Hired Your First Employee? Your Tax Obligations

Hired Your First Employee? Your Tax Obligations

It’s a major milestone for you, but it comes with a lot of paperwork that must be done correctly.

Bringing a new employee into your business is reason to celebrate. You’ve done well enough as a sole proprietor that you can’t handle the workload by yourself anymore.

Onboarding your first worker, though, comes with a great deal of extra effort for you at first. You have to show him or her the ropes so you can offload some of the extra weight you’ve been carrying.

But first things first. Before your employee even shows up for the first day of work, you should have assembled all the paperwork required to keep you compliant with the IRS and other federal and state agencies.

A New Number

As a one-person company, you’ve been using your Social Security number as your tax ID. You’re an employer now, so you’ll need an Employer Identification Number (EIN). You can apply for one here.

The IRS’s EIN Assistant walks you through the process of applying for an Employer Identification Number (EIN).

Once you’ve completed the steps in the IRS’s EIN Assistant, you’ll receive your EIN right away, and can start using it to open a business bank account, apply for a business license, etc.

You’ll also need an EIN before you start paying your employee. It’s required on the  Form W-4. If you’ve ever worked for a business yourself, you’ve probably filled out this form. As an employer now, you should provide one to your new hire on the first day. When it’s completed, it will help you determine how much federal income tax to withhold every payday. If you’re not bringing in a full-time employee but, rather, an independent contractor, you won’t be responsible for withholding and paying income taxes for that individual. You’ll need to supply him or her with a Form W-9.

Note: Payroll processing is probably the most complex element of small business accounting. If you don’t have any experience with it, you’ll probably want to use an online payroll application. After you’re set up on one of these websites, you enter the hours worked every pay period. The site calculates tax withholding and payroll taxes due, then prints or direct deposits paychecks. Let us know if you want some guidance on this.

Don’t forget about state taxes if your state requires them, and any local obligations. The IRS maintains a page with links to each state’s website. You can get information about doing business in your geographical area, which includes taxation requirements.

More Forms

You also have to be in contact with your state to report a new hire (same goes if you ever re-hire someone). The Small Business Administration (SBA) can be helpful here, as it is in many other aspects of managing a small business. The organization maintains a list of links to state entities here.

All employees are required to fill out a Form I-9 on the first day of a new job.

New employees must also prove that they’re legally eligible to work in the United States. To do this, they complete a Form I-9 from the Department of Homeland Security. As their employer, you’re charged with verifying that the information provided is accurate by looking at one or a combination of documents (U.S. Passport, driver’s license and birth certificate, etc.). By signing this form, you’re stating that you’ve done that.

You can also use the U.S. government’s E-Verify online tool to confirm eligibility.

A Helping Hand

The Department of Labor has a great website for new employers. The FirstStep Employment Law Advisor helps employers understand what DOL federal employment laws apply to them and what recordkeeping they they’re required to do.

Please consider us a resource, too, as you take on a new employee. Preparing for a complex new set of tax obligations will be a challenge. We’d like to see you get everything right from the start.

Working with Checks in QuickBooks

Working with Checks in QuickBooks

Online banking may get all the headlines, but a lot of small businesses still prefer paper checks. QuickBooks can accommodate them.

“I don’t write checks anymore,” you hear a lot of people say these days. Debit cards, smartphone payment apps, and online banking have replaced the old paper checkbook for a lot of consumers.

That’s fine if you’re at Starbucks or the grocery store, but many small businesses still prefer to issue paper checks to pay bills, cover expenses, and make product and service purchases. QuickBooks provides tools that help you create, print, and track checks.

But you don’t just head to the Write Checks window every time something needs to be paid. There are numerous times when you would record a payment in a different area of the program. For example, if you’ve already created a bill in Enter Bills, you’d go to the Pay Bills screen to dispatch a check.

 

Once you’ve recorded a bill in Enter Bills, you need to visit the Pay Bills screen to dispatch a check. The image above shows the bottom of that screen.

Other examples here include:

  • Issuing paychecks (click the Pay Employees icon),
  • Submitting payroll taxes and liabilities (Pay Liabilities icon), and
  • Paying sales taxes (Manage sales tax icon).

Simple Steps

Let’s say you asked an employee to go to an office supply store to pick up some copy paper because you ran short before your normal shipment came in. If you knew the exact amount it would cost, you could write a check directly to the shop. But the employee agrees to pay for it and be reimbursed.

Click the Write Checks icon on the home page. If the BANK ACCOUNT that’s showing isn’t the correct one, click the arrow to the right of that field and select the right one. Unless you’ve written a check to that employee before, he won’t be in the Vendor list that opens when you click the arrow to the right of PAY TO THE ORDER OF. Enter his name in that field.

The Name Not Found window opens. If this was a new vendor that you would be working with again, you’d click Set Up and follow the instructions in the step-by-step wizard that opened. Since this isn’t the case, click Quick Add. In the window that opens, click the button next to Vendor.

Note: If you’re using a payroll application, you already have an employee record for that individual, which would have filled in automatically when you started typing the name. Since this is a Non-Payroll Transaction, it won’t get mixed up with his payroll records as long as you assign the correct account.

 

If you don’t want to create an entire record for the payee of a check, you can just click Quick Add.

QuickBooks will then return you to the check-writing screen, where you can verify the check number and date, and enter the amount. Fill in the MEMO field so you’ll remember the reason for the payment.

At the bottom of the screen, you’ll see a tabbed register. The Expenses tab should be highlighted and the amount of your check entered. Click the down arrow in the field under ACCOUNT to open the list, and select Office Supplies. The AMOUNT should fill in automatically. Not sure which account to select, and what the remaining three columns mean? Ask us.

Note: You would only enter the expense under the Items tab if you were buying inventory items or paying job-related costs.

 

Warning: If you’re planning to print the check, be sure to check the Print Later box in the horizontal toolbar at the top of the screen.

When you’re finished, save the transaction. Since you want to pay the employee right away, click the Print Checks icon and click in the field in front of the correct check to select it, then click OK.

Easy, But Tricky

QuickBooks makes the mechanics of writing checks easy. Simple as it is, though, a lot can go wrong if you, for example:

  • Issue a check from the wrong screen,
  • Classify a check incorrectly, or,
  • Skip a step.

We encourage you to set up a learning session with us if you’re new to check-writing in QuickBooks or are confused about any of its attributes. We’ll be happy to help ensure that your accounts payable activities will result in accurate record keeping.

Are You Protecting Yourself from Tax Identity Theft?

Are You Protecting Yourself from Tax Identity Theft?

The IRS has thwarted some identity theft attempts, but thieves are still stealing billions of dollars every year from taxpayers.

 Another annual income tax deadline has come and gone. Maybe you had to pay in, but perhaps you were owed a refund. If the latter is true, did you receive it?

A lot of taxpayers didn’t, because hackers swooped in and stole their sensitive tax-related information. Tax identity theft is a serious problem, despite the IRS’s efforts to stop it.

But there are steps you can take to keep from being a victim, some of which are simply a matter of common sense.  For example, consider the security of any wireless network you use when you’re working on your taxes. Don’t ever do so on a public network, and make sure your home or office wireless is password protected.

Offline Risks                 

You don’t have to be online to be at risk for tax identity theft. Hackers can grab your personal information in other ways. For example, do you ever carry your tax-related papers back and forth to work or some other location? Know where they are at all times; don’t ever leave them laying around where someone can copy your Social Security number and other details. Always be aware of your surroundings. If there are other people around when you’re working on your taxes—if you’re in a coffee shop or library, for example—make sure no one is reading over your shoulder.

Phone calls can be risky. A good rule of thumb is never provide someone who calls you with any sensitive personal data – unless you can verify it was a call you were expecting, like one from your bank or a medical office. When you place a call to a legitimate number, it’s generally okay.

Other Traps

You’d think that a call from the IRS would be safe. In reality, the IRS doesn’t ask for personal information over the phone. They send letters through the U.S. Mail. If you ever get a phone call from someone who claims to be from the agency and is demanding some sort of payment immediately, hang up. This is a popular phone scam. You can always contact the IRS directly to see if there is some sort of issue.

Don’t make a practice of carrying your Social Security card with you. Keep it in a safe place unless you absolutely need it away from home for some reason. Also:

  • File your return early to keep a hacker from getting in line for your refund in front of you.
  • Reduce your refund by adjusting your withholdings at work. It’s nice to get that big payment after you file, but couldn’t you use that money throughout the year?
  • Request direct deposit of your refund. That way, no one can steal your check out of your mailbox or somehow re-route a paper payment.

Online Thieves

Be especially careful if you’re preparing your taxes on a website. Before you even begin, investigate the publisher’s security protocols to ensure that your very sensitive tax-related data will be treated with great care. Also, update any applications that will be involved, including your browser and antivirus/anti-malware tools.

The IRS will never send you an email out of the blue asking you to click a link or download an attachment or fill in fields to update personal information. In fact, it’s a good idea to avoid taking those actions anytime unless you’re expecting an email and can verify the sender’s address.

Finally, use a very strong, unique password, one you don’t use anywhere else. You’re probably tired of hearing that piece of advice, but it’s absolutely critical when you’re working with a tax preparation application.

Take Action Quickly

It’s possible to get stung by a tax identity thief even if you’re being careful. If it happens to you, you’ll need to complete and submit IRS Form 14039, Identity Theft Affidavit, and watch for responses from the agency. Contact your credit bureaus and financial institutions to apprise them of the situation. Tax identity thieves sometimes try to open new credit cards, for example. You should also file a report with the FTC.

 

Recovering from tax identity theft isn’t a quick process nor an easy one. If you have questions about it or simply want to talk to us about your year-round tax planning and preparation process, be sure to contact us.

How to Keep Your QuickBooks Data Safe

How to Keep Your QuickBooks Data Safe

You work hard to make sure your QuickBooks data is accurate. Make sure it’s safe, too.

Your QuickBooks company file contains some of the most sensitive information on your computer. You may have customers’ credit card numbers and employees’ Social Security numbers. An intruder who captured all that data could create tremendous problems for you and a lot of other people.

That’s probably the worst-case scenario. But other situations could also spell disaster for your business, which  involve losing your company data through fraud, hacking, or simple technical failures.

We can’t overstate the vital importance of protecting your QuickBooks company file, especially your customer and payroll information. Whether someone steals it or it’s inaccessible for another reason, it’s gone. Keeping your business going after such a loss would be very difficult – maybe even impossible.

Here’s what we suggest to prevent that.

Internal Safeguards

No business owner wants to believe that his or her employees could use their QuickBooks access to commit fraud. But it happens. Your company file contains credit card and checking account data that could be used for nefarious purposes. As we discussed last spring, you can restrict user access to specific areas  and actions of QuickBooks.

 

You can limit your employees who have QuickBooks access to certain areas and activities.

 

To get started, open the Company menu and select Set Up Users and Passwords | Set Up Users. The User List window opens. It should have at least one entry there, for you (Admin). Click Add User and enter the employee’s name and password in the next window that opens, then click Next.

Tip: Your QuickBooks license limits you to a specified number of users. If you’re not sure how many you’re allowed, click F2 to open the Product Information page. The number of user licenses you’ve paid for appears in the upper left.

On the next page of this wizard, click the button in front of Selected Areas of QuickBooks. The following screens will let you define that employee’s access permissions in areas like Sales and Accounts Receivable, Inventory, and Payroll and Employees. When you’ve clicked through every screen and reviewed the summary displayed, click Finish. Your user will now be able to sign in and access the areas you specified.

You can—and should—take numerous other steps to keep your QuickBooks data safe. If your company is big enough to have a dedicated IT expert, he or she will handle most of this. But there’s a lot you can do on your own to prevent data loss and theft.

Keep Your Operating System and Applications Updated

Don’t ignore this dialog box.

 

Software companies’ occasional updates offer more than just adding new features and fixing bugs. They sometimes refresh your software to ensure greater security based on new threats. Don’t forget about those all-important antivirus and anti-malware applications, as well as QuickBooks itself.

Keep Your Networks Safe

Just as a cold virus spreads around your office, so, too, can unwanted intrusions like computer viruses. Don’t allow an electronic epidemic to get started; take steps ahead of time to prevent it:

  • Discourage employees from excessive web browsing. This can be a hard rule to enforce, as some employees probably need internet access for research, timecard entry, and other work-related tasks. Create a firm policy legislating what workers can and can’t do on company-issued equipment (including tablets and smartphones) or any personal devices that use your wireless network.
  • Ask employees to refrain from using public networks on work equipment. Enforce the rules vigorously, and make compliance an element of performance evaluations.
  • Minimize app installations on business smartphones. Employees should ask for approval. Viruses and malware get in that way, as well as through some websites and email attachments.
  • Use monitoring software. If you can’t afford to pay for “managed IT” (a la carte, third-party IT services), install an application that alerts you to problems.

Use Common Sense

You can fight data loss and theft by being cautious. Be diligent about backups, and if you create them on a local, portable device, don’t leave them in the office. Cloud-based solutions are better. Shred papers that have sensitive information on them. Log out of QuickBooks when you’re not using it or when you leave your office. Be aware of who may be around you, looking over your shoulder.

We take data security very seriously in our own office, and we strongly encourage you to do the same. Contact us if you’re at all concerned with your own data safety, and we’ll come up with a plan together.

Paying Estimated Taxes? When You Should

It’s not just the self-employed who must submit estimated taxes. IRS obligations are pay-as-you-go.

Much as we may grumble about them, estimated taxes and payroll withholding are good things. Imagine preparing your taxes in April having not paid in anything through the 12-month tax period. Chances are, a large percentage of taxpayers would be filing extensions (which doesn’t get you off the hook for paying by the April deadline: You’re still expected to submit an estimate of the tax due).

If you’re a salaried or hourly employee of a company, it’s up to your employer to collect and submit an estimate of your income tax obligation every pay period, based on the withholding information you provided on your W-4.

The number of allowances you claim affects how much money is taken from each paycheck for taxes. If an insufficient amount is withheld, you may need to pay estimated taxes to avoid penalties.

But if you’re a freelancer or contractor who has no money withheld, the burden is on you. The IRS expects you to do the same thing an employer would: periodically (every three months) make a payment that approximates what you would owe for that quarter. Then, like everyone else, you’ll include that information when you prepare your income taxes, at which time you’ll either get a refund or have to pay in.

Warning: We’ll tell you up front: Calculating estimated taxes is difficult, and the IRS rules and exceptions are complex. If you’ve never gone through this process before, or if your financial situation is changing in 2017, we recommend you gather up your income and expenses, and let us help you with this.

Everyone Is Subject

What this means is that the IRS expects all taxpayers to keep up with their taxes throughout the year. If you’re not having enough taken out of your paycheck, you should be submitting estimated taxes. You’ll avoid paying penalties, and you probably won’t have to file an extension.

Even if your withholding is working well for you, there may be times when you have extra money coming in because of things like alimony, interest and dividends, and prizes. You’ll need to factor this into your income. If you’re a sole proprietor, partner, or S corporation shareholder, and you believe you will owe $1,000 or more in taxes for the 2017 tax year, you’re expected to make quarterly payments. For corporations, the cutoff amount is $500.

Note: The IRS has different requirements for farmers, fishermen, certain household employers, and some high-income taxpayers.

Unless you’re paying electronically, you’ll need to visit this IRS page to print your estimated tax vouchers.

A Complex Calculation

Unfortunately, there’s no magic formula for calculating the estimated taxes you should pay every quarter. That’s why they call them “estimated.” And changes to the tax code aren’t finalized by Congress until the end of the year, by which time you should have made three payments (April 18, June 15, and September 15, 2017; your final quarterly payment is due January 16, 2018).

You can use the worksheet that the IRS supplies (you’ll find payment vouchers here, too). If you’re using accounting software or a website, it’ll be much easier to assemble the numbers. (And if you’re still doing your accounting manually, we can help get you set up with a solution that works for you.) If your financial situation hasn’t changed much since the previous year, you could use your most recent return as a model.

The IRS offers multiple ways to make your quarterly estimated payments electronically. In fact, the agency encourages it.

Don’t Forget State

Do you live in a state that requires you to pay income taxes? If so, you’ll need to check with your state tax agency to see how to handle state estimated taxes. The Small Business Administration (SBA) maintains an online directory that you can consult to locate the appropriate website.

There’s no reason to add penalties to your tax bill when paying estimated taxes can help you avoid that. We’ll be happy to consult with you so you u

Are You Memorizing Transactions? Should You Be?

You know that QuickBooks saves a lot of time. But have you explored how it does so by memorizing transactions?

Your accounting work involves a lot of repetition. You send invoices. Pay bills. Create purchase orders. Generate payroll checks and submit payroll taxes.

Some of the time, you only fill out those transaction forms once. You might be doing a one-time purchase, like paying for some new office furniture. Other times, though, you’re paying or charging the same companies or individuals on a regular basis.

QuickBooks contains a shortcut to those recurring tasks, called Memorized Transactions. You can save the details that remain the same every time, and use that template every time the bill or invoice is due, which can save a lot of time and improve accuracy. Here’s how it works.

Making Copies

To memorize a transaction, you first need to create a model for it. Let’s say you have a monthly bill for $450 that’s paid to Bruce’s Office Machines. You’d click Enter Bills on the home page or open the Vendors menu and select Enter Bills. Fill in the blanks and select from drop-down lists to create the bill. Then click Memorize in the horizontal toolbar at the top of the form.  This window will open.

Before you can Memorize a transaction, you first have to create a model (template) for it.

The vendor’s name will already be filled in on the Memorize Transaction screen. Look directly below that. There are three ways that QuickBooks can handle these Memorized Transactions when one of their due dates is approaching:

  • Add to my Reminders List. If you click the button in front of this option, the current transaction will appear on your Reminders List every time it’s due. You might request this for transactions that will change some every time they’re processed, like a utility bill that’s always expected on the same day, but which has a different amount every month.
  • Do Not Remind Me. Obviously, QuickBooks will not post a reminder if you click this button. This is best used for transactions that don’t recur on a regular basis. Maybe you have a snow-shoveling service that you pay only when there’s a storm. So the date is always different, but everything else is the same.
  • Automate Transaction Entry. Be very careful with this one. It’s reserved for transactions that are identical except for the issue date. They don’t need your approval – they’re just created and dispatched.

Click the down arrow in the field to the right of How Often and select the correct interval. Then click the calendar icon to pick a date for the next occurrence. If you have selected Automate Transaction Entry, the grayed-out lines below Next Date not shown here) contain fields for Number Remaining and Days in Advance to Enter.

How Does QuickBooks Know?

Obviously, you’ll want advance warning of transactions that will require processing. QuickBooks lets you specify how many days’ notice you want for each type. Open the Edit menu and select Preferences. Click Reminders in the left vertical pane, then the Company Preferences tab. You can tell QuickBooks whether you want to see a summary in each category or a list, or no Reminder. Then you can enter the number of days’ warning you want.

QuickBooks lets you specify the content and timing of your Reminders.

Working with Memorized Transactions

Once you’ve created some Memorized Transactions, you will undoubtedly need to review them at some point. QuickBooks makes this happen. Open the Lists menu and select Memorized Transaction List to see all the templates for recurring bills, invoices, etc., that you’ve defined. Right-click on one you want to work with, and this menu appears:

The Memorized Transaction List with the right-click window open

You have several options here. If your list is so long that it fills multiple screens, you can Find the transaction you’re looking for. If you’ve created multiple related transactions, you can save them as a New Group. You can also Edit, Delete, and Enter Memorized Transactions.

Anytime you’re letting QuickBooks do something on its own, it’s critical that you thoroughly understand the mechanics of setting the process up. We’d be happy to go over the whole topic of Memorized Transactions with you, or any other aspect of QuickBooks operations.

 

When a Hobby Becomes a Business

A few dollars here, a few dollars there. What do you do when the money from a hobby starts to add up?

Maybe you didn’t consider it a real business when you first started working on friends’ computers or building birdhouses or designing logos and other graphics for people. At first, you just charged for materials. But eventually, you started charging more for your time, and then you realized that you were making a profit from your work.

That’s when the Internal Revenue Service gets interested. If you’ve turned a profit for three of the last five years (including the current one), the IRS considers your hobby to be a business, complete with the obligation to pay income taxes.

The good news is, of course, that you can start writing off some expenses. And there’s something to be said for building something from nothing on your own. But you need to consider whether it’s time to formalize your venture by filing a Schedule C.

When it’s time to stop calling it a hobby and call it a business, you’ll be filing a Schedule C with your Form 1040.

9 Questions

Some IRS rules are absolute when it comes to reporting your income and expenses for tax purposes. The numbers on your W-2s and 1099s are the numbers you’ll enter on your tax forms, for example. And your mortgage interest is your mortgage interest.

There’s a little more gray area in determining the difference between being a hobby or a business in the eyes of the IRS. If you think you’re a business and you’re happily doing what you’re doing to make a profit, you’re a business.

Maybe, though, you’d rather your efforts remained a hobby. There’s no absolute, cut-and-dried test to determine your status. But there are nine issues that the IRS would like you to consider. The agency wants you to “…take into account all facts and circumstances with respect to the activity. No one factor alone is decisive.”

Here, then, is what you’ll need to ask yourself.

  • Whether you’re carving little wooden figures, creating your own jewelry, or writing online content for people, are you doing it in a “businesslike manner?”
  • Think of the time and effort you put into your work. Are they enough that it seems you’re clearly trying to make your venture profitable?
  • Do you need the money you’re making? Does it represent at least a part of your livelihood?
  • What about the losses you’ve taken? Are they caused by “circumstances beyond your control?” Or do you consider them normal for a fledgling small business?
  • Have you ever changed the way you do things to turn a higher profit?
  • Are you going it alone, or are people advising you? Do you—or they—know enough about what’s required to turn your hobby into a successful business?
  • Did you make a profit in previous years from doing the same activity?
  • Do you make a profit some years? How much?
  • Are you anticipating making a profit in future years from the “appreciation of the assets used in the activity?”

Claiming Expenses

You’ll claim business expenses on the Schedule C.

The IRS does have rules about what you may and may not claim on the Schedule C as business expenses. You’ll learn all about them the first time you file taxes as a business. The agency’s general rule of thumb is that you can deduct “ordinary and necessary expenses” required by the work that you do. Other words it uses to define the allowable expenses are:

  • Common
  • Accepted, and,

Here’s where you may need our help. You can, of course, call us if you want to talk about whether you are indeed a business. You may also want to explore your options for your business structure. Many one-person ventures are sole proprietors, but there are alternatives.

Determining what you can and cannot claim as legitimate business expenses may be challenging for you the first time or two around. We can help you in three ways here. First, we’ll get you set up with good cloud-based applications or mobile apps that can help you with your ongoing record-keeping. Attempting to run a business on paper is very difficult, and things can slip through the cracks.

We’re also available to work with you on your income tax return. Finally, once we’ve learned about your business, we can get you started on a year-round tax planning strategy. No one likes surprises at tax filing time, and we’d be happy to help you avoid them.

Setting Up Users in QuickBooks

If you plan to have multiple employees using QuickBooks, you can limit their access to specific areas.

Controlling access to your QuickBooks company file is easy when you’re a one-person accounting department. You simply use one password to protect your data.

But when you add new employees to the mix, do you want them to have access to absolutely everything in QuickBooks? Probably not. You have confidence in your employees or you wouldn’t have hired them. But this isn’t solely a matter of trust. It’s just good business practice to restrict individuals to specific areas and responsibilities, no matter what the application.

That’s why QuickBooks has built-in tools to help you limit activity. Here’s how it works.

Identifying Users

To get started, open the Company menu and scroll down the list to highlight Set Up User Names and Passwords. On the slide-out menu, select Set Up Users. The User List window will open, and you should see your own entry as Admin. Click Add User.

To give an employee access to QuickBooks, enter a User Name for him or her here, then a password.

 

The Set up user password and access window will open. Fill in those fields and check the box in front of Add this user to my QuickBooks license. This will not be an option if you already have five users, since that’s the maximum number allowed by QuickBooks Pro and Premier. To buy more, open the Help menu and select Manage My License, then Buy Additional User License.

Tip: If you’re not sure how many user licenses you’ve purchased, hit your F2 key and look in the upper left corner. If you’ve maxed out and need more licenses, talk to us about upgrading to QuickBooks Enterprise Solutions.

Click Next. In the window that opens, you’ll define the access level for your new user. Your options here are:

  • All areas of QuickBooks,
  • Selected areas of QuickBooks, or,
  • External accountant (you can grant us access to all areas of the software except for those that contain sensitive customer data, like credit card numbers).

Click the button in front of the second option, then Next.

You can specify the access rights for individual employees in numerous areas.

 

The image above shows the first screen of 10 that display the levels of access available in many individual areas of QuickBooks. Be sure to read the whole page carefully before assigning rights. Here, for example, you’re not just allowing the employee to enter sales and A/R transactions. You’re also deciding whether to grant him or her permission to view the Customer Center and A/R reports. As you can see, your options are No Access, Full Access, and Selective Access (three levels there). Check the box below this list if you want the employee to be able to View complete customer credit card numbers.

When you’re finished there, click Next to specify your similar preferences for Purchases and Accounts Receivable, Checking and Credit Cards, Inventory, Time Tracking, and Payroll and Employees. The next two screens contain more complex concepts, but you’ll follow the same process to express your wishes. They are:

  • Sensitive Accounting Activities, like funds transfers, general journal entries, and online banking tasks
  • Sensitive Financial Reporting, which allows access to all QuickBooks reports. The option you choose here overrides all other reporting restrictions that you’ve specified for the employee.

Finally, you’ll tell QuickBooks whether this person can change or delete transactions in designated areas, and whether he or she can do so to transactions that were recorded before the closing date (if this applies). The last screen displays a summary of the access and activity rights you’ve given the employee. Check them carefully, and if they’re correct, click Finish.

Housekeeping Options

 

The User List window

 

QuickBooks then takes you back to the User List window, where you’ll see the employee’s name displayed. If you want to Add, Edit, Delete, or View a user, make sure the correct name is highlighted and click the button for the desired action.

If you’re just now looking to add your first employee to QuickBooks or if you’re starting to outgrow the five-user limit, give us a call. There are more issues to consider when you take on multi-user access. We’d be happy to discuss them with you.

Are Your Social Security Payments Taxable?

They may be. The IRS’s rules for taxing Social Security benefits could require some studying on your part.

If you’ve received Social Security benefits for more than a year, you probably already know the answer to this question. But if you started receiving those government-issued checks or direct deposits in 2016, now’s the time to find out.

As you know, many IRS rules are absolutely cut-and-dried. But there are many others with exceptions, and this is one of them. Numerous factors are involved in determining whether your Social Security benefits are taxable.

Here’s some of what the IRS considers. (To get the whole picture and find out how these regulations apply to you, contact us.)

This worksheet displays the formula you can use to determine whether your Social Security Benefits may be taxable. It doesn’t tell the whole story, though. You may owe tax on only part of your payments.

 

By now, you should have received a Form SSA-1099, the Social Security Benefit Statement. Using the information reported there, you can use the IRS formula that helps determine whether your benefits may be taxable (it’s possible that they won’t be). The worksheet above illustrates this.

If it looks like your benefits are taxable, you’ll have to determine how much of your distributions are affected. The IRS looks at the combination of your Social Security benefits and your other income. The higher that number is, the more likely it is that you’ll have to pay taxes on a larger percentage of your benefits.

Complex Calculations

In most cases, the maximum taxable portion of your Social Security benefit distributions is 50 percent. You could, though, be taxed on up to 85 percent in one of two scenarios:

  • You add one half of your benefits to the total of all your other income and come up with more than $34,000 ($44,000 if married filing jointly).
  • Your return will report that your status will be married filing separately and you lived with your spouse for any length of time during the year.

Now comes the tricky part: calculating exactly what percentage of your Social Security benefits is taxable. Your 1040 or 1040A instructions should contain a very complex worksheet that can help you. But this, like any other element of your income tax return, must be absolutely correct, or you’ll be receiving post-filing correspondence from the IRS.

It’s no small task to do the calculations and reporting required to find out what—if any—percentage of your Social Security benefits are taxable.

There are many exceptions to the rules and formulas we’ve discussed here. And you must fully understand them to come up with the right answer. This will involve poring over IRS instructions that may be difficult for you to decipher.

Start Now

If you know that you’ll start receiving Social Security benefits in 2017, it would be a good idea to start thinking soon about how this will affect your overall income tax obligation. We always advise year-round tax planning. Such an approach not only helps you avoid unpleasant surprises at filing time – it may also help you take action before the end of the year to minimize what you owe. We’d be happy to meet with you and get you started on better, smarter preparation for taxes.

Establishing Preferences in QuickBooks

Before you start entering data, make sure QuickBooks is set up appropriately for your company.

QuickBooks was designed to serve the needs of millions of small businesses. To do that, it had to include the tools and processes suitable for a wide variety of companies. But Intuit recognized that every organization is unique, so your copy of QuickBooks can be customized in ways that make it work best for you.

You could just dive in and start adding records and transactions. But we recommend you do some setup first. If you don’t, you may run into some issues later, such as finding that some features you need haven’t been turned on, for example, or that QuickBooks is simply not doing some things the way you do. The good news is that you can change many of these.

Getting There

QuickBooks refers to these options as Preferences. You’ll find them by opening the Edit menu and selecting Preferences.

To start customizing QuickBooks so it works best for you, open the Edit menu and choose Preferences.

As you can see, the left vertical pane contains a list of Preference types. Click on any of these to change the option screens to the right. Always click the tabs labeled My Preferences and Company Preferences to make sure you see everything that’s displayed for each type (sometimes one will have no choices).

Setting Up Reminders

Let’s look closely at one set of Preferences: Reminders. It’s very important that you visit these screens when you begin using QuickBooks. Depending on how big your company is and how complex your accounting processes are, there may be things you need to do every day, like pay bills and follow up on overdue invoices. It would be nearly impossible for you to do everything on time if you didn’t ask QuickBooks to keep track of critical dates and remind you of them.

Click Reminders in the left vertical tab. You’ll see one option under My Preferences. Do you want QuickBooks to show Reminders List when opening a Company file? If so—and this is a good idea—click the box in front of that line if there isn’t a checkmark there already.

Then click Company Preferences. Here’s where you’ll tell QuickBooks whether you want to see summaries or lists for each reminder, or neither. You can also specify how much advance notice you want for specific tasks by entering a number of days. QuickBooks comes with default settings, but you can easily change these.

QuickBooks comes with default settings for Reminders, but you can enter your own Preferences here.

As you can see, it’s easy to specify your Company Preferences. Click the appropriate button under Show Summary, Show List, or Don’t Remind Me. If you’ve requested a reminder, delete any number that appears in the box in front of days before or days after and then enter your own.

Critical Areas

We recommend that you look through all of QuickBooks’ Preferences and change any that don’t fit your company. Some simply have to do with the way QuickBooks displays information and how it functions, but others have direct impact on your accounting work. As always, we’re available if you have questions here.

There are many that you will probably want to visit. They may have numerous options, but here’s some of what you can establish in each:

  • Accounting. Do you want to use account numbers and classes?
  • Checking. Which accounts should QuickBooks automatically use for tasks like Open the Pay Bills, Open the Make Deposits, and Open the Create Paychecks?
  • Finance Charge. Will you be assessing finance charges on late payments from customers? What’s the interest rate, minimum finance charge, and grace period?
  • Items & Inventory. Do you want inventory and purchase orders to be active?
  • Multiple Currencies. Does your company do business using other currencies?
  • Payments. Can customers pay you online? What methods can they use?
  • Payroll & Employees. Will you be processing payroll using QuickBooks?
  • Sales & Customers. Do you want to use sales orders? How should QuickBooks handle invoices when there are time and costs that need to be added?

You can see why it’s important to study QuickBooks’ Preferences early on. It’ll help you avoid unnecessary roadblocks and ensure that your company’s needs are reflected well in the software.

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