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5 QuickBooks Online Reports You Should Run Regularly

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side profile of a businesswoman using a laptopThere are numerous QuickBooks Online reports that you should be consulting at regular intervals. But you need these five at least every week.

QuickBooks Online’s Dashboard, the first screen you see when you log in, provides an effective overview of your company’s finances. It contains at-a-glance information about your recent expenses, your sales, and the status of your invoices. It displays a simple Profit and Loss graph and a list of your account balances. Scroll down and click the See all activity button in the lower right and your Audit Log opens, a list of everything that’s been done on the site and by whom.

You can actually get a lot of work done from this page. Click the bar on the Invoices graph, for example, and a list view opens, allowing you access to individual transactions. Click Expenses to see the related Transaction Report. Below the list of account balances, you can Go to registers and connect new accounts.

Other Pressing Questions

The Dashboard supplies enough information that you can spot potential problems with expenses and sales, accounts, and overdue invoices. But you’re likely to have other tasks that require attention. How’s your inventory holding up? Are you staying within your budget? How about your accounts payable – will you owe money to anyone soon?

QuickBooks Online offers dozens of report templates that answer these questions and many more. If you’ve never explored the list, we suggest that you do so. It’s impossible to make plans for your company’s future without understanding its financial history and current state.

QuickBooks Online has many reports that can provide real-time, in-depth insight into your company’s financial health.

Comprehensive and Customizable

When you click Reports in your QuickBooks Online toolbar, the view defaults to All. The site divides its report content into 10 different sections, including Business Overview, Sales and Customers, Expenses and Vendors, and Payroll. Each has two buttons to the right of its name.

Click the star, and that report’s title will appear in your Favorites list at the top of the page. This will save time since you’ll be able to quickly find your most often-used reports. Click the three vertical dots and then Customize to view your customization options for that report (you’ll have access to this tool from the reports themselves).

Necessary Knowledge

You can, of course, run any report you’d like as often as you’d like. Most small businesses, though, don’t require this frequent intense scrutiny. But there are five reports that you do want to consult on a regular basis. They are:

1. Accounts Receivable Aging Detail. Displays a list of invoices that haven’t yet been paid, divided into groups like 1-30 days past due, 31-60 days past due, etc.

2. Budget vs. Actuals. Just what it sounds like: a comparison of your monthly budgeted amounts and your actual income and expenses.

Warning: Some reports let you choose between cash and accrual basis. Do you know the difference and which you should choose? Ask us.

You can customize QuickBooks Online reports in several ways.

3. Unpaid Bills. Helps you avoid missing accounts payable due dates by displaying what’s due and when.

4. Sales by Product/Service Detail. Tells you what’s selling and what’s not by displaying date, transaction type, quantity, rate, amount, and total. 5. Product/Service List. An accounting of the products and/or services you sell, with columns for price, cost, and quantity on hand.

Customization, Complex Reports

Note that there’s a category of reports in QuickBooks Online named For My Accountant. That’s where we come in. The site includes templates for reports that you can run yourself, but that you’d have difficulty customizing and analyzing. These standard financial reports—which, by the way, you’ll need if you create a business plan or try to get funding for your business—include Balance Sheet, Statement of Cash Flows, and Trial Balance.

You don’t need to have these reports generated frequently, but you should be learning from the insight they provide monthly or quarterly. We can handle this part of your accounting tasks for you, as well as any other aspect of financial management where you need assistance. Contact us, and we’ll see where we might help provide the feedback and bookkeeping expertise that can help you make better decisions for the future of your business.

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QuickBooks Online reports pick up where the Dashboard leaves off, providing dozens of templates ready for your company data. Do you know how to best use them?

You can create some QuickBooks Online reports using either cash or accrual basis. Do you know the difference? Ask us if you don’t.

Overwhelmed by the number of reports QuickBooks Online offers? Click the star next to the ones you run most often, and they’ll appear in Favorites.

QuickBooks Online contains several reports in a section titled For My Accountant. These are complex financial reports that we can run and analyze for you.

If you have questions, we’re always ready to provide friendly support and practical solutions to get you back up and running quickly. We can also review and clean up your QuickBooks data file at regular intervals to ensure it’s always accurate and up to date. Call us at 480-945-6158 or request your free consultation online now to learn more.

The Top 5 Ways Businesses Get in Trouble With the IRS

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business-consultingAs a small business owner, you probably know that willfully avoiding paying taxes will lead to severe problems with the IRS; however, IRS problems aren’t always a result of a business owner’s intentional actions. These are five ways business owners can get into trouble with the IRS that they might overlook or not realize.

1. Under-Reporting Income

All business income must be reported to the IRS. Even if you are a freelancer, receive contract payments, or are paid in cash, you must let the IRS know or risk hefty fines and penalties on top of the tax you owe on that income. Some individual self-employed people fail to pay taxes – either due to lack of knowledge about tax laws or evasion – and do not realize they are responsible for up to six years of back tax returns. Take note that if you do need to file back tax returns, many deductions are not claimable on more than the most recent three returns. Additional years, up to six, must be filed; however, the benefit of deductions is lost beyond three years.

2. Over-Reporting Expenses

Keep business expenses separate, preferably paid from a separate account and with a separate credit card, so that your expenses do not get mixed in with those for your business. The most common over-reported expenses are private travel being claimed and business travel and private miles driven and claimed as business miles. If you’re not sure what qualifies as an actual business expense, consult with your tax preparer or accountant. For a business expense to be deductible, it must be ordinary and necessary. An “ordinary” expense is common and accepted in your business; a “necessary” expense is helpful and appropriate for your business. Expenses like the cost of goods sold (for manufacturing businesses) and capital expenses (costs that are part of your investment in your business) are figured separately from business expenses.

3. Failing to Report “Trust Fund Taxes”

As an employer, you must withhold taxes from employee earnings. Those taxes are not paid to employees as wages and are held “in trust” until paid to the U.S. Treasury. Thus, the name “trust fund taxes.” These are income tax, Social Security, and Medicare taxes (aka “withholdings”). Sales tax is also considered a “trust fund” tax since it is collected from someone else like a customer or client and held until paid to the Treasury. These taxes must be paid and reported to the proper taxing authority and cannot be used for operating or financing a business. If they are, and they are not reported, it is considered tax fraud.

4. Forgetting the Self-Employment Tax

Just like an employer must withhold Social Security and Medicare taxes from employees, if you are self-employed, you must pay self-employment (SE) tax, consisting of Social Security and Medicare taxes, to the Treasury. The SE tax is 15.3 percent (12.4 percent for social security (old-age, survivors, and disability insurance) and 2.9 percent for Medicare (hospital insurance) of net self-employment income in addition to income taxes. That means it is calculated after expenses are deducted. Note that SE tax does not include any other taxes that self-employed individuals may be required to file, so these individuals must consult their tax preparer or accountant to be sure they are paying all the required taxes. Also, self-employed individuals can deduct the employer-equivalent portion of the SE tax when calculating their adjusted gross income (AGI). Also, keep in mind that the tax is paid only on net self-employment earnings, that is, income after expenses are deducted.

5. Not Paying Estimated Quarterly Taxes

As a small business owner, you do not have taxes withheld from a formal paycheck as wage-earning employees do. However, that does not mean there are no taxes due to the IRS. If a small business owner anticipates a tax liability of $1,000 or more, they must send estimated quarterly tax payments to the IRS. Not doing so can lead to a whopping end-of-year tax bill with penalties, too.

Again, as mentioned above, consult your tax preparer or trusted accountant to help you make sure you stay in the clear with the IRS.

Get one step closer to the tax relief you’ve been longing for today! Call us at 480-945-6158 and discuss your tax problems with an experienced Scottsdale, AZ CPA and tax professional. Or request a free consultation through our website now.

Business Meals are Deductible Again: Here’s What You Need to Know

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Business people colleagues shaking hands meting Planning Strategy Analysis ConceptThe Consolidated Appropriations Act of 2021 brings a favorite business tax deduction back to life. The so-called “three-martini lunch” is in vogue once again; however, not everyone is happy about it. So, what does this mean for businesses? Read on to learn more about the deduction and the associated pros and cons.

What is the Three-Martini Lunch Tax Deduction?

There was a time – up until the mid-1980s – that business owners and executives could take a 100 percent tax deduction for entertaining clients, colleagues, or even themselves (as it was not unheard of for personal expenses to be grouped in with “business expenses”).

The somewhat scoffing name of the deduction – the Three-Martini Lunch – comes from these lavish “business expenses” that sometimes included leisurely lunches (complete with cocktails), rounds of golf, sporting event tickets, and even vacations. However, under tax laws at the time, as long as the activities were conducted in the name of entertaining clients, they could be deducted on a business’ federal return.

What Changed?

The Tax Reform Act of 1986 eliminated or significantly reduced many tax deductions, including putting a severe halt to businesses’ total deductions for entertaining potential or current clients. Beginning in 1987, the business meal deduction decreased from 100 to 80 percent. Further, the Act called for any part of the meal that was considered “lavish and extravagant” to be excluded from the amount used to calculate the deduction (although no accurate guidance was provided on what constituted “lavish and extravagant”).

Over the years, the deduction was further reduced, and finally, the Tax Cuts and Jobs Act (TCJA) of 2017 repealed the entertainment allowance and scaled the business meal deduction down to 50 percent. The deduction applied only to expenses encountered during actual business activities or active discussions.

Of course, there were caveats and loopholes associated with the changes; however, those loopholes no longer seem necessary as, after more than 30 years, the 100 percent deduction is restored. This increase is due to the Taxpayer Certainty and Disaster Tax Relief Act of 2020, part of the Consolidated Appropriations Act of 2021 (CAA 2021).

The Consolidated Appropriations Act of 2021

Championed by the White House and Senator Tim Scott, a Republican from South Carolina, the Act increases the deduction to 100 percent so that businesses can deduct the total cost of business meals on federal taxes. This increase in deduction occurred by way of an amendment to the Tax Reform Act of 1986 that makes an exception to the 50 percent rule until January 1, 2023.

What You Should Know

For expenses to be fully deductible, they must be paid or incurred during 2021 or 2022, and the food and beverages claimed must be provided by a restaurant. The Act does not explicitly apply this full deduction to entertainment expenses. Intended to help the flailing restaurant industry during the global pandemic, the Act leaves many business personnel with questions. For example, what constitutes a “restaurant”? (this is not clearly defined in the IRS code).

For some guidance, Section 4.01 of Part III of the IRS procedural guide for taxpayers who own or operate a restaurant or tavern deems a “restaurant” to be a place where “food and beverages are prepared to customer order for immediate on-premises or off-premises consumption. Examples are full-service restaurants, limited-service eating places, cafeterias, special food services (like food service contractors, caterers, and mobile food services), and bars, taverns, and other drinking places.”

Another question taxpayers are asking is how should non-food and beverage expenses be handled? (there is no accurate guidance on entertainment expenses).

As you consider these and other questions regarding the new deduction guidelines, also consider some of the proposed pros and cons of the ruling.

Pros and Cons of the Three-Martini Lunch

Returning to a full deduction for business meals and entertainment has been praised and criticized regarding how the change will impact businesses and the economy in general.

Some suggested benefits include:

  • An increase in business will help restaurants and bars reopen in the time of the global pandemic.
  • New employment for those out of work and reemployment for furloughed food service employees.
  • A limited-time (two-year) action to bolster the foodservice industry during the pandemic.

Some of the criticisms of the Act are that:

  • This deduction robs tax relief funds that are more important.
  • It could be challenging to eliminate the deduction when the two-year limit comes.
  • The benefit will extend only to the wealthy who do not need immediate tax relief.
  • Only large, high-end restaurants that serve wealthy business clientele will benefit.

These and other points of interest – as well as many questions – will likely arise as the tax year unfolds. To address these, it is always best for business owners to consult with a tax professional.

Find out how we can decrease your Federal and State taxes. Call us today at 480-945-6158 to learn more or request a consultation through our website now and we’ll contact you.

How to Create Recurring Transactions in QuickBooks Online

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Business people colleagues shaking hands meting Planning Strategy Analysis ConceptQuickBooks Online saves time and improves accounting accuracy in numerous ways. One example is its support for recurring transactions.

It’s easy to get distracted when you’re doing dull, repetitive accounting work. That distraction leads to errors sometimes. So, besides the time you’re spending on work that could be automated, you have to tack on additional time to chase down your mistakes.

QuickBooks Online already reduces repetitive data entry by saving your lists of customers, vendors, products, etc., and making them accessible when you’re creating transactions. But it does more to save time and minimize errors by allowing you to create recurring transactions. Enter a transaction like an invoice or bill once, and QuickBooks Online memorizes it for future use!

Here’s how it works. Let’s say you have a customer who wants to rent a printer from you for one year. You create an invoice for one month’s rental. At the bottom of the screen, click Make recurring. A partial view of the screen that opens is pictured below.

 

Much of this screen will have already been filled in. You’ll need to enter a name for the template you’re creating at the top of the screen, one that will remind you of its content. In the second field, the drop-down list displays three options for how the recurring transaction will be handled by QuickBooks Online They are:

  • Scheduled. Your invoice will go out automatically at the scheduled interval, with only a change to the date. As with any automated process, you should be very careful when selecting this option.
  • Reminder. You will get a reminder ahead of each occurrence so you can make any necessary changes before sending.
  • Unscheduled. No automation is involved here. The invoice is memorized, but you’ll have to remember when it needs to go out.

If you chose Reminder, the next field will read Create (x) days in advance. Enter the number of days here. On the next line, you’ll only have to check or uncheck the Options.

Under Interval, you’ll tell QuickBooks Online when the invoice is scheduled to go out. You can choose from Daily, Weekly, Monthly, and Yearly. The invoice in this example should be processed and sent on the first day of every month. The start date is January 1, 2021, and it will end on December 31, 2021. If your recurring transaction should continue to go on indefinitely, you’ll have the option to select None from the drop-down list under End. You can also choose After.

Check the fields below this line to make sure they’re correct. You can change the message if you’d like and add an attachment. If everything looks correct, click Save Template in the lower right corner.

Using Recurring Transactions

If you’ve set this transaction up to recur automatically, you don’t have to do anything more with it unless you need to edit it at some point. If you need to do so, or if you’re responding to a reminder (or chose not to be reminded), you can access the list of transactions you’ve memorized by clicking the gear icon in the upper right and selecting Recurring Transactions under Lists. A screen containing this section will open:

 

The table that appears will contain other columns describing the recurring transactions, like Type and Interval. The image above shows the end of each row that reads Edit until you open the drop-down menu. You can see what your options are. They include Use, which you would select when you want to edit and/or send a transaction. You can also create a Duplicate, Pause the recurrences temporarily, Skip next date, or Delete the template. Click the arrow next to Reminder List in the upper right and select Run Report to see the Recurring Template List Report.

As you can see, recurring transactions can not only save time, but they can also help reduce errors and minimize unnecessary work. They’re not overly difficult to create, but you should use caution if you choose to automate them. We’re available to answer your questions about this useful tool and about any other element of QuickBooks Online. Stay healthy, and here’s to 2021!

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QuickBooks Online offers many ways to save time and reduce errors in your accounting. Recurring transactions are among them. Do you know how to set this up? Find out here.

Are you creating similar invoices over and over? QuickBooks Online allows you to create recurring transactions. Find out more here.

QuickBooks Online allows you to automate your recurring transactions, but you should be very careful if you choose this option. We can help step you through this.

Missing bill payments? You can set regular reminders in QuickBooks Online by creating recurring transactions to help with this. Here’s how.

Call us at 480-945-6158 or request your free consultation online now to learn more.

Small Business Health Care Tax Credit

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Eligible small employers who provide health care coverage to their employees can receive a Small Business Health Care Tax Credit from the Federal government. Here’s what you need to know about who qualifies and how to take advantage of the credit.

What is the Small Business Health Care Tax Credit?

Small business owners make numerous decisions about employee benefits. For example, the type of benefits offered can entice the most desirable candidates to apply for their company’s positions. The right type of benefits can also boost employee retention. An excellent employee benefit to consider is health insurance. If that’s a perk being offered, the small business health care tax credit is a feature of the Affordable Care Act (ACA) that may be of interest. The tax credit is limited to employers with less than 25 employees, and it operates as a sliding-scale credit based on the size of the employer. The larger the employer, the smaller the tax credit. The maximum credit is 50 percent of premiums paid (35 percent for tax-exempt employers).

Qualifying small employers can take advantage of the small business health care tax credit for two consecutive tax years providing the business owes no taxes during those years. The credit can also be carried forward or back to other tax years. Any excess amount paid for health insurance premiums over the allowable credit can be claimed as a business expense.

Who qualifies for the Small Business Health Care Tax Credit?

As mentioned above, the small business health care tax credit is for small employers with fewer than 25 full-time equivalent employees (FTE). Note that the FTE concept is based on hours worked rather than the actual number of employees.

Other qualifications include that:

The employer pays less than $50,000 a year per FTE in average wages. Determining FTEs and average annual wages should be done by your qualified tax preparer, CPA, or via guidance from the Internal Revenue Service (IRS).

The employer offers a qualified health plan to employees through a Small Business Health Options Program Marketplace (SHOP).

The employer pays at least 50 percent of the employee’s premium cost. (Not family or dependent premium cost.)

What about Tax-exempt Organizations?

Tax-exempt organizations are also eligible for the small business health care tax credit. In this case, the credit is refundable to the extent that it does not exceed income tax withholdings or Medicare tax liability. Refunds to tax-exempt organizations are reduced by the current fiscal year sequestration rate. For an explanation of sequestration and how it impacts the small business health care tax credit, consult your tax advisor or accountant.

How do small businesses take advantage of the Small Business Health Care Tax Credit?

To claim the small business health care tax credit, the IRS requires Form 8941 (Credit for Small Employer Health Insurance Premiums) to be filled out and submitted. For small businesses, the amount should be included as part of the general business credit on the company’s federal tax return. The amount should be included on Form 990-T (Exempt Organization Business Income Tax Return) for tax-exempt organizations. Note: this form must be filed for a tax-exempt organization to claim the small business health care tax credit, even if the business does not typically file that form.

Small business owners may find that offering perks like health insurance aren’t beyond their economic reach with incentives like this. As always, a trusted tax professional is the place to turn regarding this and other tax credits for small businesses.

Call Scott H. Miller Company, PC at 480-945-6158 today and set up an appointment for a free initial consultation to discuss your business goals.

Keeping Up With Your IRA: Tax Season Checklist

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side profile of a businesswoman using a laptop

If you’re one of the millions of American households who owns either a traditional individual retirement account (IRA) or a Roth IRA, then the onset of tax season should serve as a reminder to review your retirement savings strategies and make any changes that will enhance your prospects for long-term financial security. It’s also a good time to start an IRA if you don’t already have one. The IRS allows you to contribute to an IRA up to April 15, 2021, for the 2020 tax year.

This checklist will provide you with information to help you make informed decisions and implement a long-term retirement income strategy.

Which Account: Roth IRA or Traditional IRA?

There are two types of IRAs available: the traditional IRA and the Roth IRA. The primary difference between them is the tax treatment of contributions and distributions (withdrawals). Traditional IRAs may allow a tax deduction based on the amount of a contribution, depending on your income level. Any account earnings compound on a tax-deferred basis, and distributions are taxable at the time of withdrawal at then-current income tax rates. Roth IRAs do not allow a deduction for contributions, but account earnings and qualified withdrawals are tax free.1

In choosing between a traditional and a Roth IRA, you should weigh the immediate tax benefits of a tax deduction this year against the benefits of tax-deferred or tax-free distributions in retirement.

If you need the immediate deduction this year — and if you qualify for it — then you may wish to opt for a traditional IRA. If you don’t qualify for the deduction, then it’s almost certainly a better idea to fund a Roth IRA.

Case in point: Your ability to deduct traditional IRA contributions may be limited not only by income, but by your participation in an employer-sponsored retirement plan. (See callout box below.) If that’s the case, a Roth IRA is likely to be the better solution.

On the other hand, if you expect your tax bracket to drop significantly after retirement, you may be better off with a traditional IRA if you qualify for the deduction. You could claim an immediate deduction now and pay taxes at the lower rate later. Nonetheless, if your anticipated holding period is long, a Roth IRA might still make more sense. That’s because a prolonged period of tax-free compounded earnings could more than make up for the lack of a deduction.

Traditional IRA Deductible Contribution Phase-Outs

Your ability to deduct contributions to a traditional IRA is affected by whether you are covered by a workplace retirement plan.

If you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA will be reduced (phased out) if your modified adjusted gross income (MAGI) is:

  • Between $104,000 and $124,000 for a married couple filing a joint return for the 2020 tax year.
  • Between $65,000 and $75,000 for a single individual or head of household for the 2020 tax year.

If you are not covered by a retirement plan at work but your spouse is covered, your 2020 deduction for contributions to a traditional IRA will be reduced if your MAGI is between $196,000 and $206,000.

If your MAGI is higher than the phase-out ceilings listed above for your filing status, you cannot claim the deduction.

Roth IRA Contribution Phase-Outs

Your ability to contribute to a Roth IRA is affected by your MAGI. Contributions to a Roth IRA will be phased out if your MAGI is:

  • Between $196,000 and $206,000 for a married couple filing a joint return for the 2020 tax year.
  • Between $124,000 and $139,000 for a single individual or head of household for the 2020 tax year.

If your MAGI is higher than the phase-out ceilings listed above for your filing status, you cannot make a contribution.

Should You Convert to Roth?

The IRS allows you to convert — or change the designation of — a traditional IRA to a Roth IRA, regardless of your income level. As part of the conversion, you must pay taxes on any investment growth in — and on the amount of any deductible contributions previously made to — the traditional IRA. The withdrawal from your traditional IRA will not affect your eligibility for a Roth IRA or trigger the 10% additional federal tax normally imposed on early withdrawals.

The decision to convert or not ultimately depends on your timing and tax status. If you are near retirement and find yourself in the top income tax bracket this year, now may not be the time to convert. On the other hand, if your income is unusually low and you still have many years to retirement, you may want to convert.

Maximize Contributions

If possible, try to contribute the maximum amount allowed by the IRS: $6,000 per individual, plus an additional $1,000 annually for those age 50 and older for the 2020 tax year. Those limits are per individual, not per IRA.

Of course, not everyone can afford to contribute the maximum to an IRA, especially if they’re also contributing to an employer-sponsored retirement plan. If your workplace retirement plan offers an employer’s matching contribution, that additional money may be more valuable than the amount of your deduction. As a result, it might make sense to maximize plan contributions first and then try to maximize IRA contributions.

Review Distribution Strategies

If you’re ready to start making withdrawals from an IRA, you’ll need to choose the distribution strategy to use: a lump-sum distribution or periodic distributions. If you are at least age 72 and own a traditional IRA, you may need to take required minimum distributions every year, according to IRS rules. This age was increased from 70½, effective January 1, 2020. Account holders who turned 70½ before that date are subject to the old rules.

Don’t forget that your distribution strategy may have significant tax-time implications if you own a traditional IRA, because taxes will be due at the time of withdrawal. As a result, taking a lump-sum distribution will result in a much heftier tax bill this year than taking a minimum distribution.

The April filing deadline is never that far away, so don’t hesitate to use the remaining time to shore up the IRA strategies you’ll rely on to live comfortably in retirement.

1Early withdrawals (before age 59½) from a traditional IRA may be subject to a 10% additional federal tax. Nonqualified withdrawals from a Roth IRA may be subject to ordinary income tax as well as the 10% additional tax.v

Find out how we can decrease your Federal and State taxes. Call us today at 480-945-6158 to learn more or request a consultation through our website now and we’ll contact you.