The target: Buyers from other states who fail to pay a use tax on purchases made online or by phone. Vendors in these states are not responsible for collecting sales taxes unless they have a physical presence in the buyer’s state, so their state sales tax will not appear on the invoice. But the buyer is still responsible for reporting the purchase and paying the use tax to his/her local tax authority. Failure to do so can add interest and penalties to taxes owed.
Biggest mistake: assuming that not reporting such purchases eliminates the problem. States now monitor large out-of-state sales and may notify the buyer’s state, which can then track down the buyer. Also: Customs transmits declaration statement data to state tax agencies, enabling them to track overseas purchases.
Best bet: Pay the use tax on inter-state purchases. Amounts are not usually large—unless failure to pay results in interest and penalties.
But your state revenue department will be going after even the most honest, tax-paying businesses for more revenue by selecting you for a state sales and use tax audit.
It’s that time again to file sales tax. You have already made your payment online via a credit card and it’s time to enter the transaction into QuickBooks. You go to Vendors > Sales Tax > Pay Sales Tax, you select all the information to pay and realize that you don’t have the option to pay with a credit card. How can this be? You guessed it folks, you can’t! Even with the newly released 2010, it’s one thing they haven’t fixed. So how do you get around it? I made a video tutorial (Jing) to show you how…..
To view the larger, 1010 x 800 video, click on read more for the download link.
To avoid mispostings—and liability for another employee’s misdeeds, follow these simple steps:
Returned checks. When the bank notifies you that it is returning a customer’s check for NSF (not sufficient funds), debit the customer’s account immediately—even if you plan to redeposit the check the same day. For good internal controls, instruct your bank to address all returned checks to someone other than you—possibly the owner or a senior manager. This can protect you if an employee tries to use fictitious checks to cover temporary shortages.
Postdated checks. If a customer gives you postdated checks, treat them as a note receivable. In other words, debit it to Notes Receivable, not to Cash. On the date written on the check, deposit it to your firm’s account, debiting Cash and crediting Notes Receivable.
Change: The compression software that QuickBooks uses to back up and restore files has been upgraded in QuickBooks 2010 and is not compatible with earlier versions of QuickBooks.
Occasional Result: Accountants who find it necessary to open the backup copy (made as part of conversion of a company file to QuickBooks 2010) will discover problems restoring the backup from earlier versions. The error would appear as follows:
Solution: QuickBooks 2010 has a new menu item for just this occasion, to deal with the change in compression software between QuickBooks 2010 and earlier versions. Using this new menu item provides a backup copy that can be opened up by earlier versions of the software.
Problem: Employees try to increase their take-home pay by handing in a new W-4 with more withholding allowances or by claiming exempt from withholding.
Solution: Tell employees that you are not required to post the new W-4 until the first payroll period ending on or after the 30th day from the date the new W-4 was submitted (see IRS Circular E). This is the most time that the law allows.
Example: Joe is paid on the 15th and 30th of each month. On September 10, he gives you a new W-4. The September 10th withholding changes must be applied to his paycheck of October 15, the first payroll period following September 30.
To avoid major penalties, audit your own practices to ensure FLSA compliance, advises Shawn Smith, Next Level Consulting LLC, Harrison, NY. She cites four common problems:
1.Worker classification. You cannot avoid overtime pay simply by paying employees a salary and classifying them “exempt.” To avoid misclassification, know what jobs are exempt (regardless of whether they are salaried or paid by the hour), then review job descriptions and how each job is actually performed.
2.Docking pay. An exempt worker docked for a partial-day’s absence may lose his/her exempt status, costing you retroactive overtime pay, unless the docking is connected to an FMLA-related leave.
3.Voluntary or unauthorized work. Nonexempt employees must be paid for time worked, voluntary or not. Even if your policy requires that a manager approve paid overtime, your firm must still pay at least 1½ x the employee’s hourly rate for each hour worked over 40 hours in the workweek.
Working taxpayers may be eligible for the Making Work Pay tax credit, a significant tax provision of the American Recovery and Reinvestment Act of 2009. This tax credit means more take-home pay for millions of American workers. Here are five things the IRS wants every taxpayer to know about the Making Work Pay tax credit:
1. This credit — available for tax years 2009 and 2010 — equals 6.2 percent of a taxpayer’s earned income. The maximum credit for a married couple filing a joint return is $800 and $400 for other taxpayers. Most wage earners have been enjoying a boost in their paychecks from this credit since April.
2. Eligible self-employed taxpayers can also benefit from the credit by evaluating their expected income tax liability. If eligible, self-employed taxpayers can make the appropriate adjustments to the amounts of their upcoming estimated tax payments in September and January.
3. Taxpayers who fall into any of the following groups should review their tax withholding to ensure enough tax is being withheld. Those who should pay particular attention to their withholding include:
Although most people won’t be filing their tax returns for several months, the dog days of summer are actually a great time to start planning for the tax filing season by ensuring your records are organized. Whether you are an individual taxpayer or a business owner, you can avoid headaches at tax time with good records because they will help you remember transactions you made during the year.
Here are a few things the IRS wants you to know about record keeping.
Keeping well-organized records also ensures you can answer questions if your return is selected for examination or prepare a response if you are billed for additional tax. In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, you should keep any and all documents that may have an impact on your federal tax return.
Individual taxpayers should usually keep the following records supporting items on their tax returns for at least three years:
For example, suppose your firm makes an estimate of an asset’s life at time of purchase, then a new estimate several years later. How does the change affect annual depreciation expense? Here is the answer.
Example: On Jan. 1, 20X5, DryCo acquires for $40,000 a machine with an estimated useful life of 10 years and no residual value which will be depreciated under the straight-line method. On Jan. 1, 20X9, DryCo changes the machine’s estimated useful life to 12 years. What is depreciation expense on the machine for 20X9 and subsequent years?
To compute:
Original cost
$40,000
Accumulated depreciation through
12/31/X8 (40,000/10 years = 4,000 x 4*)
16,000
Undepreciated balance on 1/X9
$24,000
* Depreciation for the 4 prior years
On Dec. 31, 20X9, DryCi records the following entry:
Depreciation Expense
3,000*
Accumulated Depreciation
3,000
* 12 years (new estimated life) – 4 years already depreciated = 8 years to be depreciated
$24,000/8 yrs. = $3,000 new annual depreciation expense. Thus, depreciation expense for 20X9 and future years is $3,000 a year.
Major New Release Addresses Online Banking and Much More
Last week Intuit enabled Intuit® QuickBooks® 2009 Release 8 (QB09-R8) as an automatic update. Clients who have enabled automatic updates will be prompted to complete the update.
Note: This is a significant update covering many issues, but most importantly to some QuickBooks accounting professionals will be upgrades to online banking in two ways:
QB09-R8 provides users the ability to switch to the exact same online banking functionality (and register view) that was in QuickBooks 2008 or use the default approach to Online Banking in previous releases of QuickBooks 2009.
The default approach to Online Banking provides many new enhancements and restoration of previously missing functions.
Users can toggle between the two views without affecting data at this interface:
Edit > Preferences > Checking > Company Preferences
Users can toggle between the two views without affecting data at this interface:
