Using apps with Xero or QBO for a best of breed solution-Unleashed

Virtually all the valid reasons preventing SMBs from making the move from desktop software (i.e. QuickBooks Desktop), to a cloud based solution are gone.  Over the past few years, SMB cloud based software such as QBO and Xero have improved the breadth and depth of “built-in” functionality, but the even more exciting has been the improvement of the add-ons that our now available.  By combining QBO or Xero with other best of breed apps, SMBs can achieve a depth and breadth of functionality that matches or exceeds what is available from a QB desktop solution.  Over the next few months we will discuss some of the apps that we recommend for SMBs that are looking to migrate to the cloud or looking to extend an existing cloud based solution.    

Inventory management has been the primary reason for many SMBs to stick with a local or hosted QB Desktop solution.  In fact, for many years, we were not able to recommend clients with inventory management requirements to move to a cloud based solution (unless they could afford NetSuite).  Finally, things have started to change.  Over the past few years both QBO and Xero have slowly added some basic inventory functionality.  The existing built-in functionality can be sufficient for some, but for SMBs with more robust inventory management requirements, an integrated add-on is the way to go.  The inventory management “app” that we often recommend (particularly for some of our food and beverage clients) is Unleashed.  Next week I will discuss some of the pros and cons of using Unleashed.  In the meantime, please visit our Unleashed page for more information and feel free to send me an email if you have any questions.

Christopher Hansell

The rush to prepare 1099s begins!

We expect January to be a very busy month for businesses that are required to file form 1099-MISC forms.   Government copies of Forms 1099-MISC (and related form 1096) containing nonemployee compensation (box 7) must be filed with the IRS by January 31, no longer February 28 (or March 31 for e-filers).

The new filing deadline for the government copy is very significant since there used to be an additional month or 2 for corrections to be made before government copies were filed.  We recommend that our clients target 1/15 as the date to issue forms to recipients.   We also recommend having your contractors confirm the information as soon as it is received, just in case a revision needs to be made.

Below are some due date and filing extensions for business entities

Due Dates for 2016 returns in parentheses

-Due Date: 2.5 Months (March 15 2017)
-Extension: 6 months (September 15, 2017)

S corporations
-Due Date: 2.5 Months (March 15, 2017)
-Extension: 6 months (September 15, 2017)

C corporations
-Due Date: 3.5 months (April 18 2017)
-Extension: Federal 5 months (September 15, 2017), CA 6 months (October 16, 2017)

C corporations (June 30 year-end)
-Due Date: Federal 2.5 months (September 15, 2017), CA 3.5 months (October 16, 2017)
-Extension: Federal 7 months (April 17, 2018), CA 6 months (April 17, 2018)

C corporations (Other than calendar or June 30 year-end)
-Due Date: 3.5 months
-Extension: 6 months

Fall tax tips

Summer vacation is over and the kids are back in school.  It’s time to take a breather, because before you know it Halloween, Thanksgiving, Hanukah and Christmas will be upon us.

This tiny lull in the action provides the perfect opportunity to review your tax situation for 2016 and get your stuff in order.  Because in the blink of an eye, it will be January and you will be scrambling to get these items together! If you review the following this fall, come tax time, you will be way ahead of the game.

Ensure the right amount is being withheld from your paycheck.

Changes in your income – a new job, the birth or adoption of a child, or receiving income without having any taxes withheld (i.e. rental or investment income) can result in the need to change your withholding.

Gather your receipts

Now is the time to ensure you have all the documentation for those tax deductible items that you don’t want to forget about!  Charitable donations, mileage logs, unreimbursed business expenses and property tax payments are all examples of things that can help reduce your taxable income.

Pull together summer camp expenses

If your child went to summer camp while you were working or looking for work, you may qualify for a tax credit.  While the cost of overnight camps does not qualify, any day camp or other sitter or daycare facility usually does. Depending on your income, your credit may be up to 35% of your qualifying expenses.  Make sure you have the receipts and tax identification numbers for these providers.

Take action to reduce your taxable income before year end

If you review your current situation and determine that you may still end up owing tax at the end of the year, you may be able to take steps towards reducing the liability.  Examples of actions you might want to consider include paying property tax installments early, selling off investments that will create a loss (can be used to offset investment income), accelerate a charitable donation you were planning on making early in the new year.     

By reviewing your tax situation well before the end of the year, not only can you ease that tax time headache by being organized before you start, you can take a proactive approach to reducing your tax bill.

Five Common Accounting Mistakes Made by New Companies

We have had the privilege of helping many new businesses get off the ground.  It is an exciting time for a new business owner, but can also be very stressful since there are many things to think about.  Unfortunately, keeping accounting/bookkeeping often takes a back seat to the other items.  We often get clients coming to us after they have been in business for months, only to find out they haven’t been maintaining adequate accounting records.  We get it, it is not a fun thing to deal with and it’s much easier to focus on the other items you are more comfortable with.  But putting accounting on the back burner will come back to haunt you.  Below are some of the more common mistakes we have seen.

No accounting system

Maintaining an accounting system is more than just tracking money in and money out in a spreadsheet.  It should also be used for tracking other information such as fixed assets and related depreciation, keeping track of which customers owe you money and how what are your liabilities are in respect to your various vendors and lenders.  Depending on the circumstances your business may be required to include a balance sheet as part of a business tax return.  That is usually overwhelming for the non-accountant. Fear not there are several online accounting packages that you can get started for minimal cost.  Be sure to have a qualified accountant assist you with the selection and set up to make sure you get started on the right foot.

Not establishing a separate bank account and credit card for the business

So you’ve decided to start your business, and you need to buy a few things.  You write a check from your personal bank account.  You take a client out for lunch and use your personal credit card.  You shove the receipts in your wallet.  When the statement comes, you’ll separate out the business from the personal, right?  This may work for a few months but six months down the line, your bank or credit card statement will be ten pages long and you won’t remember which transactions are personal and which transactions are related to the business.  You’ll be tearing your hair out (or your accountant will be).

Knowing when to have a payroll

If your business is a Corporation (including an “S” Corporation, or an LLC taxed as a corporation), you will need to setup a payroll in order to receive compensation.  A payroll entails withholding taxes, filing quarterly payroll tax returns, and giving yourself a W-2 at the end of the year.  Don’t start just taking money out and say to yourself “I’ll figure it all out later”. Also avoid the temptation to “pay” yourself as a contractor and just give yourself a 1099 at the end of the year.  Determine if your situation requires a payroll to be used for owner compensation.  If it does, then have one setup before you start taking money out of the company.  Payroll for a small company isn’t as daunting as it sounds – we provide a service to our clients that starts as low as $50 a month and you can pay the taxes and file the returns electronically as well as generate your year-end W-2s.  If you are operating as a sole proprietor, partnership or LLC (single member or partnership), you should not be on a payroll.  Under those circumstances you will use draws and/or guaranteed payments to take money out of the business.

Selling product before you understand sales tax rules

Simply put, sales tax can be a nightmare.  Right now there are nearly 10,000 sales tax jurisdictions in the United States. Different counties and cities charge different amounts.  There are many factors that determine if you are supposed to collect and remit sales tax, and those factors differ from state to state.  Before you start expanding your operations into other jurisdictions you should determine if you are required to register the business in those jurisdictions.

Not filing your income tax returns

There is a difference between not paying taxes and not fling a tax return.  The IRS imposes penalties for both so it is important to be aware of the due dates for your business and personal tax returns.  In the event that you are not going to be able to file on timely basis, you may still be able to avoid/minimize failure to file penalties by filing an extension to file.  Also be aware that if your business operates as a Partnership, LLC, or S Corporation, you will likely need to have the business returns prepared in advance of the deadline for filing personal returns.  If other partners, members or shareholders are involved, their personal tax returns are also dependent on having K1 data.  Needless to say it is important to have your income tax returns ready to file on a timely basis and the best way to facilitate that is by keeping your books and records up to date.

There are so many things to think about when starting a business, inevitably something is going to fall through the cracks.  Engaging a CPA sooner rather than later will almost always end up saving you time and money right from the start