who received those payments, the payments total $600 or more, and those personsare NOT your EMPLOYEES, you have to issue a Form 1099.

1099's are issued to non-employees only. Do not issue a 1099 to an employee unless they worked for you as and independent contractor before hire or after separation from employment.

1099's are usually issued for payees that provide services, prizes & awards, not tangible goods. Follow this link for a more complete IRS list. Payments that are exempt from 1099 reporting include: payments for merchandise, communication services such as telephone, freight, storage, and similar items.

Generally, you do not have to report payments to CORPORATIONS on Form1099-MISC, but there are some exceptions, including: payments formedical or health careservices, cash purchases of fish, attorneys' fees, gross proceeds paidto attorneys, substitute payments in lieu of dividends or tax-exemptinterest, and payments made by a federal executive agency for services.

Rent payments are reported on 1099 R, interest payments are reported on 1099 INT.

1099's must be post-marked to the recipient by January 31st of the year following payment, and a copy must be submitted to the Internal Revenue Service along with a 1096 summary sheet. Large filings of 250 or more individual forms must be filed ELETRONICALLY.

For more information visit www.irs.gov.

This material is for informationalpurposes only and not intended and financial, legal or tax advice.Please consult your finance, legal or tax professional to confirm theaccuracy of all information.

Hints for your Quickbooks Item List

2009-12-26T11:05:00.000-08:00

Here are a few quick hints for creating your Item List in Quickbooks.

1) Be consistent. Be sure to use the same type of spacing and spelling. Quickbooks sorts using a very basic alphabetic system. The number of spaces between words can affect the alpha order of your Item List as well as hyphens and other marks. In other words, item HPP 626 will not appear alphabetically next to HPP - 627 which will not appear next to HPP-628. Use the same alpha method for all your items. Either use equal spaces and hyphens in all or none at all. You can resort your item list by clicking on the title of the column you want to sort by: Name, Description, Type, Price, etc.

To return the Quickbooks item list to it's default order, click on the item button in the lower left corner of the item screen and chose Re-sort list.

2) If you have a large item list consider using headers. Let's say you are an Air Conditioning parts company. You may want to create a header for Filters, Belts, Tools, etc., then enter all corresponding parts under the appropriate header as a sub-item. Here is an example.

       FILTERS
            CARBON
                 12X12X1
                 12X12X2
            FIBERGLASS
                 10X16X1
             10X20X1

Create Headers the same way you create items. Use the same expense and income defaults for all sub-items under a header to keep your financial reporting consistent as well. One thing you will want to do with the "Header" system is to be sure you don't record any transactions to the Header. This can create quantity issues with Inventory Parts and complicate your reports.

If your item list in already in place you can edit a description or make it a sub-account of a header without affecting any prior recorded transactions. Sort your list by Name to find and items that are not consistent with the rest of your alphabetic method. Highlight the item you need to correct and click the "Item" button in the corner of the Item screen and chose "Edit Item".

If you have a large item list, you can use the "Look For" feature in the upper left corner of the item list screen to search by keyword for a specific item in your list.   This feature is not available on some older versions of Quickbooks. If you carry a large inventory but don't have this feature in your version, it is probable worth updating your Quickbooks.

Need more information, post a comment here.

How do I record cash expenses for my business?

2009-12-23T16:59:00.000-08:00

First, lets preface this posting by recommending that all business and personal transactions should be processed separately. If you are operating a legitimate business be sure to use a separate checking account. Do not mix and mingle personal and business transactions.

To record business expenses paid with personal cash or with a personal debit or credit card record a journal entry. No matter what software you use, or if by some remote chance you are still doing things on paper, record a debit (left) entry to the appropriate expense and record the total credit (right) entry to Owner Investment, which is an equity account. In Quickbooks the entry would look like this...

Your debit and credit side of the entry must be equal. If you are using Quickbooks or other software the entry will automatically balance in order for it to be recorded.

More and keeping business and personal transactions separate.

Adding payments and balance due to a customer invoice

2009-12-22T18:30:00.000-08:00

How do you include partial payments made and balance due on a customer's invoice? Use the Customize feature in the customer invoice. Choice the Intuit invoice that best suits the service or product you are invoicing for then select "Cutomize". Quickbooks will prompt you to make a copy of this invoice.

Click on the "Additional Customization" tab that appears in the lower section of the Customize window, then chose the "Footer" tab.

Check the "Payments/Credit" box and the "Balance Due" box. Quickbooks will tell you that you are creating fields that will overlap. Chose the "Continue" button on this warning. The preview screen will show you the new boxes overlapping the body of the invoice. From here chose the "Layout Designer" button. With the Layout Designer you can move and re-size the data and title boxes in the invoice form as desired.

In the Layout Designer click on the part of the invoice you want to modify. You will see it highlited with the central boxes to make the box smaller or larger. Resize the body of the invoice to fit above the Payments/Credits box.

When you click on any box on the invoice form the lower left corner of the Layout Designer will tell you what box you are modifying. When adding the Balance Due to an invoice be sure to delete the "Total" label and data field. If you forget to do this your customer will see a Balance Due and a Total that may not be the same.

Once you have re-sized all the fields and nothing overlaps, click "ok". You will be returned to the Customize window. Review what your invoice will look like in the preview box. If you wish to modify it further, simply chose the Layout Designer button again and continue with your modifications. From here chose the "Manage Templates" button at the top of the Basic Customization window. Click on the Template Name and rename the copy invoice as desired, then click "ok".

Once the preview in the Customize window meets with your satisfaction click "ok".

Now you can use this same customized invoice when ever you want to show the payments applied and the balance due on an invoice.

"How do I show my customer the history of their payments?"

2009-12-22T07:18:00.000-08:00

To show your customer a history of their payments in Quickbooks use the Create Statements activity. You will find this listed under "Customers" on the top menu bar in Quickbooks.

Choose your statement date and the From and To and dates of transactions that you want to show on the statement. Any transactions occurring before your From date will show as a "Balance Forward". It's always a good idea to have your statement date and To date the same.If you want to show each individual transactions, and thus list each by date and amount be sure that the "all open transactions as of statement date" button in UNCHECKED. Choosing this option will only show the open/unpaid balance of the customers invoices and will not show any payment detail.

There are several options you can chose from on the right side to include in the generation of your customer statement. This is where you can also customize your statement form to include the information in the format that you desire.You can then generate a statement for all your customers, some of your customers or only one of your customers.

You have the option to print and/or email the customer their statement. If you chose the Preview option prior to printing you will be able to review that you have selected the correct dates and format before you print. You can then print the statement(s) directly from the preview screen.

Just remember the Quickbooks Golden Rule...What you put in is what you get back out. The information generated on your statement is a copy of the individual transactions that you have created.

Happy Bookkeeping!

This material is for informationalpurposes only and not intended and financial, legal or tax advice.Please consult your finance, legal or tax professional to confirm theaccuracy of all information. Quickbooks is a registered product ofIntuit.

A simplified Explanation

2009-12-18T17:05:00.000-08:00

OK, so it's not really about bookkeeping, (yes there are bookkeeping components to it) but I thought it was worth writing for someone out there who may not know. After all, I was having a conversation with a family member who didn't know what a Ponzi scheme was so here is my layman's summary.

A Ponzi scheme is where someone takes money from an individual under the assumption that person will receive a return of the money with some sort of gain. As time goes buy the schemer takes money from new individuals to pay out "gains" to individuals who gave him or her money earlier. Each new "investor" does not know that absolutely nothing is being done with their invested money other then to forward a "dividend" to the older investors and probable fund a very high life style for the schemer.

These swindles usually come to light when the investors want to receive the initial payment into the program back, and they find that this is not an easy thing to do. Some of the more recently discovered Ponzi schemes were discovered through investigation when investor began to complain to the SEC and other government organizations, because they were getting the run around on getting their investment dollars returned to them.

Here is the biggy...the best know, and largest Ponzi scheme in the U.S??? Social Security. Yep, that's right. The one and only legal Ponzi scheme is not only perpetrated but openly operated and it is done so by the US Government. You pay into Social Security and those funds are used to pay benefits to those who current qualify to receive those benefits. Supposedly, when you retire, you will receive funds that will be adjusted for inflation so that at retirement age you will be able to live decently.

It is my personal belief that Social Security will no longer be viable by the time I reach the legal age to receive benefits. Who knows what they will change that age to as I get closer to retirement. My plan is to develop a residual source of income in addition to doing some retirement investing that will enable me to live decently with or without the promised return.

So that's a simple explanation.

Quickbooks Inventory Feature

2009-12-17T14:07:00.000-08:00

Tricky, tricky, tricky. There is so much to know about how to use Quickbooks for inventory tracking and there are so many ways that you can easily end up with an incorrect inventory count and value.

First and foremost, you only need to use the Quickbooks inventory feature if you keep items in stock that you buy and hold. If you sell product to your customers but buy it only at the time you sell it and only at the exact quantities that you sell it at, use the "non inventory part" classification in your item list.

Second, DO NOT adjust the value of your inventory until you have corrected your physical count first. Need to know how to do that? just post a comment and I'll respond.

Third, record your inventory purchases exactly the way you sell them. In other words, if you buy you inventory stock in bulk such as 1 case, or 1 pack, be sure you invoice your customers in the same way. Do not record that you have received 1 case (of 12 pieces) and then invoice you customer by the piece. If you sell the item by individual piece that is how you must record that you have purchased it. If your supplier only sells in multiple packs, but bills you by single such as case, box, pack etc., be sure you put the entry into your Quickbooks based on your sale method.

Whenever possible be sure to record the receipt of your inventory prior to recording the sale to your client. The goal is not to sell product if your inventory quantities show that you don't have enough stock to fill a sales order or invoice. You can use the purchase order and item receipt features in the Vendor transactions to add this inventory prior to receiving the bill from your supplier.

Fourth, the Quickbooks inventory feature works when you are buying and selling the same product over and over. Quickbooks Premier and Enterprise allow for recording inventory parts that can be assembled into another sellable product.

Be sure to understand this feature before you begin using it. Start with a few items that you can work with to fully understand how to do all of your entries before you create a large inventory list.

In some cases, the Quickbooks inventory feature is simply not the best choice. There are several choices in add-on compatible software that might be more suitable to certain types of businesses carrying inventory in stock.

This material is for informational purposes only and not intended and financial, legal or tax advice. Please consult your finance, legal or tax professional to confirm the accuracy of all information. Quickbooks is a registered product of Intuit.

Not sure what to do?

2009-12-17T12:47:00.000-08:00

As a professional bookkeeper I have been using Quickbooks software for over 10 years, and have been certified by Intuit as a "Proadvisor".

Email me if you have a question on using Quickbooks for a particular entry or function. I will be happy to respond via email with an answer.

Here is an important piece of Quickbooks information...

Quickbooks software is called "real-time" software. What that means, in my own lay-men's terms is that what ever the record is at any given point that you look at it, that is what it has always been. In other words, if you wrote a check and dated it 10/15/09 that's what the date of the check would be. If you go back to that same check and change the date to 11/15/09 then that is what it is, and the 10/15/09 date will not show up anywhere. There are ways to look at things that have been changed but that can get confusing and complicated if you don't know what specifics to use.

To be safe just think of it as being a permanent change that wipes out whatever you did before. One of the ways this really comes into play is in the bank reconciliation feature. Once you have completed the monthly bank reconciliation process in Quickbooks, if you change the date, delete or change the amount of a reconciled transaction you will find the following month that your balance will no longer match the bank statement.

If it is important to have a record of the change that you can see in Quickbooks use the "Make Journal Entry" feature to make your correction. This way you will be able to see the original transaction as well as the correction you made.

The positive think about the real-time feature in Quickbooks is that most items can be corrected as easily as they may have been "messed up".

Email me if you have a question about something that you might think is "messed up" in your quickbooks file.

This material is for informational purposes only and not intended and financial, legal or tax advice. Please consult your finance, legal or tax professional to confirm the accuracy of all information.