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5 Things You Need to Know About Sales Taxes in QuickBooks Online

August 20, 2020 by admin

Man and Women WorkingThe most important thing you need to know about sales tax is that administering it correctly can be challenging.

If you sold only one type of product to customers in one city, collecting and paying sales tax would be easy. But most businesses have a wider reach than that.

QuickBooks Online offers tools that allow you to set up sales tax rates and include sales tax on sales forms. Further, it calculates how much you must pay to state and local taxing agencies.

This is one of the most complicated areas in QuickBooks Online because you may have to deal with numerous taxing agencies. If you’re not already working with sales taxes, we strongly recommend you let us help you get everything set up correctly from the start. Taxing agencies can audit your recordkeeping and you want to make sure it is set up correctly.

That said, here are five things we think you should know.

QuickBooks Online calculates sales tax rates based on:

  • Where you sell. Every state is different. If your business is located in Florida and you sell to a customer in Minnesota, you’ll be charging any sales tax levied by the state of Minnesota and possibly the city and county and other taxing authorities – if you have a connection, a “nexus” in that state (a physical location, active salesperson, etc.).
  • What you sell.
  • To whom you sell. Some customers (like nonprofit organizations) do not have to pay sales tax. You’ll need to edit their customer records to reflect this in QBO. Open a customer record and click the Edit link in the upper right. Click the Tax info tab and make sure there’s no checkmark in the box that says This customer is taxable. The Default tax code will be grayed out, and you can enter Exemption details in that field.

QuickBooks tips

Customer records for exempt organizations should contain details for that exemption. You’ll need to see their exemption certificate or at least know its official number.

Intuit now offers a revamped version of QuickBooks Online’s sales tax features.

At some point, you’ll be asked if you want to switch to the new, more automated system. The actual mechanics of the process are simple, but you’ll be moving historical and in-process data to a new structure. If you have sales tax set up right now and your situation is at all complicated, you’re going to want our help with the transition.

This enhanced feature only supports accrual accounting.

You can combine individual tax rates.

If you are required to pay city, county, and state sales tax rates for a particular customer, for example, you can create a Combined tax rate that contains all of the individual components. The customer will only see the total on an invoice or sales receipt, but QuickBooks Online will track each one accordingly for payment and reporting purposes.

QuickBooks tips

You can combine sales tax rates in QuickBooks Online (image above from current Sales Tax Center in QuickBooks Online, not the enhanced one).

Product and service records should contain sales tax information.

This is another area that will require some research. Just as some services are subject to tax, some products are not (like groceries in Arizona). So, you’ll need to find out what the rules are for what you sell. You can find this information on the website of the state’s Department of Revenue (sometimes called the Department of Taxation).

Once you know, you can record that status in QuickBooks Online. Open a product record by going to Sales | Products and Services and clicking Edit in the Action column or create a new one by clicking New in the upper right. Scroll down to Sales tax category in the record. You can choose between Taxable – standard rate and Nontaxable.

There’s a third option here: special category. This gets complicated. We can help you determine whether it applies to you.

QuickBooks Online tracks the sales tax you owe.

You can see what you owe to each agency by running the Sales Tax Liability Report, and record payments when you’ve made them. Summary and detail versions of the Taxable Sales report are also available.

Once you get sales taxes set up in QuickBooks Online, it’s easy to add them to the relevant sales forms. Getting to that point, though, takes time, study, and careful attention to detail. If you’re getting ready to sell, or you’re already selling and struggling with sales taxes, let us know. We can schedule an initial consultation to see how we can be of assistance.

Filed Under: QuickBooks

5 Ways to Lower Your SUTA Tax Rate

July 21, 2020 by admin

Close up of female accountant or banker making calculationsAn employer’s SUTA tax rate is susceptible to fluctuation. If yours is escalating, contrary to popular belief, you actually might be able to reduce it! Check out these five strategies to curb your SUTA tax rate.

Because the State Unemployment Tax Act – or SUTA – tax is mandatory, you may think you have no control over your SUTA rate. But to some extent, you do. The first thing to remember is that each state sets its own criteria for state unemployment tax, and rates vary by employer.

Typically, new employers are assigned a standard “new employer” rate. Over time, they receive an “experience rating,” which can be higher or lower than the new employer rate. The experience rating mainly depends on how many former employees have drawn unemployment benefits on the employer’s account. The more benefits claimed on an employer’s account, the higher its SUTA tax rate. Other determinants may include whether the employer is in the construction industry and the employer’s payroll size.

You may be powerless against some of these influencers – such as your business’s age and industry — but there are other ways to lower your SUTA rate. Here are five tactics.

1. Hire only when needed

Letting employees go because you don’t need them anymore likely renders them eligible for unemployment benefits. If they file for unemployment benefits, your SUTA rate is likely to increase. So, make sure you truly need an employee before hiring him or her.

2. Help your employees succeed

Employees terminated for gross misconduct typically do not qualify for unemployment benefits. However, employees fired for poor performance – such as due to lack of skills – may be eligible. To reduce the likelihood of terminating employees for poor performance, give them the resources they need to succeed, including proper tools and training.

3. Use independent contractors

You can avoid unemployment claims by legally hiring independent contractors instead of employees. If you decide to take this route, ensure all mandatory requirements for independent contractor status are met, including the Internal Revenue Service’s “right-to-control” test and applicable state tests.

4. Contest dubious unemployment claims

Dubious unemployment claims may involve former employees providing the state workforce agency with false information to obtain benefits or filing a claim even though they were rightfully terminated for gross misconduct. Before you fight an unemployment claim, consult with an unemployment benefits expert to gauge the strength of your case. Also, make sure you have supporting documents to back up your version of events.

5. Make voluntary contributions

Many states allow employers with an experience rating to voluntarily make a “buydown” payment, which cancels all or part of the benefits charged to their account, thereby reducing their SUTA tax rate.

More tips

Consider alternatives to layoffs, such as reducing employees’ work hours via your state’s work-sharing program.

Offer departing employees a solid severance package as well as outplacement services to help them quickly find a job. This way, they will be less inclined to rely on unemployment benefits.

Keep an eye on your SUTA tax rate. If it’s spiking for unknown reasons, contact your state’s workforce agency for an explanation.

Want to learn more about our small business accounting services? Give Jeff Martin a call at 912-634-7722 today to schedule your free initial consultation.

Filed Under: Business Tax Articles

Social Security: Note the Key Changes for 2020

June 17, 2020 by admin

M. Jeffery Martin, CPA, LLCThe Social Security Administration has released new numbers for those paying Social Security and those collecting it. Check out the new maximum taxable earnings amount as well as COLA and other key adjustments.

Every year, the Social Security Administration takes a fresh look at its numbers and typically makes adjustments. Here are the basics for 2020 — what has changed, and what hasn’t.

First, the basic percentages have not changed:

  • Employees and employers continue to pay 7.65% each, with the self-employed paying both halves.
  • The Medicare portion remains 1.45% on all earnings, with high earners continuing to pay an additional 0.9% in Medicare taxes.
  • The Social Security portion (OASDI) remains 6.20% on earnings up to the applicable taxable maximum amount — and that’s what’s changing:

Starting in 2020, the maximum taxable amount is $137,700, up from the 2019 maximum of $132,900. This actually affects relatively few workers; the Society for Human Resource Management notes in an article that only about 6% of employees earn more than the current taxable maximum.

Also changing is the retirement earnings test exempt amount. Those who have not yet reached normal retirement age but are collecting benefits will find the SSA withholding $1 in benefits for every $2 in earnings above a certain limit. That limit is $17,640 per year for 2019 and will be $18,240 for 2020. (See the SSA for additional information on how this works.)

Cost-of-living adjustments

Those collecting Social Security will see a slight increase in their checks: Social Security and Supplemental Security Income beneficiaries will receive a 1.6% COLA for 2020. This is based on the increase in the consumer price index from the third quarter of 2018 through the third quarter of 2019, according to the SSA.

A detailed fact sheet about the changes is available on the SSA site.

Filed Under: Business Tax Articles

Tax-Deductible Expenses: Are You Recording All of Them?

May 19, 2020 by admin

QuickBooks - M. Jeffrey Martin, CPA, LLCMake income tax preparation easier by tracking all the deductions you can take.

You’ve heard it said before: Tax planning should be a year-round process. It’s so true. Your life will be a lot easier early next year when all your tax forms start rolling in.

Forms like 1099s and W-2s do a lot of the tracking for you. You only need to transfer data over to your IRS tax forms and schedules. But what about the daily stuff, the expenses you incur as a part of your workday that no one else is documenting? There are a lot of tax-deductible costs that can really add up when it’s time to file.

The IRS has two criteria for evaluating the validity of business expenses. First, is it ordinary? Is it something that other companies in your trade or profession would commonly buy? Second, is it necessary? Is it “…helpful and appropriate?”

Warning: Some expenses that you think might be deductible are not. Obviously, you can’t claim the costs of personal items. The IRS specifies two other types of expenses that can’t be deducted: Capital Expenses and those used the calculate the Cost of Goods Sold. Questions? Ask us.

Pulling together all that numbers required for the IRS Schedule C can be challenging. Let us know if you have questions.

Here are some examples of expenses that you might not consider, but which should be recorded as they occur so you don’t forget about them come tax time.

Advertising and promotion

Some of these expenses are obvious. For example, you might report printing costs for brochures, ad space bought, and postage for mailers and other business correspondence. But there’s much more that fits into this category. Think about everything you do that helps promote your business, like expenses related to:

  • Business cards
  • Team sponsorships
  • Your website (including startup and maintenance fees)
  • Graphic design
  • Workshops/webinars

Insurance

Do you have any kind of business insurance, like liability or malpractice? Your premiums are deductible.

Car and truck expenses

Understandably, you can only deduct expenses for miles driven for business purposes. If you have a vehicle—either owned or leased—that you also use for personal driving part of the time, you’ll need to track those two separately.

There are two options for calculating business mileage: Actual Expenses and Standard Mileage. To calculate the latter, you’d multiple the number of business miles driven by 53.5 cents for tax year, then add tolls and parking fees. The Actual Expense method is more complicated; it involves many costs, and recognizes depreciation of the vehicle. Check with us if you’re planning to claim expenses for a car or truck, as there are additional rules governing this deduction.

Postage and office supplies

Yes, they’re deductible if you need them for your business.

Meals and entertainment

Familiarize yourself with the rules for this one. They’re complicated, and the IRS looks closely at such deductions.

Business use of your home

Ditto. There are all kinds of regulations, restrictions, and exceptions here, even if you use the simplified method that the IRS introduced a few years ago. Further, the home office deduction can be an audit red flag.

The rules are very specific and very rigid. For example, even if you use your home’s land line for business, you can’t deduct it. Add another line for business, and you can.

Professional and legal fees

If you pay an individual or firm for services provided to help you operate your business, those fees are often deductible. This includes lawyers, accountants, and tax preparers, of course, but as always, there are exceptions. You can’t usually, for example, deduct attorneys’ fees if you were getting legal help to buy business assets.

Dealing with Details

As you can see, there are many allowable business expenses that require meticulous recordkeeping. You can, of course, do this on paper or in a spreadsheet. There are cloud-based applications specifically designed for this purpose. If you’re interested in checking these out, let us know. We’re always available to help you plan for future tax filings.

Filed Under: QuickBooks

4 Areas to Consider When Transitioning Employees to Working From Home

April 15, 2020 by admin

M. Jeffery Martin, CPA, LLC - Individual TaxFor businesses that haven’t traditionally embraced remote employees, it may be difficult to get up to full speed with the current turn of events.  To make the inevitable transition less overwhelming, we assembled a handy checklist of actions to consider while adjusting to the new workplace reality.

Organization

  • Access your staff members and/or roles that are able to work remotely, those that can’t work remotely, and those where remote work may be possible with some modifications.
  • Conduct an employee survey to determine the availability of computers that can be used for working remotely, as well as availability to high-speed internet access.
  • Create company guidelines covering remote employees, including inappropriate use of company assets and security guidelines.
  • Develop and conduct work-at-home- training for using remote access, remote tools, and best practices.
  • Select a video-conferencing platform for services, such as Zoom, Cisco WebEx, or Go To Meeting.
  • Develop a communications plan to involve remote employees in the daily activities of the organization.

 Security

  • Create and implement a company security policy that applies to remote employees, including actions such as locking computers when not in use.
  • Implement two-factor authentication for highly-sensitive portals.
  • If needed, confirm all remote employees have access to and can use a business-grade VPN, and that you have enough licenses for all employees working remotely.

Staff

  • Institute a transparency policy with your staff and communicate frequently.
  • Check in on your staff, daily if possible, to confirm they are comfortable with working from home. Find and address any problems they may be experiencing.
  • Make certain each staff member has reliable voice communications, even if this results in adding a business-quality voice over IP service.
  • Don’t attempt to micro-manage your staff. Remember their working conditions at home won’t be ideal, and they will need to work out their own work patterns and schedules.
  • Create a phone number and email address where staff members can communicate their concerns about the firm, working at home, or even the status of COVID-19.

Infrastructure

  • Ensure that you have ample bandwidth coming in to your company to handle all of the new remote traffic.
  • Make sure you have backups of your services so your staff is able to keep working in the event extra traffic causes your primary service to go down.

You may need to adjust or expand this list to match the specific needs of your firm and the conditions affecting your organization.  Use this list to get you started and to help guide you through the process.

Want to learn more about our small business accounting services? Give Jeff Martin a call at 912-634-7722 today to schedule your free initial consultation.

Filed Under: Business Best Practices

The New Estate Tax Benefits, Uncertainty or Both

March 18, 2020 by admin

M. Jeffrey Martin, CPA, LLC - New Estate Tax BenefitsTongue-in-cheek conversations love to make jokes about death and taxes as being the two only certain things in life. Well ironically, on the surface anyway, the new, colloquially termed “death tax” flies in the face of this popular “accepted truism” – well, almost.

Stripping the latest Estate Tax Law (effective January 2018) down to its nuts and bolts, we see that any single taxpayer who calculates his or her assets to be under $11.2 million can cast all worries to the wind – at least for the next 8 years. Thinking a little wider, a married couple has a clear runway if their estate is valued under $22.4 million. After that, the terrain gets decidedly more uninviting, allowing the IRS to potentially grab a flat 40% of estate value above the restated threshold.

Let’s be clear, room under the newly raised tax barrier has been improved by some 100% versus where it was in 2017 (i.e. it was $5.4 million and $10.8 million for a single-payer and married couple, respectively), which in anyone’s language is no mean concession. It was a bumper move make no mistake, and possibly a first decisive step in the Trump Administration’s determination to eradicate death taxes altogether. However, this particular tax item has been around for donkey’s years and its stubborn reluctance to leave the stage forever, and in every way, is simply not happening.

Statistically speaking there is no doubt the case can be made for the new threshold (all but) killing death taxes. Last year, and for some time before that, 2 in every 100 tax-paying families (a reliable estimate) were caught up in the estate tax net. The 2018 proclamation whittles it down to 1 in every 1000.

When paradigm shifts like this hit the ranks of the rich, especially the uber-rich, there are invariably a number of curved balls being launched in different spots. One of these effects families now facing estate valuations between the new and old yardsticks. More often than not an irrevocable trust is somewhere in the mix from years back, and this means it has built-in inflexibility. The thing is, it becomes one big head-scratcher when one tries to re-introduce assets back into the estate (to take advantage of the higher limit) extracted from a structure that’s purposely designed to be rigid.

Another one takes aim at the time-aged estate plans that have combined themselves with generation-skipping transfers and gifting options. The chances are that the new laws have moved the goalposts to a place, not all that appealing to either the surviving spouse or the children/grandchildren. This flows straight into the next bump in the road – spending money on revising an estate plan that looked good for so many years. No longer is this cost tax-deductible, but considering what’s at the stake here the $2000 – $10,000 tax accountant’s fee may be the best money you spend.

Some tax authorities are slamming the new Estate Tax as ill-planned and lacking foresight. The big fly in the ointment is the sunset clause, which taxpayers close to the new or old estate value tax limits should pay attention to. Things are touch-and-go when you consider that that there’s probably a huge assessed tax difference (in the multi-millions) between the surviving spouse dying in 2026 or just one year later. Throw in the intermingling of the estate tax with gift tax and generational skipping and it puts all these items on the proverbial chopping block. Some estate plan moderation at the very least is on the cards, and perhaps a complete renovation in cases.

If ever there was a time to make an appointment with your tax team to look at estate planning, it’s now. The variables that are pushing and shoving the comfort zone back and forth have to be addressed in the most emphatic way. Our professional experts are geared and ready to get into your corner and make any needed transition as painless as possible.

Call us now at 912-634-7722 to learn more or request your free consultation online to get started.

Filed Under: Individual Tax Articles

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