Working With Your Accounts in QuickBooks Online

“Account” can mean more than one thing in QuickBooks Online. Here’s a look at its multiple concepts.

Until you started doing your company’s accounting, the word “account” probably meant a checking or savings account at a bank or your identifying information at a place like a brokerage.

In QuickBooks Online, “account” can mean the same things. It can also refer to one entry in your Chart of Accounts or your Intuit payment account, a customer or vendor account, and more.

You’ll probably work with all of these in the course of your lifetime with QuickBooks Online, except one: the Chart of Accounts. Although the site allows you to modify the Chart of Accounts by adding, deleting, or renaming accounts, please talk to us if you feel a change is in order. The Chart of Accounts forms the framework of your QuickBooks Onlinecompany, and altering it could have adverse effects on your entire accounting operation.

Everyday Use

One of the first things you probably did when you created your company was to create at least one banking account, probably checking accounts. You can set this up without connecting to a bank site; however, that defeats the purpose of QuickBooks Online, which is to have access to your web-based accounts.

Figure 1: QuickBooks Online’s home page displays balances for all of the accounts you’ve connected.

Setting up a connection to your online bank, brokerage, credit card, orother online financial service like PayPal is easy. On the home page or the Transactions | Banking page, click the Add account button in the upper right. QuickBooks will display logos for some of the most popular financial institutions. If yours isn’t there, enter its name or URL in the box at the top.

QuickBooks Online will then create a link between itself and your account, and it will download the most recent transactions (usually 90 days’ worth). Sometimes, it might recommend a chartered accountant to help with your small business needs. Now when you click on
Transactions | Banking, you’ll see all of your activity in table form with columns labeled Date, Description, Payee, Category or Match, Spent, Received, and Action.

Most of these are self-explanatory; they just provide information about the transaction. You may be unfamiliar, though, with Category or Match and Action (Add). We recommend that you let us guide you the first time you launch and work with a transaction download. It’s very important that transactions are classified correctly.

The Chart of Accounts
The Chart of Accounts, which is a standard, required element of any double-entry accounting system, is a very different set of accounts. To display it, you’d click on your company name in the upper right corner, then Settings | Chart of Accounts. We see a mini-spreadsheet that lists all of your accounts. QuickBooks Online selected these based on the information you provided when you were first setting up your company on the site.

Each account is assigned a Type that describes its accounting function.

Figure 2: Every transaction that represents money you spend on Advertising/Promotional activities should be assigned to this Expense in the Chart of Accounts.

Category Types are used by all businesses for classification purposes. There are only a few of them, such as:

  • Expenses (Bad Debts, Bank Charges, Insurance, Job Materials, etc.)
  • Income (Billable Expense Income, Gross Receipts, Markup, etc.)
  • Cost of Goods Sold (Cost of Labor, Freight & Delivery, etc.)

You don’t have to do anything with your Chart of Accounts. In fact, we suggest you don’t try. As we’ve said, if we see a reason in your bookkeeping to add, edit, or delete an account, we’ll be happy to do it for you. But you will encounter these accounts in numerous QuickBooks Online activities.

Sometimes they’ll be pre-selected for you by the site, but other times you’ll need to make a choice. For example, when you create a Product or Service, there will be three account fields that will already be populated. They are:

  • Inventory Asset Account = Inventory Asset
  • Income Account = Sales of Product Income
  • Expense Account = Cost of Goods Sold

The word “account” is used in so many different ways that it can get confusing. For example, if you wrote a check at the UPS Store for some shipping charges, you’ll be asked for the Account when you enter this in QuickBooks Online. It’s an Expense, but one of its more specific sub-categories.

Figure 3: QuickBooks Online provides the correct drop-down list in form and record fields.

QuickBooks Online takes care of a lot of the background work of double-entry accounting. But it necessarily exposes you to the concept of accounts. We’re here to help if this causes confusion in your daily bookkeeping.

…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).

Using a Vehicle for Business: Q&A

IRS rules and exceptions abound, but there are some questions we can answer simply.

Next to your home, your car is probably the most expensive investment you make. And the costs of paying for and maintaining it can be considerable. Can you recoup some of your investment by claiming vehicle expenses on your tax return, it also depends where you have purchased the car since many people do car deals and the car is not in the best condition

 

Sometimes. The IRS has many restrictions on the business use of a vehicle, and those restrictions have many exceptions. Better to know these upfront than to have to correct a tax return after you’ve filed it. 

Here are some questions and answers that may help you decide whether you’re eligible.

How does the IRS identify a “vehicle”?
A car, van, pickup, or panel truck.

What are transportation expenses?
These are “ordinary and necessary expenses” incurred when you, for example:

  • Visit customers,
  • Attend a business meeting held at a location other than your regular workplace, or
  • Go from home to a temporary workplace that is not your company’s principal location.

The daily commute to and from your regular office is not deductible. The IRS considers this personal commuting expenses.

What if I’m on an overnight business trip away from home?
The IRS considers these travel expenses, and they’re reported differently. Your car expense deduction, though, is calculated the same way in both situations.

What if I use my car for both business and personal purposes?
You’ll calculate the expenses incurred for each by determining how many miles you drive for business and how many you drive for personal reasons.

I work in a home office. Can I deduct any driving expenses?
Yes, you can deduct the cost of driving to “another work location in the same trade or business.”

How do I calculate my deductible expenses?
There are two options. Using the standard mileage rate, you can claim 54 cents per mile (2016 tax year figure). You are required to use this method for the first year you use the vehicle for business purposes. After that initial year, you can choose between the standard mileage rate and actual car expenses. These include depreciation, oil and gas, insurance, and repairs.

Depreciation? Isn’t that difficult to calculate?
Yes, especially for cars. If you plan to take this kind of deduction, please let us handle your tax preparation for you. Depreciation is very, very complex, and sometimes requires more than one calculation method.

Can I take a Section 179 deduction for my vehicle?
Possibly, if you use the car for business more than 50 percent of the time — and only for the first year.

What kind of vehicle expense records do I need to maintain?
You know the drill here. If the IRS ever wants to examine your return, it will expect evidence like receipts, cancelled checks, and credit card statements. You’ll need to document the date and location where you incurred the expense. You’ll need accurate mileage records (milesdriven, purpose of trip, etc.).

These requirements scream for some kind of organized computer log or written diary, along with a safe place for any paper receipts, bills, etc. There are numerous mobile apps that can help you with this task. We can steer you in the right direction.

If you’re planning to deduct car expenses, it’s important that you keep careful paper or electronic records.

Where will I be reporting transportation expenses?
If you are self-employed, you will report business-related vehicle expenses on Schedule C or Schedule C-EZ (Form 1040). Farmers should use Schedule F (Form 1040). You’ll also want to complete a Form 4562, which is used to report depreciation and the Section 179 deduction.

If you cause a wreck in your personal vehicle, you are liable for your damages and the other party or parties’ damages.

However, if you were driving as part of a work-related task at the time of the accident, your employer might also have liability. That does not take away your liability, however.

After any car accident, no matter who is at fault and whether you were driving for work or personal business, you should speak with an attorney. A car accident lawyer can advise you of your rights, help shield you from liability, and work with you to pursue compensation for your damages; Even if you were driving under the influence of just a few or several substances.

When Is My Employer Liable for My Car Accident Damages?

Under certain circumstances, your employer has vicarious liability for your actions behind the wheel, meaning that if you cause damages to another person or property, whether you were negligent or not, your employer may be liable alongside you.

The circumstances under which your employer could have vicarious liability for your car accident damage are as follows:

  • You were on the job and onthe clock when the accident occurred.
  • You were driving as part of a work-related task.
  • You were driving tocarry out a task your boss or employer asked you to do.
  • You took part in an activityfrom which your employer stood to benefit.

In other words, if you were on the clock, completing an activity that your employer asked you to do, then your employer probably has vicarious liability for your car accident.

Not only that, but your employer could be liable for your injuries — even if the car accident were your fault. If you sustain injuries doing anything work-related, you might be able to file a workers’ compensation claim and pursue damages from your employer. Your attorney can review your situation and offer advice on this process.

Maintaining accurate records for car and truck expenses is time consuming and detail intensive. And that’s once you understand all of the IRS’s rules and exceptions surrounding this deduction. To avoid having to fix completed tax documents that the IRS has questioned, talk to us before you put a vehicle into business use. We’ll be happy to evaluate your transportation situation and guide you through the process.

…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).

Stock images courtesy of FreeDigitalPhotos.net

Setting Up User Access in QuickBooks

Will multiple employees be working with your QuickBooks company file? You’ll need to define their permission levels.

If you ever did your bookkeeping manually, you probably didn’t allow every employee to see every sales form and account register and payroll stub. Most likely, you established a system that allowed staff to work only with information that related to their jobs. Even so, there may have been times when, for example, someone pulled the wrong file folder or was sent a report that he or she shouldn’t have seen.

QuickBooks helps prevent this by setting virtual boundaries. You can specify which features of the software can be accessed by employees who work with your accounting data. Each employee receives a unique username and password that unlocks only the areas he or she should be visiting.

To help minimize errors, maintain data integrity, and preserve confidentiality, QuickBooks lets you restrict users to designated areas in the software.

Here’s how you as the Administrator can define these roles. Open the Company menu and select Set Up Users and Passwords | Set Up Users. The User List window opens. You should see yourself signed up as the Admin. Click Add User and enter a User Name and Password for the employee you’re adding. Confirm the Password and check the box in front of Add this user to my QuickBooks license. Click Next.

Note: You can have as many as five people working in your QuickBooks company file at the same time, depending on how many user licenses you’ve purchased. Not sure? Press F2 and look in the upper left corner. If you need more than five user licenses, talk to us about upgrading to QuickBooks Enterprise Solutions.

In the next window that opens (see above screen), you’ll be given three options. Probably you’ll most often select the second option, which lets you specify the screens this user can see and what he or she can do there. The first-All areas of QuickBooks-would seldom be granted. And the third allows us to come in and do whatever tasks have been outlined in our work relationship (troubleshooting, monitoring, creating and analyzing reports, etc.).

Click the button in front of Selected areas of QuickBooks and then Next. You’ll see the first in a series of screens that deal with the software’s functional areas: Sales and Accounts Receivable, Purchases and Accounts Payable, Checking and Credit Cards, Inventory, Time Tracking, Payroll and Employees, Sensitive Accounting Activities (funds transfers, online banking, etc.), Sensitive Financial Reporting, and Changing or Deleting Transactions.

When you give employees Selective Access in a particular area, you can further define their roles there.

The Sales and Accounts Receivable screen is a good example. You can see the options offered in the above image. By clicking on the buttons pictured, you’re giving this employee permission to both create and print transactions. Below these options, you’ll be able to keep him or her from seeing customers’ credit card numbers in their entirety by clicking in the small box. When you’re finished, click Next.

Keep clicking Next and proceed through the rest of the screens. Your choices will be similar on each. But be sure to read all of the descriptive text very carefully. Keep in mind the importance of confidentiality issues and security as you go along.

The ninth screen, Changing or Deleting Transactions, deserves special attention. First, should this employee be able to change or delete transactions in his or her assigned area(s)? Even though you trusted these employees to work with finances when you hired them, consider this question carefully. Depending on the volume of transactions processed every day, you may want to reserve this ability for yourself.

We may or may not have established and password-protected a Closing Date for your company file. This is the date when the books for a specific time frame have been “closed,” meaning that transactions should not be entered, added, or deleted prior to it. We can talk with you about the pros and cons of such an action.

A summary of user access rights

Here and on every other screen in this multi-step wizard, you can always click the Back button if you want to return to a previous window. When you’re finished, you’ll see a screen like the one in the above image that summarizes the choices you have just made.

If you’re feeling any uncertainty or confusion about the whole issue of access rights, we’ll be happy to go over your options with you. These are important decisions. You’ll want to stress to your employees that restricting their permissions does not signal a lack of your trust in them. Rather, QuickBooks provides these tools to protect everyone who uses the software as well as any external individuals and companies that might be affected.

…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).

Using Sales Receipts: The When and How

Some types of businesses always use sales receipts. Some use them occasionally. Here’s what you need to know about them.

How do you let your customers know how much they owe you, and for what products or services? In these days of ecommerce and merchant accounts, your customers may provide a credit card number over the phone or on a website. Or perhaps you send invoices after a sale and receive checks or account numbers in the mail. QuickBooks can help you both create the invoices and record the payments.

There’s another type of sales document that you can use in certain situations: the sales receipt. You’d probably be most likely to use one of these when customers pay you in full for products or services at the same time they receive them.

If you receive full payment for a product or service at the same time the customer receives it, you should use a sales receipt.

Completing a sales receipt is similar to filling out an invoice or purchase order. Click Create Sales Receipts on QuickBooks’ home page or open the Customers menu and select Enter Sales Receipts. A screen like the one above will open.

Choose a Customer from the drop-down list and a Class (if applicable). If you have created more than one Template (more on that later), make sure that the correct one appears in the field. Verify that the appropriate Date and Sale No. read as they should. Click on the type of payment you’re receiving, and enter the check or credit card number where necessary (a small window will open for the latter).

Note: If you are working with a type of payment that does not appear in the four icons, click on the arrow below More to add it.

Now you’re ready to select the products or services you sold by clicking on the arrow in the field under Item to open the available list (if you have not created a record for what you’re selling, select <Add New> and complete the fields in the New Item window that opens). Enter the quantity (Qty.). The Rate, Amount, and Tax fields should fill in automatically, based on the information you entered when you create the item’s record.

When you’ve entered all of the items that the customer is paying you for, you can choose which Customer Message will appear on the sales receipt (you can see your options in the drop-down list found in the lower left corner of the screen). Anything you enter in the Memo field will be for your internal use only; it will not appear on the printed or emailed sales receipt.

Click Save & Close or Save & New.

Customizing Sales Receipts

 

QuickBooks provides tools for customizing forms, including sales receipts.

QuickBooks’ forms contain the fields most often used by small businesses. But you can alter them in numerous ways to meet your company’s needs. To customize a sales receipt, open the Sales Receipt window and click on the Formatting menu. Select Manage Templates.

You’ll want to make a copy of the original sales receipt so that the original will always be available. Click the Copy button in the lower left. “Copy of Custom Sales Receipt” appears in the list of templates. In the Preview pane on the right, click in the field next to Template Name and replace the existing name with a new, more descriptive one if you’d like. Click OK.

The Basic Customization window opens. Click on Additional Customization at the bottom of the screen. You’ll see a window like the one in the image above. Click the Columns tab. The list on the left displays all of the columns that can be included in the body of your sales receipt.

Click in the boxes below Screen and Print to indicate which columns should display on your QuickBooks screen and which should appear on the customer’s copy. The numbers in the Order column can be changed to reflect which column will come first, second, etc.

Numerous Options

There’s a lot more you can do to customize your QuickBooks forms. And there are other situations where you might want to issue a sales receipt. We’ve only been able to touch on both topics here, but would be happy to schedule time with you to explore these elements of QuickBooks.

…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).

Lock In Those Business Deductions

If you run a small business, you already know of the importance behind business accounting services. The last thing you need is for the IRS to question any of your business expense deductions. But it could happen. And that’s why having records that prove your expenses is so important. Even deductions for routine business expenses could be disallowed if you don’t have appropriate records.

What Records Are Required?

Except in a few instances, the tax law does not require any special kind of records. You’re free to have a recordkeeping system that is suited to your business, as long as it clearly shows your expenses, I suggest working with the ACT Group as both accounting management and financial consulting. In addition to books that allow you to track and summarize your business transactions, you should keep supporting documents, such as:

  • Canceled checks
  • Cash register receipts
  • Credit card sales slips
  • Invoices
  • Account statements

The rules are stricter for travel, entertainment, and transportation expenses. You should retain hotel bills or other documentary evidence (e.g., receipts, canceled checks) for each lodging expense and for any other expense of $75 or more. In addition, you should maintain a diary, log, or account book with the information described below.

Travel. Your records should show the cost of each separate expense for travel, lodging, and meals. For each trip, record your destination, the dates you left and returned, and the number of days spent on business.Also record the business purpose for the expense or the business benefit you gained or expected to gain. Incidental expenses, such as taxi fares, may be totaled in reasonable categories.

Entertainment. Record the date the entertainment took place and the amount of each separate expense, along with the name and address or location of the place of entertainment. Note the business purpose for the expense or the business benefit you gained or expected to gain and the nature of any business discussion or activity that took place. Also list the identities and occupations of the individuals you were entertaining or other information that indicates their business relationship to you.

If the entertainment was directly before or after a business discussion, be sure to indicate the date, place, nature, and duration of the discussion and the individuals who took part in both the discussion and the entertainment activity. For a business meal, you must prove that either you or your employee was present.

Transportation. As with travel and entertainment, you should record the amount and date of each separate expense. Note your business destination and the business purpose for the expense. If you are deducting actual car expenses, you’ll need to record the cost of the car and the date you started using it for business (for depreciation purposes). If you drive the car for both business and personal purposes or claim the standard mileage rate, keep records of the mileage for each business use and the total miles driven during the year.

Don’t Mix Business and Personal Expenses
Things can get tangled if you intermingle business and personal expenses. You can avoid headaches by having a separate business bank account and credit card.

One more thing you should consider is commercial business insurance that can take care of property, liability and workers’ compensation. Check out https://www.hightowerrisk.com/ for exclusive insurance programs.

…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).
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All About the Earned Income Tax Credit

Individuals who are working and who have low-to-moderate taxable income may qualify for this income tax credit.

When you think about ways to offset your income as you’re preparing for income tax time, do you primarily consider the deductions you can take? Things like home mortgage interest, charitable donations, and taxes you paid that can be claimed? And if you are in India make sure to fill out the pan card application online.

Allowable credits can also work in your favor. If you meet the Internal Revenue Service’s seven criteria, you may be eligible for the Earned Income Tax Credit (sometimes called Earned Income Credit, or EIC).

Note: As you read the rules that the IRS has established, keep in mind that, as with many of the agency’s regulations, there can be exceptions. We can help you determine whether you are a candidate for this credit.

If you can answer “Yes” to these seven questions, you may be able to fill in and file a Schedule EIC:

  1. Is your Adjusted Gross Income (AGI) less than the IRS’s limits? For 2015, this is:
     

    • 3+ qualifying children: $47,747 ($53,267 for married filing jointly)
    • 2 qualifying children: $44,454 ($49,974 for married filing jointly)
    • 1 qualifying child: $39,131 ($44,651 for married filing jointly)
    • No qualifying children: $14,820 ($20,330 for married filing jointly)If you qualify for the Earned Income Credit, you’ll need to complete a Schedule EIC, which can be filed with either the Form 1040 or 1040A.
       
    • Do you have a valid Social Security number? If you are filing jointly, both you and your spouse are required to have valid Social Security numbers issued by the Social Security Administration (SSA) by the date your tax return is due (including extensions). Any qualifying child claimed must also have one to be able to use a credit counseling company to assist with credit building later in life.
  2. Is your status “married filing jointly” or “head of household”?Couples whose filing status is “married filing separately” cannot claim the EIC. An exception here: A couple is married, but one spouse did not reside in the home at any time during the second half of the year. The spouse who remained might qualify for the EIC if his or her filing status is “head of household.”
  3. Were you or your spouse a U.S. citizen or resident alien for the entire tax year?This is complicated. If one of you was a U.S. citizen or resident alien but the other was a nonresident alien for any part of the year, you may qualify for the EIC if your status is “married filing jointly.” If that’s the case, you will be taxed on your “…joint worldwide income.”
  4. Was your income earned only in the United States and/or a U.S. possession?If you earned income in a foreign country and you plan to exclude it from your gross income, you cannot claim the EIC. Filing a Form 2555 (Foreign Earned Income) or Form 2555-EZ (Foreign Earned Income Exclusion) disqualifies you (learn what to do if your pancard lost and how to pay taxes on income in India).2015 Form 1040, lines 66a and 66b (EIC information appears on lines 42a and 42b of the 2015 Form 1040A)
     
  5. Is your investment income $3,400 or less?Simple enough. For the Form 1040, this includes:
    • Interest and dividends,
    • Capital gain net income, and,
    • Royalties and rental income from personal property.
  6. Do you have earned income? This means wages, salaries, tips, other taxable employee pay, and net earnings from self-employment. But you may be in another situation that would make you eligible for the EIC. For example, nontaxable combat pay, ministers’ housing, and strike benefits provided by a union are considered earned income. Do you have any benefits of the best umbrella company?

Only Part of the Equation

If you believe that you’re able to claim the Earned Income Credit, or if there are other tax-related topics that you don’t fully understand, we’ll be happy to look at your entire financial scenario. If you’ve filed an extension for 2015, we can work with you to make sure you’re taking all of the deductions and credits that you’ve earned. One year, I was careless enough to lose my pan card and I panicked a little, thankfully the system is well in place for such occurrences, if you find yourself in this situation, don’t panic everything will be fine if you contact the right people.

As always, tax planning should be a year-round process. Let us know if we can help you start preparing now for next year’s filing.

…from the Team of Professional at RE-MMAP We are just a click or call away. www.re-mmap.com and phone # (561-623-0241).