Tuesday, December 30, 2008

Beginning of the year payroll

When preparing to process payrolls for the beginning of a new year, it's important to keep a few things in mind:

1. If you are using a computerized payroll processing program, make sure you pay any renewal fees ahead of time in order to acquire any updates needed for the next year's tax withholding tables. You will also possibly need your state unemployment rates handy to set up before the system will allow you to generate payrolls. If you are unable to generate a payroll with dates for the new year, contact your software technical support for further information and help. It's always a good idea to conduct and early attempt at a 'dummy' payroll that can be deleted at a later time just to make sure you are ready to go before the actual day. This can cause many frustrating issues when dealing with banking deadlines for direct deposit services, especially with the New Year's holiday.

2. When processing payroll information manually, it's important to be sure you have an updated set of 2009 Federal and MO State (or whichever state is applicable for your business) as well as any Local tax table rates handy as some they change from year to year. Many of these tables can be found online for your convenience.

3. If you have an outside payroll processing service, be sure you have given them your updated unemployment rates, as these forms often are mailed directly to the business address on file and not to your specific preparer.

As always think ahead, pay early and be prepared!

Wednesday, November 26, 2008

"Do I really have to keep *all* these receipts?"

This is a common question from people in business. Let's think practically here for a moment. Those receipts can be quite a bother. They seem to accumulate over night and take over your desk before you can sort through them! Right? Well the bigger trouble is, at year's end, they matter. You need to be able to prove your expenses if you're going to claim them on your tax return against the income you've received.

A sound piece of advice would be to find a way of contending with receipts as the year progresses, perhaps a filing system or system of envelopes by category would work. Remember, always date such envelopes with atleast the year on the outside, this will help keep things simple in the future. Maybe it could be just as simple as stapling them to the check stubs or taping it to your calender. A quick note on the receipt saying who/what it was for or to would also be a good idea, this may clear up any questions regarding it's relativity later.

Also, talk to your tax preparation professional to find out which receipts they need to complete your tax forms. As a preparer, they do not need to see every one, you wouldn't want to pay them that much to sit and go through all those receipts. But they will need some for back up in their records. Contributions is a more recent important receipt that will be needed by your tax professional due to changes in the recent tax laws.

Always keep in mind, an IRS agent will automatically delete any expense you can't prove so it is extremely important to keep your receipts and keep them in an orderly fashion for easy retrieval for this purpose. If you are ever audited by the IRS, your receipts are imperative. So be diligent and organized when it comes to receipts and work closely with your tax professional to save expense and time in the long run.

Monday, November 3, 2008

Time to order forms

It's Nov. and that means the year end is right around the corner. Don't forget to order all the year end forms and corresponding envelopes to finish your calendar year tax filing requirements. Various businesses need more of some and less of others to meet all the requirements set forth depending on their activities. Some basic forms you may need are:

Federal 941: Employer's Quarterly Tax return
Federal 940: Annual Federal Unemployment
W-3: Transmittal summary sheet that accompanies the Copy A pink forms of the ...
W-2: All copies. You have to send out recipient copies and the pink Copy A's as well as keeping a Payer Copy. Don't forget the envelopes to accompany forms W-2 to employees for their personal tax filing information. Reminder: The deadline for postmarking W-2 forms to employees and the IRS is January 31st.
1099's: There are various 1099's according to what type of monies have been paid. The most common will be the'1099 Misc' used for box 7, Nonemployee Compensation paid to self employed sub contractors and the like. Oh, also box 1, rents paid. Make sure you have the correct spelling and full information for each recipient including their Social Security number or Federal ID number. Don't forget to order window envelopes for the specific style of forms you purchase.
1096: Transmittal summary form to accompany the Copy A to be sent in to the government.

Don't forget to order early, sometimes you can save a bundle on your supplies. And be conservative when ordering, these forms are year specific and cannot be used in later years (or prior years either). January is normally a very hectic month trying to do inventory and keeping up with other various year end reporting as well as staying on track with current regular duties, shopping for year end forms at the last minute and hoping they arrive on time to complete and send in can be more of a hassle than necessary. Order early and your supplies will be waiting for you!

As always, seek professional help if you have any questions or need assistance completing your forms and filing them timely. You may even decide to have an accounting and payroll professional prepare all of your forms for you by providing the final figures to them. This is also a good time to seek a local trustworthy tax and accounting professional in your area in order to secure the help you need. Chances are, they will have their hands full if you wait til the last minute to seek help and you may end up paying late penalties and interest if you do that.

Tuesday, October 28, 2008

3rd Quarter Filing reminder

For those of you who will need to file payroll forms & taxes, sales tax returns and use tax returns for the 3rd quarter 2008, remember this Friday October 31st is your postmark deadline.

All tax deposits to be called in using EFTPS systems will need to be called in on Thursday October 30th for withdrawal on Friday October 31st.

Some states offer discounts for the timely filing of tax reports and payments. The state of Missouri, for instance, offers a 2% discount on State withholding on payroll as well as sales tax amounts due. In other words, if you are paying your MO state withholding payment and have for example, $200 in withheld funds, making your payment timely will save you $4 and you will only have to send in $196. Pay timely, save money.

Tuesday, October 14, 2008

Tax deadline reminder!

Don't forget, tomorrow (10/15/08) is the deadline for filing tax returns which will still qualify for the stimulus package from the IRS. If you do not file your taxes until after this deadline, there will be no way to get the free money the IRS is handing out to you.

So what are you waiting for? Get ta filing!!!

Thursday, October 2, 2008

"Your donation is tax deductible"

Beware of ads claiming your donations are 'tax deductible'. Not everyone can itemize their deductions and itemizing is the ONLY way to claim donations of any kind. Keep in mind, if the value of the donation along with the other allowed deductions bump you up to a higher amount than your standard deduction, your higher amount will allow you to itemize where otherwise you might not be able to. I think they should change their ads to say, "Your donation could be tax deductible."

Standard Deductions vs. Itemized Deductions

When filing your personal income taxes, you have 2 options when claiming deductions: Standard Deduction OR Itemized Deductions. First, lets define 'deductions'. Deductions are allowable subtractions from your adjusted gross income that the IRS gives before applying your tax rate and determining how much tax you will owe.

Alot of factors determine which type of deduction plan you can take*. You can only claim donation amounts if you are able to Itemize your deductions. To determine if you can Itemize, using IRS 1040 form Schedule A, you would compile your totals for the various acceptable deductions according to the Schedule A instructions. When you arrive at a Total of Itemized deductions on line 29, compare this to the Standard Deduction according to your filing status (single, married filing joint, head of household etc.). If the Total of Itemized deductions is higher than the Standard deduction amount, congratulations, you can itemize!

But for those of us who don't have enough Itemized deductions to rise above the Standard, continue to contribute and give donations of all kinds! They still benefit the recipients, you just can't take if off of your taxes.

Monday, September 29, 2008

Keep track of your business mileage

It is extremely important to keep track of your business mileage (incurred on your personal vehicle) in the form of a mileage log. Even if that is a 99 cent mini spiral notebook, you should be recording mileage info. for every business associated drive. Yes, even to the post office to buy stamps to mail out your bills! This also includes charitable mileage, medical mileage and moving expenses incurred, but some of these have different rates at which to compute the deductible amount for taxes. In this post, we will be discussing business type miles only.

You are allowed to deduct expenses that are incurred to make the income. You should always be thinking, "How will I prove this expense if I needed to at the end of the year?" Staying organized and keeping track of your miles will make things alot easier on you come tax preparation time. You can just leave that little notebook right in your car for convenience.

If your business records vehicle expenses for gasoline, repairs and such, you would not need to also record mileage. The mileage rates are intended to cover those costs on a per mile basis. It's either actual expenses OR mileage reporting.

Individuals who receive a W-2 from their employer, who use their own vehicles in their line of work also qualify to deduct this expense in certain circumstances*. If your employer does not reimburse you or only partially reimburses you, you may be entitled to claim it on your taxes filing Federal Form 2106. Here are some instructions and a flow chart if you'd like to see if you would qualify to file this form.

The mileage rate for the tax year 2007 was $0.485
The mileage rate for the tax year 2008 from Jan. 1-Jun.30 was $0.505
The mileage rate for the tax year 2008 from Jul. 1-Dec. 31 is $0.585

As you can see, the tax year 2008 has 2 distinct time periods with different rates. It will be important for you to have a mileage log showing the number of miles accumulated for each separate rated time period. Your tax preparer will need this information in the form of a total of miles for each time period. In the event of an audit, your IRS agent will want proof in the form of a mileage log for all year, otherwise they will most likely add back some or all of the deduction from form 2106.

When recording your mileage log, be sure to include the date, beginning mileage, ending mileage, total miles for the trip and a brief notation about the nature of the trip couldn't hurt either. For example:
8/29/08 61,558-61,601=43 P/U Parts
For more information on mileage rates and requirements, see the IRS.gov website.

*See your tax professional for more details.

Friday, September 26, 2008

1st Things 1st - Getting Organized

Those of you just starting a business will benefit greatly from starting off on the right foot with organization. If you are already up and running and find yourself in a disorganized mess, don't fret!

Getting organized is really easier than you might think. Your desk, paperwork, bills, invoices, supply orders, emails, bank statements and post it notes will all begin to pile up if you don't implement a system for dealing with it.

Just starting out?
The most obvious suggestion would be to get a bin, basket or folder for putting everything as it accumulates and then once a week, sit down and go through it all. Have separate files according to what action is necessary for what's inside. In other words, have an Accounts Payable file for storing the bills to be paid, a separate file for receipts on items already paid and so on. I find having different colored files help with this task as well. Don't forget to have a separate file for 'Income Tax Information'. This is one area you will not want to get behind in. Whatever the system you create, just stick with it. You will benefit much in the long run from a little preventative organization all along. If this is your first year in business, please stay tuned for more beginning helpful information.
Already up and running?
If you have been in business for a while and find yourself in a disorganized mess, don't give up yet! A smooth and organized accounting system is just around the corner. You can do *something* intentional each day to move toward a more organized way of doing things. One thing's for sure, if you have outdated information in your way, this is definitely a good place to start. I find having 1 big file or box for each calender year's records (or fiscal year) is best. That way after the year end, all the information is now in 1 place. Having a system of folders for A/P and such is great for staying on track in the current year. At the end of the year, after everything has been balanced and filed, in the box or file it goes and that's that! Whatever system you utilize, just keep up with it. Do a little something each day to stay on top of new things and take 5 or 10 minutes to get prior information organized too.

Don't forget to keep all those receipts! For more information on the importance of keeping receipts, please stay tuned.

Wednesday, September 24, 2008

Introduction to Simplistic Accounting

I've created this blog for everyone who is new to the business world and would like more information on accounting and ways to keep the paperwork in control. Most people find themselves jumping into a new business venture and have NO clue what information will be needed at year's end for tax purposes and financial reporting.

I have worked full time for an accounting and tax service specializing in small businesses for over 10 years now and have picked up some very valuable tools which I would be happy to share with you. I started out at entry level data entry and now have been promoted to Data Processing Manager and Payroll Specialist. I have worked full time directly under an accounting professional who is well regarded in this field, highly skilled and trained and actively participates in accounting societies locally and on the state level. The knowledge and experience I have gleaned from my position over the past 10 years is priceless and will make for many strong and interesting posts in the future of this blog, so please come back frequently to discover more ways of staying ahead of the accounting game.

Here is a brief list of just some of the topics we will cover:
  • Payroll 101
  • Accounting 101
  • Software recommendations
  • Staying organized
  • Knowing when to get professional help
  • Benefits of financial statements
  • Balancing your business checkbook
  • Budgets
  • Tax issues
  • Year end forms to file
  • Tax payment deadline reminders
Thanks for visiting, please feel free to comment and ask questions at any time. Remember, accounting does not have to be complicated. With a few tips and tricks, you will be on your way in no time to a stress-free accounting system that works for you!