QuickBooks advise
I like to explain the use of QuickBooks as a funnel. The data is entered – that’s the top of the funnel; the reports come out – that’s the bottom of the funnel. The reports, at the bottom of the funnel, are meaningful only if the data is entered properly, at the top of the funnel. Given the correct set up and training, QuickBooks is a very powerful tool. You can enter your day to day things like bills and payroll in such a way that invoicing is almost automatic. While you are entering your customers’ information to prepare invoices, QuickBooks is building a database to use for mailings. While you are preparing payroll, QuickBooks is building your yearend W-2’s. While you are entering bills, invoices and payroll, QuickBooks is preparing your profit and loss statement. Now you ask if QuickBooks can do all of this, why do I need an accountant at all? This is a question many mediocre accountants hope you never ask. But, superstar accountants are so happy you did. When QuickBooks is set up correctly, when day to day activities are entered correctly, it allows superstar accountants do what they do best – Help business owner’s make money! This allows great information to be communicated between client and accountant so tax planning can be done, major purchases can be discussed, even to decide when it is time to lower overtime and add an additional employee. This tool allows more analyzing and helping time by removing some entry time.
One of my favorite parts of QuickBooks is the job costing function. This feature is a great tool that enables me to be helpful to many different industries. I first learned and used job costing extensively in the construction field. I have since learned how to use this to help many different industries, even the accounting industry. This tool is an amazing management tool to see not only job costing, but labor costing, efficiency, and purchasing power.
The proper knowledge of the inner workings of QuickBooks can relieve the fear of messing up your company’s information beyond repair. QuickBooks has tried to help the end user “correct” mistakes by offering what is termed “the drill down feature”. This feature allows the user to hover over a transaction in question, if there is a magnifying glass, you may double click and go one step back. The more you “drill down” the closer you get to the original transaction that created your question. When you no longer see the magnifying glass, you have uncovered the original entry that caused the question. Once you have uncovered the entry, you are allowed to correct it. You may want to pay attention to the date of this transaction because dates are important in QuickBooks.
QuickBooks uses something named “real time”. This is a method that is date driven. Sounds harmless enough, right? Not really. If, for instance, you mistakenly dated an entry 01/01/20 when you meant 01/01/2014, QuickBooks would place this entry in the year 2020. QuickBooks has added an option to warn the user if the entry is 30 days in the future or the past, but it has to be turned on and the warning has to be heeded. We quickly realize that dates become extremely important to pay attention to.
Another feature Intuit, the owner of QuickBooks, has worked diligently on is to help QuickBooks work with other software or integrate. This has opened up a brand new world for many industries who could not use QuickBooks before. This allows the best of both worlds, so to speak. Let’s say your industry has specific needs to produce your product. You may have specific software to help you track, purchase, sell, market, etc. your product. But many of these software manufacturers don’t really understand the accounting function. Well, with this, they don’t need to. The accounting can be handled by a specialist in the accounting industry. Just like the specialist that is handling the production.
We have been a QuickBooks ProAdvisor since 2002. Give us a call to help you select QuickBooks programs for your Company; or for help in optimizing your existing system.
Depreciation
Depreciation seems to be a mystery to many people. What is depreciation? Why is there depreciation? How does depreciation work?
What is depreciation?
According to Merriam Webster: to deduct from taxable income a portion of the original cost of (a business asset) over several years as the value of the asset decreases.
Why is there depreciation?
In order for a taxpayer to be allowed a depreciation deduction for a property, the property must meet all the following requirements:
- The taxpayer must own the property. Taxpayers may also depreciate any capital improvements for property the taxpayer leases.
- A taxpayer must use the property in business or in an income-producing activity. If a taxpayer uses a property for business and for personal purposes, the taxpayer can only deduct depreciation based only on the business use of that property.
- The property must have a determinable useful life of more than one year.
A taxpayer must identify several items to ensure the proper depreciation of a property, including:
- The depreciation method for the property
- The class life of the asset
- Whether the property is “Listed Property”
- Whether the taxpayer elects to expense any portion of the asset
- Whether the taxpayer qualifies for any “bonus” first year depreciation
- The depreciable basis of the property
How does depreciation work?
There are several options most taxpayers have when depreciation is really examined. Possibly, that is also the reason depreciation can be such a mystery. The first year “bonus” depreciation is such a powerful tax planning tool. The key is to know the rules and consequences of not following the rules. That is where the tax professionals come in. Someone who studies, applies, and understands the ins and outs of the rules and consequences can be your best resource.
Business owners have so many rules to follow and know when making profits on the industry they are great at. Then the taxes are added to this long list of tasks. That is the time to seek the valuable knowledge of an accounting professional. There are several allowable methods of depreciation. Again, this is dependent on what your particular goals and plans are as to the best application.
Please don’t try to fight these decisions on your own. Give us a call to discuss your particular situation and depreciation opportunities. Our complementary first visit is free.
Types of Businesses
What sort of entity or organization should your business be?
Sole proprietor – A sole Proprietor is the most simplistic in most people’s view. The reporting to the IRS is a separate schedule, a schedule C, inside your personal income tax return, 1040. The taxpayer pays income tax, social security and Medicare tax on the profit the business makes. Most taxpayers use the cash method when filing as a sole proprietor even though there are different methods available. The cash method means the taxpayer computes the tax due by calculating the amount of cash received and the amount of cash spent. A sole proprietor is a good fit for someone who is beginning their business journey may not have employees yet, even though you can have employees as a sole proprietor, and profits are nominal. However, just because this is the most simplistic it may not be the most advantageous for the taxpayer.
Partnership – A partnership means there are two or more people or entities who are conducting business together. The reporting to the IRS is a complete separate return, form 1065. The partners receive a form named K-1 to report on their personal return. Partnerships have the option to report their income on the cash basis like a sole proprietor or on accrual basis. Accrual basis means the business reports their income when they earn it not necessarily when they get the money. A partnership is a good fit for diverse business types and is extremely popular for real estate ventures or a business who desires great flexibility.
Sub Chapter S Corp – A Sub Chapter S Corporation began as a hybrid corporation that blended the C Corporation and a sole proprietor in 1958. After more than fifty years it has become the most popular of all the entities. The reporting to the IRS is a complete separate return, form 1120S. The shareholders receive a form named K-1 to report on their personal return. Sub Chapter S Corps also have the option of reporting their income on the cash or accrual basis also. An advantage Sub Chapter S Corps have is that the shareholders become an employee of the business and the monies the shareholders receive from the business can be taken as salary and as distributions. The shareholders are taxed on the profits as they earn the profits. This means whether or not the shareholders receive the cash they are taxed. That also means that every time they receive money from the business they are not necessarily taxed on it. It depends if they receive money as wages or distributions. Wages are expected to be taken by the shareholders for the work they perform for the business. These are always taxed. The distributions, if received in the year earned, are indirectly taxed, but, if the distributions of profit are received in any year after they are earned, the tax has already been paid.
C Corporation – A C Corporation means there are stock holders. The C Corporation is the oldest of the entities. The businesses that are commonly known C Corporation entities would be GM, Ford, McDonalds, etc. C Corporations may use the cash basis of accounting only if the gross receipts over the last 3 years average $5 million or under. Otherwise, they will need to use the accrual method. Also, the stock holders receive dividends, which are usually reported to the stockholder at the end of year on form 1099. Many of us hold stocks and are familiar with receiving dividends. This means that the C Corporation really is taxed twice; once as the profits are made and second when the stockholders receive dividends.
There are many things to consider when choosing your entity. Many people have heard of LLCs, LLPs, and so on. What about these? How do they fit in the above explanations?
The IRS does not recognize LLCs, etc. as a taxing unit. So now what? How does an LLC report income? Do they have to pay tax on their income? These are the type of Questions we can answer at our first complementary meeting.
So, if you are starting a business, which entity will you choose?
We suggest that you review the above and then give us a call. Let us discuss your particular situation and then help you explore your options.
We are often asked why Tax Superstars is so extremely popular with farmers and farm families?
From a tax and financial management perspective most farms are actually small business operations; and should be treated as such.
More importantly there are specialized tax rules that apply to farm operations. And, many “big city” accountants have difficulty dealing with all of these unique applications. Several actually refuse farm clients for this reason. Not so at Tax Superstars.
Most of our staff members have close ties with the land. Many have been raised, have lived, and/or currently are living on family farms.
This first-hand experience with farms, farming, and farm tax and bookkeeping needs gives us a real advantage and opportunity to maximize the tax benefits for our farm clients.
Are you paying too much in taxes? Then, check your timing
Every year, far too many customers show up at tax time unable to take perfectly legal tax deductions because they did not time their action to take full advantage of the law.
I urge clients to be proactive, not reactive, when it comes to their tax savings practices. Take the time now to take advantage of all of the available deductions by the end of the year. To get in front of and minimize your tax responsibilities.
Give me a call. Let’s see if we can start reducing your future tax liabilities today. While we still have time. The first consultation is free.
Proper, Preparation, Prevents, Poor, Performance
The five P’s rule is crucial to good accounting and excellent accounting service. Clients must provide the proper information and maintain the substantiating records. And, this data must be collected and presented in a timely manner.
Tax Superstars must then Consult, Organize, Analyze, and File that data in the most advantageous form. Again, in a timely manner.
Good accounting is not Voodoo, Black Magic, Luck, or Happenstance. Good accounting is the systematic and timely application of sound accounting practices. Practices that require a cooperative effort of the client and agency in the application of proper, up to the minute, state of the art, accounting rules and regulations.
To stay in business you must be very good at what you do
You must work hard; you have a lot of things only you can do. You need to spend all of your time and energy making your company successful; making money.
Free up your precious time by letting us do what we are good at for you. Let us worry about the constantly changing tax laws, payrolls, and filing reports on time, among other things.
With Tax Superstars you have highly qualified, experienced personnel properly recording, filing, and analyzing your accounts. At Tax Superstars we simply do more. We make sense of your numbers. We search for tax advantages. We search for deductions. We search for ways to maximize your profits. We build mutually beneficial rapport and relationships based on understanding and catering to your individual wants, needs, and goals.
Farming is a special lifestyle, a calling, Farming is about family, about training future farmers
But farming is more than crops and livestock. It is a business and the finances must be handled in a businesslike manner. And the future farmers; sons, daughters, and grandchildren need training in farm finances.
I grew up on a farm and understand farming. As an bookkeeper for over 20 years I have many farm family clients. At Tax Superstars we search for Farm Tax Advantages, Potential Deductions and ways to maximize your farm profits.
Give me a call. Let’s see if we can start reducing your farm tax liabilities today. While we still have time. The first consultation is free.
You work hard, long hours, and must concentrate on making a profit to stay solvent
Free up more of your time to concentrate on making money. Let Tax Superstars handle your finances. Let us do what we are good at for you.
Why should you worry about compliance to the ever changing tax laws; IRS rules and regulations when you can use the tax and finance expertise of our company?
At Tax Superstars we make sense of the numbers, we search for tax advantages and potential deductions.
We search for ways, methods, and means to maximize your profits. With Tax Superstars you have experienced professionals handling and analyzing your numbers. And, often at a savings when compared to your current methods.
Mission Statement Tax Superstars is committed to providing outstanding bookkeeping, tax preparation, and consulting services to small businesses and individuals. We are committed to providing these financial services with the utmost integrity, while excelling in customer service at a fair price to all parties involved.