We first want to wish all of you a very Merry Christmas Season. I for one am looking for a glimmering of great memories in such a crazy year. Hopefully all this craziness will be behind us in a few short months. In this issue of the Small Business Quick Reads please find some valuable information regarding some significant tax changes that will most likely affect your business this year and well beyond.

As we get to most business' yearend, making sure your books are "clean" becomes a much higher priority than during the rest of the year.

We specialize in getting your books "clean" and restructuring your accounts so you can get timely and valuable financial insights about your business at the end of each month . So many business owners typically wait until their CPA/Accountant does yearend tax returns to see "How they did last year". You don't need or should run any business this way!

Please keep in mind, CPAs and Accountants are focused on just your tax liabilities and not your business operations. This is where we have assisted many collision repair businesses as well as other small businesses get this under control ... the way it should be.

Let's make 2021 a GREAT YEAR !

Tony Passwater

IRS Clarification:

PPP Loan Covered Expenses Only Deductible If Loan Not Forgiven!

As federal, state, and local governments pass legislation and offer guidance in response to the coronavirus pandemic, we are continuing to monitor the landscape to provide helpful information to you and your business.

The IRS and U.S. Treasury Department released guidance pertaining to the Paycheck Protection Program (PPP) on November 18, 2020, to clarify how to deal with covered expenses for a PPP loan that is not forgiven in the year it was received:

What does the PPP loan expenses are only deductible if a loan is not forgiven mean?
It means if you used the monies you received for the PPP Loan correctly, the loan will be forgiven, but those expenses you paid which would normal reduce your net profit and tax liability, are not deductible. In a year like 2020 this may cost small businesses more than expected, and simply was not the intention by Congress on how this would affect small businesses.

At this time, this is the IRS position on forgiveness, but Congress could change this through legislation. However, it does not seem likely that Congress will agree on much at this point.

There is also some confusion on when the deadline for applying for forgiveness applies. Borrowers may submit a loan forgiveness application any time before the maturity date of the loan, which is either two or five years from loan origination.

However, if a borrower does not apply for loan forgiveness within 10 months after the last day of the borrower's loan forgiveness covered period, loan payments are no longer deferred, and the borrower must begin making payments on the loan. For example, a borrower whose covered period ends on October 30, 2020, has until August 30, 2021, to apply for forgiveness before loan repayment begins.

Also the expiration date in the upper-right corner of the posted PPP loan forgiveness application forms has been providing some confusion as well. These dates are displayed for purposes of SBA's compliance with the Paperwork Reduction Act. It reflects the temporary expiration date for the approved use of the forms. This date will be extended, and when approved, the same forms with the new expiration date will be posted.

We are providing access to a tool from one of our partnering payroll providers, ADPrun, so you can estimate your PPP Loan forgiveness. To access Click Here.

Feel free to contact us if you have any questions ... We are here to help in anyway we can.

Tax Laws and Some Key Changes Affecting Your Business


The complications involving tax law are an ever changing landscape. Many may not affect your business but there are many that can cause additional tax liabilities and even audits.

Some, you may not be aware of until your CPA sends you your tax returns, but then it is too late!

These can be usually avoided with just a little tax planning and a review of how your financials are being accounted for in your accounting system such as QuickBooks. It also makes sense to do this the right way to minimize the chance of an IRS audit.

Office Compensation: One area that often can be an issue if your business is a S-Corp revolves around the Officers' Compensation and how medical and other insurances paid by the company are accounted for.

If you are an officer of the corporation, you are required to take a reasonable salary reported on a W-2. This determination of "reasonable" is where many have gone wrong. Since any distributions (draws against profits) you take are only subject to income taxes and not Social Security or Medicare Taxes, the IRS is very particular about the ratio between your distributions verses salaries.

There is no doubt it is advantageous to take distributions since it overall saves your company over 15% verses paying salaries to officers, but this is where many have failed the tests, and when an audit is triggered additional taxes, penalties, and interest may cost your business a great deal.

In addition, if you own the property and buildings "personally", and your company pays rent to you, this also can be a problem area as well. Rents too, are only subject to income taxes as distributions, but they too need to be in line with comparable property/building rent in your market.

Being a S-Corp can offer some great tax savings for you and your business, but the combination of the above three income streams must be carefully and accurately set, or they may be disallowed.

Officer Insurances/Benefits:
Any stockholder that owns 2% stock or more must report many benefits such as medical, dental, vision, as well as some other insurance as income directly on their W-2 forms. This is often overlooked and the IRS has begun to look at this more frequently, triggering audits.

In our November 15th, 2020 edition we covered these important considerations that you should prepare for before year end. Check it out by Clicking Here.

Meals/Entertainment Deductions Have Changed!

I have not met a small business owner that does not believe that when they drive to a parts store, business meeting, or client event that when they stop and eat or buy meals for the employees, they are a expensable business expense.

Well that changed in 2017 with tax reform changes in the Tax Cut and Jobs Act (TCJA).

Basically, the 2017 TCJA eliminated the deduction for any expenses related to activities generally considered entertainment, amusement or recreation. It also limited the deduction for expenses related to food and beverages provided by employers to their employees.

Also check out a great tax law chart showing the common areas that you will need to be aware. This chart is provided by CBiz and this TCJA Chart can be viewed by Clicking Here.

This as usual is somewhat a complex change that with careful changes in your accounting processes will not cause your business greater tax liability or audits.

Contact us for additional information and support.

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Use Early Bird by January 1st to receive $100 Discount !

Business Value Spotlight

If you are a QuickBooks user, I am sure either you have thought about moving to QuickBooks Online for the key reason of easy remote access.

If you have already switched to QuickBooks Online, it still is not too late to change to a much better solution with better pricing.

The solution is what is referred to as Cloud Hosting and has been around for many years, but simply either was not price competitive for small business, or the internet was just not very reliable.

Today the very best solution to gain secure remote access to QuickBooks Desktop as well as many management systems including CCCone, Microsoft Office, and One Drive is Cloud Hosting.

What is Cloud Hosting?
Simply put ... it is having your workstation on the internet in a very secure environment.

In the collision industry we have set up and tested the inclusion of CCCone Management integrated into QuickBooks Desktop seamlessly.

We have also set up Microsoft Office integration and One Drive to share vehicle images for jobs in a well structured system.

The cloud hosting solution is basically the installation of the purchased software with the license key on the network server which is hosted over the internet allowing access through the internet using a web browser from any corner of the world.

In layman language, the data and the software are stored on the cloud platform just like your photos are stored on the Google or One Drive and the user with authentic login credentials can easily access the software by using any device which has internet access.

You can consider the cloud hosting as a mix of the desktop version integrated with the power of the cloud, while giving you all the benefits of the online edition. So this cloud solution has all benefits, but not the clunky process that QuickBooks Online has..

Earlier most programs were available to be used only on the desktop but with the cloud advancement, the developers made many programs compatible for the cloud as well. With so many benefits internet remote access, most of the people that started migrating to replacement online versions such as QuickBooks Online (QBO) from the QuickBooks Desktop have regretted it. This is due to how the workflow is so much different and the feature differences.

How does Hosted QuickBooks Desktop functions on the cloud platform?
First of all, you will have to provide the license copy of your QuickBooks Desktop software, so it can be installed on their server.

After that, the user is given access to that particular server with certain configurations. The server being used by the user is protected with several security measures so that it becomes a fully secured platform for the user. In order to connect the end user and the server, the Remote Desktop Protocol (RDP) is used which is later configured to log in as per the desired user.

The particular server is also customized so that the user can access QuickBooks, along with several other programs, and its data through various devices and operating systems. After all the configuration setup, the user can easily access the software from the cloud by using any device which has internet access.

The changes made in the software hosted appears in real-time basis and all such changes are automatically saved with nightly backup services.

Which versions of QB can you host on the cloud?
The cloud platform is not restricted to hosting of any particular version or edition of the most software as it is a flexible and scalable solution which allows you to choose almost any version and edition of QuickBooks Desktop for hosting.

What advantages can I expect after choosing Cloud hosting?
Cloud hosting has a wide range of advantages to offer you and all these advantages comes at a very economical price. Here is the list of benefits which you can avail from the cloud hosting:

  • Anywhere, anytime access
  • High uptime
  • Bank-level security
  • Add-on integration
  • Scalable solution
  • Flexibility
  • Pocket-friendly pricing (Typically Less than QBO)
  • Backup and Recovery Solution
  • Additional Installs including Management Systems, Microsoft Office, and One Drive
  • Real-time updates
  • Multi-user collaboration
  • Automatic update
  • Competitive edge over your competitors

What are the characteristics of a good cloud hosting provider?
Most of the leading cloud hosting providers have QuickBooks hosting as a part of their service, but in order to make the most from your cloud accounting decision and the software, you should always choose those cloud providers who have partnered with QuickBooks Experts. This way, you will have a better expert by your side that will have the required knowledge about the software as well.

The cloud hosted QuickBooks defines the modern day accounting as it has got all the tools which can be developed by bundling the latest technology with the process of accounting. So in order to use the evolving technology, it is very much necessary for you as a business to shift to the cloud accounting solution and take advantage of its benefits.

Before you think about QuickBooks Online ... QuickBooks Desktop Cloud Hosting is a much better option for over 99% of collision repair businesses ... Contact us for more information.

This is a real game changer ...

How much money can this save you on your bottom line?

Please contact us directly and we can explain these programs and connect you to the right provider to get you setup.

As Service Providers for the Collision Industry, we often find many valuable products and services for our clients ... Here are a few we know you will get great value from and save you money at the same time.

Great integration into QuickBooks, Competitively Priced.

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Get rid of slow computer systems that waste your time. Best options for collision repair shops at very good prices.

Don't risk losing your critical data! Best Backup and Restoration Service.

Website and Email Hosting Service that is very competitively priced and is managed for you.

Our company AEII, QuickBooks R Us, is always here to assist any small business with a full range of services, and provide the training and support needed to achieve excellent results. We have assisted businesses worldwide ... And we specialize in the collision repair and service industry Schedule a free session to discuss any QuickBooks or small business needs you may have below:

The Year End is upon us, and probably not soon enough for many.

How did your business do this year ? Did your business reach the goals you were looking for in 2020? Looking forward, what do you want to do in 2021 better than you didn't do in 2020 ?

A mistake we often see is that small business owners treat their business as if it is just a "job" that has maximum job security, not realizing nothing is guaranteed. In 2020 this has become a stark reality to many.

Many owners often treat their business so badly, its health and sustainability is compromised. Then when there is a business climate change, it suffers badly. Whether you have one employee or over fifty ... having the right mindset and commitment to your business are critical to long term success.

As the Owner, you are the CEO of the business. This position has great responsibility and is not just a "job". The leadership you display is what employees look for during tough times. As CEO, you are not just repairing vehicles, you are in charge of the leadership for the business that repairs vehicles, and it success and health are dependent upon you.

Being a great CEO in 2021 will go along way in allowing you and your business to reach the level of success you plan to obtain.

Beware of Taxable Employee Gifts

Article Highlights:

  • De Minimis Fringe Benefits
  • Cash Gifts
  • Gift Certificates
  • Group Meals
  • FICA and Wage Withholding

It is common practice this time of year for employers to give their employees gifts. Where a gift is infrequently offered and has a fair market value so low that it is impractical and unreasonable to account for it, the gift's value would be treated as a de minimis fringe benefit. As such, it would be tax-free to the employee, and its cost would be tax deductible by the employer.

De Minimis Benefits - In general, a de minimis benefit is one that, considering its value and the frequency with which it is provided, is so minor as to make accounting for it unreasonable or impractical. De minimis benefits are excluded from income under Internal Revenue Code section 132(a)(4) and include items not specifically excluded under other sections of the Code. Examples of de minimis benefits include such items as:

  • Controlled, occasional employee use of a company photocopier.
  • Occasional snacks, coffee, doughnuts, etc., furnished to employees.
  • Occasional tickets for entertainment events given to employees.
  • Holiday gifts from the employer to the employees.
  • Occasional meal money or transportation expenses paid for by the employer for employees working overtime.
  • Group-term life insurance on the life of an employee's spouse or dependent with a face value not more than $2,000.
  • Flowers, fruit, books, etc., provided to employees under special circumstances, such as a birthday or illness.
  • Personal use of a cell phone provided by an employer primarily for business purposes.

In determining whether a benefit is de minimis, you should always consider its frequency and value. An essential element of a de minimis benefit is that it is occasional or unusual in frequency. It also must not be a form of disguised compensation. Whether an item or service is de minimis depends on all the facts and circumstances. In addition, if a benefit is too large to be considered de minimis, the entire value of the benefit is taxable to the employee, not just the excess over a designated de minimis amount.

The IRS has ruled previously that items with a value exceeding $100 cannot be considered de minimis, even under unusual circumstances.

Holiday Gifts - A gift of cash, regardless of the amount, is considered additional wages and subject to employment taxes (FICA) and withholding taxes.

Caution: If the gift recipient is a W-2 employee, the employer may not issue them a Form 1099- NEC or a 1099-MISC for a holiday gift of cash; the amount must be treated as W-2 income.

When an employer gives gift certificates, debit cards or similar items that are convertible to cash, the value is considered additional wages regardless of the amount. However, if the gift is a coupon that is nontransferable and convertible only into a turkey, ham, gift basket or the like at a particular establishment, the gift coupon is not treated as a cash equivalent.

Holiday group meals, cocktail parties, picnics or similar events for employees are also treated as de minimis fringe benefits.

So before you create unexpected tax consequences for both your employees and your business or if you have questions about the tax treatment of holiday gifts to employees, please give us a call.

Spousal IRAs Can Save You Money!

Article Highlights:

  • Spousal IRA
  • Compensation Requirements
  • Maximum Contribution
  • Traditional or Roth IRA?

One frequently overlooked tax benefit is the spousal IRA. Generally, IRA contributions are only allowed for taxpayers who have compensation (the term "compensation" includes wages, tips, bonuses, professional fees, commissions, taxable alimony received, and net income from self-employment). Spousal IRAs are the exception to that rule and allow a non-working or low-earning spouse to contribute to his or her own IRA, otherwise known as a spousal IRA, as long as the spouse has adequate compensation.

The maximum amount that a non-working or low-earning spouse can contribute is the same as the limit for a working spouse, which is $6,000 for 2020. If the non-working spouse's age is 50 or older, that spouse can also make "catch-up" contributions (limited to $1,000), raising the overall contribution limit to $7,000. These limits apply provided that the couple together has compensation equal to or greater than their combined IRA contributions.

Example:
Tony is employed and his W-2 for 2020 is $100,000. His wife, Rosa, age 45, has a small income from a part-time job totaling $900. Since her own compensation is less than the contribution limit for the year, she can base her contribution on their combined compensation of $100,900. Thus, Rosa can contribute up to $6,000 to an IRA for 2020.

The contributions for both spouses can be made either to a traditional or Roth IRA, or split between them as long as the combined contributions don't exceed the annual contribution limit.

Caution: The deductibility of the traditional IRA and the ability to make a Roth IRA contribution are generally based on the taxpayer's income:

  • Traditional IRAs - There is no income limit restricting contributions to a traditional IRA. However, if the working spouse is an active participant in any other qualified retirement plan, a tax-deductible contribution can be made to the IRA of the non-participant spouse only if the couple's adjusted gross income (AGI) doesn't exceed $196,000 in 2020 (up from $193,000 in 2019).
  • Roth IRAs - Roth IRA contributions are never tax deductible. Contributions to Roth IRAs are allowed in full if the couple's AGI doesn't exceed $196,000 in 2020 (up from $193,000 in 2019). The contribution is ratably phased out for AGIs between $196,000 and $206,000 (up from a range of $193,000 to $203,000 in 2019). Thus, no contribution is allowed to a Roth IRA once the AGI exceeds $206,000.

Example:
Rosa from the previous example can designate her IRA contribution as either a deductible traditional IRA or a nondeductible Roth IRA because the couple's AGI is under $196,000. Had the couple's AGI been 201,000, Rosa's allowable contribution to a deductible traditional or Roth IRA would have been limited to $3,000 because of the phase-out. The other $3,000 could have been contributed to a traditional IRA and designated as nondeductible.

Please give us a call if you would like to discuss IRAs or need assistance with your yearend retirement planning.

Business Value Spotlight

It is important for businesses to control their costs, and look not for "cheap", but value in the products and services they purchase and use.

One area that we see many clients waste a lot of money on is credit card processing.

It seems everyone that calls you can "save you money" processing credit cards.

To be honest the credit cad processing industry is almost a scam. We have looked at hundreds of providers over the years and these can actually save you money or even eliminate your processing costs completely.

Processing Costs:

How much do you spend for your total cost of taking credit cards ?
Do any of these describe your situation?

  • Customers charge whole bill to get "their points" or "Cash Back"?
  • Hidden fees add up to make your "real costs" higher than before?
  • You pay equipment rental/lease payment to process credit cards?
  • You pay a monthly fee to use the Merchant Account?
  • Quoted rates are not the rate for your customer charges?
  • Tired of every company saying they can "beat" the rates?
  • Thousands of dollars each year off your bottom line?

We have found two simple solutions:

  1. A Standard processing program guaranteed to reduce your processing costs, and has the best integrations available for QuickBooks and other accounting software.
  2. A customizable program which can totally eliminate all your processing, equipment,
    PCI, and monthly fees to ZERO !

The Best Standard Merchant Services
We have been approached as I am sure you
have by credit card processing companies
that ALL say they will save you money.

The credit card industry sales staff often
reminds me of the vacuum salesmen of the past ... relentless and pure sales.

We have reviewed 20 - 30 offerings over the recent years, and found a company that has exceeded our expectations, and will provide the best program. Their system has so many well thought out options on how to get paid, and integrates nicely into almost all accounting systems including QuickBooks.

We encourage our clients to check them out and just allow them to show you the savings they offer and their knowledge level without the pushy salesmen attitude.

This program is a best standard Merchant Services we have found ... Click Here for more information.

The Best "No Fees" Merchant Services

Now, if you are tired of Customers taking advantage of your business by instead of just giving you the insurance check, they deposit it and then charge the entire bill on their best rewards card ... costing you a lot of dollars, this merchant services program may be what you should consider.

The Edge program is an innovative new offering made possible by the recent Supreme Court ruling that allows you to share or transfer the costs of processing back to the customer. This wasn't possible a few years ago since it was against your merchant services agreement. Edge offers a customizable program that will allow you to encourage payment by check or cash, and reduce, or even stop these unnecessary costs to your business. This program also allows for zero equipment fees, transaction fees, and all the hidden costs to you, or share the costs based on charge levels. You can decide to take all credit cards for deductibles or sales up to $500.00 at no sharing costs to the Customer, but for charges above this amount you can even set a sliding scale. As an example; $501.00 - $1000.00 the customer shares half the costs, and over $1000.00 they pay the whole costs. Believe it or not, customers will still use their rewards card even if a non-cash fee is added, just to get their points, but it will then not cost you anything! You can also individually decide when processing to override the fee as well for your "best" customers. It is all very easy to setup, automated, and easy to use.

EPX Edge

This new program is a game changer ... Click Here for more information.

How much money can this save you on your bottom line ?

You can also contact us directly and we can explain both of these programs and connect you to the right person to get an analysis of your savings.

Our company AEII, QuickBooks R Us, is always here to assist any small business with a full range of services, and provide the training and support needed to achieve excellent results. We have assisted businesses worldwide ... And we specialize in the collision repair and service industry

Schedule a free session to discuss any QuickBooks or small business needs you may have below:

We have a large library of helpful QuickBooks Tips & Tricks, you can catch up on past issues by Clicking Here.

We also have a free self-help site with helpful procedures and videos at: QbHelp.us

Thank You and I look forward in sharing small business and QuickBooks Tips and Tricks with in the future ...

As we get ready for a very unique Thanksgiving with our family and a few friends, we still should give thanks for all we have, even though 2020 has been a rough one for many.

We also want to wish all of you the best for this Holiday, and for the rest of the year and beyond.


It is certainly timely to reflect on what 2020 has unearthed in both your personal and business perspectives for life, business, and relationships. It is also time to look at how you can make 2021 different and better at he same time. This includes looking at your business as a true "Partner" being a separate entity of it own that you are responsible for its health and well being. Take the time to reflect how you can take better care of this important child by doing things you may have been putting off, or not allocating the time needed to keep it healthy and growing strong.

Changing Your Business Outlook for 2021

There is no question 2020 has been not only hard on a lot of us small business owners, it has rolled through like no other year that I can ever remember or even have imaged.

To many business owners it has opened many cracks in the business's armor, while exposing many glaring weaknesses.

When business is running normal, or in an upswing, it seems that "Sales Can Cure Everything". Well known Multi-Millionaire, Mark Cuban, is one of the strongest advocates of this philosophy.

However, this concept may be true for businesses that sell a product, or provide software on the internet; it has limited value in a small service businesses. Of course it is true, that sales will bring in more revenue, but it is not like just cranking up the manufacturing levels to meet the demand will help getting the employees to get the jobs done faster, or supplies needed to the job quicker. In fact at times the increase of Sales Revenue may just temporarily cover up the flaws that your business is having. Operating a service business is much more complex, and if there are factors in place limiting the revenue such as fewer accidents due to lock downs, the effect can be devastating to the cash flow of the business.

The richest man in the world currently is Jeff Bezos, founder and CEO of Amazon. He has made it very clear what is critical in keeping your business successful.

So what does this mean?

What details of your business do you need to understand that you are not currently well versed with?

Hint: It has nothing to do with fixing a vehicle, providing good service to your customers, or how much additional sales you can get into your door ... it is about understanding your financials, and how they relate to volume changes and your ongoing expenses.

Most small business owners are good at the service they perform, but they simply often do not understand their financial statements, or take the time to really digest them to a level that allows them to navigate in both the good times as well as the not so good times.

This can be from just not taking the time to learn about how their financials work, but also is often because they do not have systems setup to provide them with timely, accurate information in a format that focuses on how the business is performing, rather than just for tax purposes.

In 99 out of 100 clients we have, and do work for, if the CPA or accountant has set up their "books", it will have almost zero value in analyzing your business performance, or provide the level of detail to determine where your business is doing well, or not. This is simply because their focus is on taxes, and they do not know your business key indicators.

In many industries there are third party management systems which assist in operating the business and they can also be setup to provide valuable financial insights in the Gross Profit areas of your business. Gross Profit Dollars for any small service related business is the key number to set companywide expectations for. Without enough Gross Profit Dollars, the business cannot survive.

Special Note: I did not say, Gross Profit Percentage. You cannot deposit a percentage into a bank, and you can't pay expenses with them either. Yes, you can use the percentage to monitor certain aspects, but the key is what they translate into cold hard cash.


Profit First is Critical

To get this type of real value with your financials, you must have them setup correctly in your management system as well as your accounting system. This is where we find many clients have missed the mark. The accounting setup does not provide the detail needed to see your business performance. This is where we have specialized for many years now.

Once this is done correctly, it is a matter of practice to perform the processes correctly to give you the detail and information necessary to run your business in a timely manner. Your financial reporting should be finalized by the first few days, no later than the 5th of the following month. Remember financial reports are history, so being able to get this information as close to the time it occurred is extremely important. Stale information is not what good business decisions are made with.

So to improve your business outlook for 2021 and beyond, get to know the details of your business better in a timely manner ... make a commitment to put Profit First and plan to make good business decisions on timely and solid information about your business.

Let us know if we can help you in any way to get this a priority for 2021...

Deducting Medical Insurance

Article Highlights:

  • Itemized Deduction
  • AGI Limitations
  • What Insurance is Deductible
  • Above-the-Line Deductions
  • Self-Employed
  • Partnerships
  • S-Corp Stockholders
  • Income Limitation
  • Subsidized Limitation

Health insurance premiums, especially in the wake of the Affordable Care Act, have risen dramatically and are one of the greatest expenses that most individuals pay.

Although the cost of health insurance is allowed as part of an individual's medical deductions when itemizing deductions, only the amount of total medical expenses that exceeds 7.5% of the taxpayer's adjusted gross income (AGI) is deductible. The 7.5% limitation is increased to 10% for years after 2020.

The purpose of this article is twofold: first, to remind you what insurance can be included as a medical deduction; and second, to inform you of an alternate means of deducting health insurance for certain self-employed individuals-a means that avoids the AGI limitation and allows for deduction without itemizing.

Let's start by looking at what is treated as deductible health insurance. It includes the premiums you pay for coverage for yourself, your dependents, and your spouse, if applicable, for the following types of plans:

  • Health care and hospitalization insurance
  • Long-term care insurance (limited based on age)
  • Medicare A in some circumstances*
  • Medicare B
  • Medicare C (aka Medicare Advantage plans)
  • Medicare D
  • Dental insurance
  • Vision insurance
  • Premiums paid through a healthcare marketplace net of the Premium Tax Credit

* Most workers, and any government employees who pay Medicare tax, have a portion of their wages deducted for contributions to Medicare A. This payroll tax isn't a deductible medical expense. However, those not covered under Social Security, and government employees who didn't pay Medicare tax, can voluntarily enroll in Medicare A. In that case, the Medicare A premiums are a medical expense.

Premiums paid on your or your family's behalf by your employer aren't deductible because their cost is not included in your wage income. Or, if you pay premiums for coverage under your employer's insurance plan through a "cafeteria" plan, those premiums aren't deductible either because they are paid with pre-tax dollars.

Special Rules - Self-Employed, Partnerships, and S-Corp Stockholders
If you are a self-employed individual, you can deduct 100% (no AGI reduction) of the premiums paid on behalf of yourself, your spouse, your dependents, and your children who were under age 27 at the end of the year without itemizing your deductions.

This above-the-line deduction is limited to your net profits from self-employment, less the deductible part of your SE tax and contributions to SEP, SIMPLE and qualified retirement plans.

No above-the-line deduction is permitted for any month when the self-employed individual is eligible to participate in a subsidized health plan maintained by an employer of the taxpayer, the taxpayer's spouse, any dependent, or any child of the taxpayer who has not attained age 27 as of the end of the tax year. The plan is considered to be subsidized when 50% or more of the premium is paid by the employer. This rule is applied separately to plans that provide coverage for long-term care services. Thus, if you are a self-employed individual eligible for employer subsidized health insurance, you may still be able to deduct long-term care insurance premiums as long as you aren't eligible for employer-subsidized long-term care insurance.

Partnerships:
If you are a partner who performs services in the capacity of a partner and the partnership pays health insurance premiums on your behalf, those premiums are treated as guaranteed payments that are deductible by the partnership and are includible in your gross income. In turn, you may deduct the cost of the premiums as an above-the-line deduction under the rules discussed in this article.

S-Corp Stockholders:
This above-the-line deduction is also available to more-than-2% S corporation shareholders. For purposes of income limitation, the shareholder's wages from the S corporation are treated as his or her earned income. This requires the medical insurance and other listed insurances included on the stockholder's W-2 forms. This is commonly done incorrectly by many of our clients, but can be setup automatically in QuickBooks Payroll as well as 3rd party payroll programs. If you have any questions related to setting this up properly or deducting health insurance premiums, whether as an itemized deduction or an above-the-line deduction for the listed other entities, please give this office a call.

Business Value Spotlight

We talk about efficiency in business,
but often we forget about technology updates and upgrades that can save
us thousands of dollars in a year.

Outdated hardware causes nothing but frustration when trying to do your daily jobs.

But it doesn't need to cost premium dollars to get your systems upgraded to make a huge difference in efficiency.

We are almost at the end of the year, and the accelerated depreciation after this year may be a thing of the past ... so now would be a good time to look at what there is available to upgrade your systems.

The first big mistake many business owners make is to go with laptops instead of desktop computers for their normal daily operations. Yes, there are some situations to be mobile which may consider being a laptop, but this still is often a mistake.

Laptops are inherently more expensive than desktops, and native they have slower speeds, smaller memory, and small screens. Even with an additional monitor and/or docking station (more money) they are not a quick.

Another mistake made is the usage of wireless internet over wired ethernet. Wired ethernet can be 10 - 20 times faster than wireless, especially in an office environment. Some programs used on wireless can actually corrupt your data to the point it can not be used.

Again yes, there is a place for wireless, but not if wired is available.

Workstations Don't Have to Break the Bank

We have been putting together a fantastic deal on super compact, fast Dell Workstations. These units boot to login in less that 20 seconds, and are super fast quad core Intel processors with extra memory.

Right now we have Dell USFF 9020 workstations

  • Ultra Small Form Factor Size
  • 8gig High Speed RAM Memory
  • i5 3.0 Ghz Quad Core Processor
  • 500 Gig Super Fast Solid State HD
  • DVD Player
  • Windows 10 Professional
  • 1 Gig Ethernet Connection
  • One Year Parts Warranty
  • Two Year Labor Warranty

Under $500 !!!

Click the picture for information and Quote

Better Viewing = Better Work Environment = Better Efficiency

We also have been putting in great dual monitors that make all the difference in the world when doing multiple tasks at once.

Dell Dual Monitor Stands are the best stands we have found for a busy office environment.

  • Monitors securely on one stand
  • Uses 19" - 28" Dell Monitors
  • Cord Routing for Clean Management
  • Monitors are exceptional value

Click the picture for information and Quote

Other accessories and options available as
well as Servers, Software, and Printers.

Don't Risk a Cataphoric Loss of Your Data
Today your data is almost priceless ... and many cloud based programs help with this by maintaining good backup protections.

However, you also probably have a combination of local software such as QuickBooks, images, and important documents that if they are not protected, they could be lost forever in the advent of a system crash, or worse ... be held for ransom but some security breach and the Ransomware Virus Attack.

For a number of years now, we have provided a Critical Backup Service that automatically backs up your critical data, images, and documents for protection and security. We use encrypted transfer to a highly secure Google Cloud Server, and store 7 days of file copies to stop Ransomware attacks in their tracks.

What is unique about this backup is that it is a full service. In other words, if you have an issue or need a file you have accidently lost, you just notify us and we will do the restoration for you at no additional charge.

The Service includes:

  • Nightly Auto Backups
  • Encrypted Transfer
  • Secure Cloud Google Servers
  • Multi Day Versions
  • Restoration Service Included

Click the Picture for More Information

The weather is changing and we are firmly in the last quarter of the year we may never forget, 2020. I am amazed at how many "unseen" events has took place in a year on 20 - 20 ...
I am glad my eyesight 20-20 is better than what I have seen this year unveil.

Possibly by the time you take a few minutes to read this the biggest election, I believe, in our Country will be over ... hopefully to solidify our Country and get this craziness behind us. If by chance you are reading this before Tuesday, and you haven't voted ... Please exercise your citizen's right of this Country and vote.

In this quick read, there are two critical articles you should take time to read and digest. If anything this year has taught small business owners, it is that financial hardships can come from many unexpected events. It is time as a business owner to strengthen your understanding of the financial metrics involved in your business and prepare better with them and improve your business's overall health.

We also included a quick update for the PPP Loan Forgiveness requirements which its deadlines may be coming quickly for many of you.

Our Product Spotlight in this issue is designed to save you hundreds of dollars and improve security at the same time.

As always, tell us what you would like to see in our future Quick Read Issues in the future, and we are here to help in any way we can.

Sincerely,

Top Five Key Financial Metrics Business Owners Need to Track

Operating a small business is an exhilarating and, at times, overwhelming endeavor. There are so many details to keep track of that it's easy to forget about the nuts and bolts of your organization's finances - especially if you didn't start out as a "numbers person."

Whether you're the one who is assembling your financial reports or you've hired a professional to do it for you, it's important for you to know which of the numbers are most important and what they mean in terms of the decisions you make.

You must also make an assessment of the health of your business overall. Below you'll find our list of the top five most important elements of your financial review, and what you can do with the information.

  1. Profit and Loss
    Every quarter, you should review and analyze your business' profit and loss report to understand your operating strengths and weaknesses, as well as your tax implications. It is the single, at-a-glance picture of many areas of your business and should be used to drive your business decisions and that you can show to an outsider for them to gauge your strength. However you also must have a reconciled Balance Sheet to put everything into perspective and show the "whole business picture".

    Unfortunately most small business owners look at their Total Sales, Their Gross Profit Percentage, and then their Net Profit. This is far from sufficient to rum your business effectively.

  2. Budget Versus Actual
    Think you're sticking to the plan based on what you see in terms of your bank account? We see too many small business owners trying to manage their business future by checking their online bank balance every day. The truth is that if you compare what you've budgeted as compared to what you've actually spent it will give you a far better sense of whether you're staying on track and what kind of adjustments you need to make.

  3. Cash Flow

    Most people consider cash flow the most telling metric of all, and cash certainly is the lifeblood of any company. If you're not keeping your eye on your cash flow you could find yourself caught unaware and flatfooted when it comes to making essential payments, so make measuring your cash flow (as well as your cash burn - the amount you go through monthly) and your runway (how much you can operate based on your cash on hand) part of your regular business health check.

    Poor/No Cash Flow is the leading causes of new business failures, but also is key for any established business as well. When you run "Out of Cash", your business health is on the verge of cardiac arrest.

    No matter how well you are doing, there is always the chance that you're going to encounter some unforeseen circumstance or drop in business that is going to drive the need to cut costs. The best way to do that is to take a close look at your fixed burn rate and make sure that it isn't too high.

    As tempting as it may be to sign on to a long-term contract to save a little money, if you commit yourself to a payment that you can't afford at all in the future you may be sorry. You may be better off taking some of those expenses off of a contracted status so that you can eliminate them if you have to.

The way to look at this also includes knowing your business "Break Even Point". Knowing this will allow you to track where you are compared to where you must be at a given point.

4. Employee Productivity

Though it's a given that your employees are your most valuable asset, that doesn't mean that you should be operating without ensuring that you are getting enough value out of them to justify what you are spending. The best way to do that is to actually monitor each employee's productivity to make sure that everybody is more than pulling their weight.

5. Financial Ratios and Benchmarks

Ratios are among the most useful metrics that a small business owner can use to determine the overall financial health of their organization. Among the most important are their liquidity ratio (how much cash you have on hand to pay the monies you owe); your efficiency ratio (how much it is costing you to bring in a single dollar); and your profitability ratio (profit as it compares to revenue).

Then there are Benchmarks that will compare your operation to other like business operations and well established normal financial indicators. Take a look at a Visual Dashboard Report we have developed and provided for years now.

Each of these elements is extremely beneficial in helping you understand where your money is at any time. If you'd like to discuss how our services can help you run a successful business, please contact us for more information.

The SBA Issues a Simplified PPP Loan-Forgiveness Application

Article Highlights:

  • Paycheck Protection Program Loans
  • Forgiveness Application
  • Small Business Administration (SBA)
  • The PPP Flexibility Act
  • SBA Forgiveness Form 3508
  • SBA Forgiveness Form 3508EZ
  • SBA Forgiveness Form 3508S

If you are the owner of a small business that obtained a Paycheck Protection Program (PPP) loan, you are most likely aware that the loan can be partially or totally forgiven if you used the loan proceeds for the required purposes. Loan forgiveness is not automatic and must be applied for. The borrower must submit a request to the lender or, if different, the lender that is servicing the loan, which then must make a decision upon the amount of forgiveness within 60 days.

The request must include documents to verify the number of full-time-equivalent (FTE) employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations. The borrower must certify that the documents are true and that the borrower used
the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments.

The whole process of obtaining a PPP loan and applying for forgiveness has been complicated from the start, with guidance from the Small Business Administration (SBA) and the IRS coming in dribs and drabs; for a while, it seemed that the rules were modified every week. The original forgiveness application provided by the SBA was horrendously complicated, and one almost needed an accounting degree to figure it out. It required the applicant to complete numerous complicated side computations and did not provide any corresponding worksheets.

To clarify the process, Congress stepped in and passed the Paycheck Protection Program Flexibility Act. As part of that legislation, the SBA was required to simplify the forgiveness application. In response, the SBA did somewhat simplify SBA Form 3508, this is the original forgiveness application, and came up with an easier version: SBA Form 3508EZ.

The 3508EZ is for use by:

  • Self-employed borrowers with no employees
  • Generally, borrowers with employees that, during the covered period,
  • Did not reduce the annual salary or hourly wages of any employee by more than 25%;
  • Did not reduce the number of employees or the average paid hours of employees; and
  • Was unable to operate during the covered period at the same level of business activity as it did before February 15, 2020, due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, the director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health
    Administration.

During the week of October 5th, the SBA released yet another simplified application- Form 3508S-along with 3508S Instructions for its use. This form can only be used if the total PPP
loan amount that the borrower received from their lender was $50,000 or less.

However, a borrower that, together with its affiliates, received PPP loans totaling $2 million or more cannot use Form 3508S and instead must use either Form 3508 and its 3508 Instructions or Form 3508EZ and its 3508Z Instructions (or their lender's equivalent form).

A borrower that qualifies for and uses SBA Form 3508S (or their lender's equivalent form) is exempt from any reductions in the borrower's loan forgiveness amount based on reductions in FTE employees or in employee salaries or wages from the CARES Act that would otherwise apply.

While SBA Form 3508S does not require borrowers to show the calculations they used to determine their loan forgiveness amount, the SBA may request information and documents to review those calculations as part of its loan-review process. Accordingly, the borrower must retain, for 6 years from the date when the loan is forgiven or repaid, all documentation (1) submitted with the loan application, (2) to prove the borrower's certification of eligibility for the PPP loan and material compliance with the PPP's requirements, and (3) to back up the loan-forgiveness application.

Keep in mind that the application for forgiveness, which can be submitted electronically, must be submitted within 10 months after the end of the loan-covered period to the borrower's lender or the lender servicing the borrower's loan.

If you have questions about how these changes might apply to your situation or need assistance with completing your forgiveness application, please give this office a call.

Contact us for additional information and support.

Stop Wasting $$Hundreds on Pre-Printed Checks !

If you don't print your checks and Deposit Forms out of QuickBooks, you should consider it for accuracy, convenience, and security.

If you are already, you probably are spending hundreds of dollars more than you should. If you have multiple accounts maybe even thousands!

We have worked with many companies over the years that offered software that allowed printing checks on more secure blank stock, but all of them in the past either charged an upgrade fee when you updated your QuickBooks, or required special blank stock ordered at a higher price than what we have now.

PrintBoss is the best software we have found that integrates perfectly into QuickBooks (and QuickBooks Online), and lowers your costs at the same time ...

Typically we find clients paying $300.00 or more for pre-printed checks for each account they have, and pre-printed Deposit Forms in addition,. That is ridiculous.

Deposit Forms Too !!!

This program will print deposit forms as well and the checks. The costs savings are 75% to 90% less than pre-printed checks/deposit forms, and much more secure, because if stolen, the checks are completely blank paper!

The program allows you to setup multiple bank accounts (100) if needed and recognizing multiple company files as well. The program can be set to require a password to print, and it remembers the correct bank account that should be used.

This is by far the most cost effective solution to print checks and deposit forms with QuickBooks. Save even more with purchasing larger check stock quantities.

We also highly recommend the HP Laserjet Enterprise P3015x Printer to hold both your check stock and deposit form stock.

Our company AEII, QuickBooks R Us, is always here to assist any small business with a full range of services, and provide the training and support needed to achieve excellent results. We have assisted businesses worldwide ... And we specialize in the collision repair and service industry.

Schedule a free session to discuss any QuickBooks or small business needs you may have below:

We have a large library of helpful QuickBooks Tips & Tricks, you can catch up on past issues by Clicking Here.

We also have a free self-help site with helpful procedures and videos at: QbHelp.us

Thank You and I look forward in sharing small business and QuickBooks Tips and Tricks with in the future ...

Regardless of how the pandemic has affected you, in a few short weeks we will be holding what many believe (including me) is the most important national election in our lifetimes to date. The Country has gone through an awful lot this year, and I know the vast majority just want 2020 to end.

However, how 2020 ends will be greatly affected by what happens on November 3rd ....I am not going to express my political views here, but even though most probably have made up their own minds how they are going to vote, as businesses, you should take a look at each of the Candidates Platform on Taxes.

I just want to encourage you to get out and vote ...and make sure your vote gets counted.

Also, included in this edition are a few important reads that we are sure you will find of benefit. Please let us know what you think at the bottom of this newsletter, and especially provide any other topics you would like to have included in the next one.

We are always here to help small businesses succeed and be profitable.

Sincerely,

Can it Happen to Your Business?

One of the most devastating events that can hit a micro or small business is when a trusted employee is found to have taken assets or money from the company. This act of embezzlement has caused great pain for many small businesses not just from the financial loss. Many times an employer will say "he/she was the last person I would ever have expected to steal from me" as he/she was totally and completely trusted. The loss of trust in these situations can sting even more than the monetary loss for much longer. It is critical business owners must constantly be diligent against theft, and the most common type of theft is by trusted employees. There are some of the telltale signs that an employee is embezzling and below are some tips for protecting your business from this devastating loss.

There is also a potential for recovery of the embezzled funds, but often employers decide not to prosecute. This only allows the past employee to do it again to another business in the future. So what is embezzlement? Embezzlement is theft or misappropriations by employees, or trusted others, in a business. Most embezzlement involves a theft or diversion of company funds/assets to the employee. According to a 2012 report from the Association of Certified Fraud Examiners (ACFE), "the typical US business loses 3% of its annual revenues to employee fraud" and small businesses have the most cases and the highest losses. From the 2017 Hiscox Embezzlement Study, "Funds Theft" is the most common embezzlement scheme, used in more than one-third of all cases, followed by "Check Fraud" at 22%. "Funds Theft" is most commonly perpetrated by women at 56% while 70% of check fraud cases occurred at companies with fewer than 100 employees. Although there is no "typical" embezzler, the Hiscox report points to several common characteristics of white collar criminals, including:

  • the median age of a perpetrator is 48 years old;
  • slightly more women than men commit this type of crime - 51% vs. 49%; and
  • bookkeeping and accounting are the most common job functions of embezzlers at 37%.

Many business owners blame themselves for allowing theft to happen, and this is probably one of the main reasons so many embezzlers go unreported to the law enforcement agencies. The warning signs are often subtle, but there are usually many patterns or behaviors that are common. Business owners should pay attention to the warning signs and common schemes of an embezzler in order to identify areas where they can tighten security and implement controls to manage their exposure. The Hiscox Study has also identified five common characteristics to watch for:

  • Intelligent and curious: Embezzlers are often eager to know how everything in the office works. Once they learn the
    processes, they manipulate them for their own gain.
  • Extravagant: Watch for employees who are living a lifestyle that is out of proportion to their salary.
  • Egotistical risk-taker: An embezzler is often a rule breaker in and out of work life - from speeding tickets to overusing
    'sick time.'
  • Diligent and ambitious: An embezzler may come in early and leave late, and never take vacations. This can appear to be
    dedication to the company, but in fact it is an effort to keep from being caught.
  • Disgruntled: An employee who feels they are being treated unfairly may be tempted to steal to "even the score." They may
    be unable to relax, or may experience severe changes in behavior.

Additional Signs in smaller businesses are:

  • The financials are always in a state of chaos.
  • The reports never seem to be accurate
  • The financial reports constantly change
  • Doing basic analysis they are simply incorrect
  • The person doing the books is overly protective of their work
  • They do not allow any assistance or delegation of responsibilities.

Employees Are Ingenious Regarding Their Various Methods of Embezzlement, but there are ways to minimize the risks to your business. Embezzlers typically need three things to get away with a crime - means, motive and opportunity. In smaller businesses having one person in charge of all aspects of your company's bookkeeping/accounting without oversights, controls, or just spot check audits is the first ingredient in an embezzler's formula.

Protect From Embezzlement

In many businesses we work with, there are management systems which handle the daily operations and then interface into an accounting system. Both of these systems should always be in balance, and each has several controls built into them to ensure certain processes are not compromised, if they are setup properly.

If you use QuickBooks, we have setup process controls and performed audits for clients to eliminate the means and uninhibited opportunities an employee would have to devastate your business in the future. Contact us if we can assist you in any way. This simply is not a risk you should have to face alone.

Ready for the New 1099-NEC Changes and Requirements?

There have been major changes for your business in regards to the new 2020 1099 form and their requirements.

The Internal Revenue Service has resurrected a form that has not been used since the early 1980s, Form 1099-NEC (the NEC stands for non-employee compensation).

Are you prepared for these ?

We are pretty sure you are not ...

This older form will be used to report non-employee compensation in place of the 1099-MISC, which has been used since 1983 to report payments to contract workers and freelancers. Form 1099-MISC has also been used to report rents, royalties, crop insurance proceeds and several other types of income unrelated to independent contractors.

The revival of the 1099-NEC was mandated by Congress with the passage of the PATH Act back in 2015. However, there have been some complications with implementing the form, so its use has been delayed. It will now make its return debut in 2021 for payments made in 2020.

The reason for the change is to control fraudulent credit claims-primarily for the earned income tax credit (EITC), which is based on earned income from working. Scammers were filing tax returns before the normal February 28 due date for 1099-MISC, which does not give the IRS the time to cross-check the earned income claimed in the returns. As a stopgap measure, 1099-MISC filings that included non-employee compensation were required to be filed by January 31, the same due date as W-2s, another source of earned income. By using the 1099-NEC for non-employee compensation, the IRS will be able to eliminate the problems created by having two filing dates for the 1099-MISC.

As a result, the 1099-MISC has also been revised, and Box 7-where non-employee compensation used to be entered-is now a checkbox for "Payer made direct sales of $5,000 or more of consumer products to a buyer (recipient) for resale." Other boxes after Box 7 have also been reorganized.

The 1099-NEC is quite simple to use since it only deals with non-employee compensation, which is entered in Box 1, and there are entries for federal and state income tax withholding.

If you operate a business and engage the services of an individual (independent contractor) other than one who meets the definition of an employee, and you pay him or her $600 or more for the calendar year, you are required to issue the individual a Form 1099-NEC soon after the end of the year to avoid penalties and the prospect of losing the deduction for his or her labor and expenses in an audit.

The due date for filing a 1099-NEC with the IRS and mailing the recipient a copy of the 1099-NEC that reports 2020 payments is February 1, 2021. (Normally the due date is January 31, but because that date falls on a weekend next year, the due date becomes the next business day, February 1, 2021.)

It is not uncommon to have a repairman out early in the year, pay him less than $600, then use his services again later in the year and have the total for the year exceed the $599 limit. As a result, you may have overlooked getting the information from the individual needed to file a 1099 for the year. Therefore, it is good practice to always have individuals who are not incorporated complete and sign an IRS Form W-9 the first time you engage them and before you pay them. Having a properly completed and signed Form W-9 for all independent contractors and service providers eliminates any oversights and protects you against IRS penalties and conflicts. If you have been negligent in the past about having W-9s completed, it would be a good idea to establish a procedure for getting each non-corporate independent contractor and service provider to fill out a W-9 and return it to you going forward.

IRS Form W-9, Request for Taxpayer Identification Number and Certification, is provided by the government as a means for you to obtain the vendors' data you'll need to accurately file the 1099s. It also provides you with verification that you complied with the law in case a vendor gave you incorrect information. We highly recommend that you have potential vendors complete a Form W-9 prior to engaging in business with them. The W-9 is for your use only and is not submitted to the IRS.

The penalties for failure to file the required informational returns are $280 per informational return. The penalty is reduced to $50 if a correct but late information return is filed no later than 30 days after the required filing date or it is reduced to $110 for returns filed after the 30th day but no later than August 1, 2021. If you are required to file 250 or more information returns, you must file them electronically.

In order to avoid a penalty, copies of the 1099-NECs you've issued for 2020 need to be sent to the IRS by February 1, 2021. They must be submitted on magnetic media or on optically scannable forms (OCR forms).

We can assist you in preparing your 1099s for submission to the IRS. If you use QuickBooks, the program can produce them, but you must order the correct forms to print them. They cannot be produced from QuickBooks otherwise. We can provide recipient copies and file copies for your records.

Contact us for additional information and support.

Business Value Spotlight

Any business spends a great of time not only calculating what payroll is to be paid each pay period, but also there can be the processing, then the tax deposits, and then tax forms each week, month, quarter and year.

In all, for many businesses this can be a great burden on available time.

A Better 3rd Party Full Payroll Solution

We have reviewed and worked with dozens of third party payroll services only to find that they have flaws that do not fit well with our clients, or they do not properly integrate into QuickBooks.

This forces manual distribution through a Payroll Clearing Account and journal entries to properly allocate the payroll to proper accounts. This once setup doesn't take a lot of time, but wouldn't it be nice to have a system that can be setup to import into QuickBooks, make processing payroll easy, and take the responsibilities of paying the taxes plus filing the forms from your busy days ?

ADPrun is the best and most reliable solution we have found for all businesses under 50 employees. We highly recommend them for our clients, regardless of operation size.

Why Choose ADPrun?

  • Simple to Use
  • Imports into QuickBooks better than any other on the market
  • No more Required QuickBooks Upgrades*
  • Very Cost Effective and Simple Pricing
  • Direct Deposit or have checks delivered
  • Employee Portals, so their documents are always available
  • No Hidden Fees
  • Weekly Workers Comp options (No year end payments due to low balled estimates)
  • Simple IRAs, 401Ks, SEPs
  • Child Support & garnishments handled for you
  • Additional HR Tools can be added,
  • Recruiting Tools, even a PEO provider


Your Best Payroll Option

Check Out Your Options ...
We highly suggest you check out your options ... they are providing discounts that make this payroll service a great value, and very competitively priced. Click the button below and it will open a contact form to get a direct quote from a very knowledgeable District Representative we have found to be very helpful to our clients.

There is no obligation or "hard sell", just an opportunity to see how this may make your business life much easier and even less costly.

We have a large library of helpful QuickBooks Tips & Tricks, you can catch up on past issues by Clicking Here.

We also have a free self-help site with helpful procedures and videos at: QbHelp.us

Thank You and I look forward in sharing small business and QuickBooks Tips and Tricks with in the future ...

As we enter into the final calendar quarter on 2020, many are looking forward to this year ending. At least we didn't get hit with the "Killer Hornets" (knocking on wood) and hopefully we can still count our blessings in many ways. This month we are introducing a slightly different newsletter/blog to you that is designed to not only provide QuickBooks Tips & Tricks, but small business important information. We are planning to keep this newsletter in a smaller format, with fewer major topics. In this way we hope it will only take you a few minutes to review the information. Plus, please let us know what you think at the bottom of each newsletter, and especially any other topics you would like to have included in the next one. We are always here to help small businesses succeed and be profitable.

Upcoming Important Tax Deadlines

  • October 15 extended due date for federal individual tax returns for 2019.
  • Late-filing penalty.
  • Interest on tax due.

Because of the COVID-19 pandemic emergency, the IRS postponed the original due date for filing 2019 returns to July 15, 2020. If you could not complete your 2019 tax return by July 15 and filed a request for additional time to file, that extension expires on October 15, 2020. Failing to file before the extension period runs out may cost you late-filing penalties.

There are no additional extensions available (except in designated disaster areas), so if you do not or will not have all of the information needed to complete your return by October 15, please call this office so that we can explore your options for meeting your extended filing deadline.

If you are waiting for a K-1 from a partnership, S-corporation or fiduciary return, the extended deadline for those returns is September 15 (September 30 for fiduciary returns); so you should probably make inquiries if you have not received that information yet.

Late-filed individual federal returns are subject to a penalty of 5% of the tax due for each month (or part of a month) for which a return is not filed, up to a maximum of 25% of the tax due. If you are required to file a state return and do not do so, the state will also charge a late-file penalty. The filing extension deadline for individual returns is also October 15 for most states.

In addition, interest continues to accrue on any balance due, currently at the rate of 3% per year. This rate is subject to quarterly adjustment.

If this office is waiting for some missing information to complete your return, we will need that information at least a week before the October 15 due date. Please call this office immediately if you anticipate complications related to providing the needed information so that we can determine a course of action to avoid the potential penalties.

Additional October 15, 2020 Deadlines - In addition to being the final deadline to file 2019 individual returns on extension in a timely manner, October 15 is also the deadline for the following actions:

  • FBAR Filings - Taxpayers with foreign financial accounts exceeding an aggregate value of $10,000 at any time during 2019 must file a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR) electronically with the Treasury Department. The original due date for the 2019 report was April 15, but individuals have been granted an automatic extension to file until October 15, 2020.
  • SEP-IRAs - October 15, 2020 is the deadline for a self-employed individual to set up and contribute to a SEP-IRA for 2019. The deadline for contributions to traditional and Roth IRAs for 2019 was July 15, 2020, instead of the usual April 15 contribution due date because of the COVID-19 emergency, but no further extension is available.
  • Special Note: Disaster Victims - If you reside in a presidentially declared disaster area, the IRS and most states provide additional time to file various returns and make payments.

Please call this office for information on extended due dates of other types of filings and payments as well as extended filing dates in disaster areas.

Payroll Protection Loan Information

As we get closer to the end of the year, we also are getting closer to the deadline to request the PPP Loan (if you got one) to be forgiven.

If you were one of the earlier recipients of the loan, you may have already sent in your documentation for the eight weeks following the date you received the money deposited into your account. If not, the forgiveness requirements have changed, and there may be possibility the requirements may change again.

There is talk that according to two bank lobbying organizations and Treasury Secretary Steve Mnuchin, borrowers with loans under $150,000 should not have to go through the forgiveness process. This would mean that more than 86% of all PPP loans would be automatically forgiven, according to data provided by the SBA.

However, being an election year, the replacement of a SCOTUS hearings, and other issues facing Congress, it may not get changed in time for the current year end deadline.

Also, keep in mind that even if the SBA forgives your loan, that is for Federal Tax Purposes, and there may be some additional restrictions with the actual expenses you incurred and documented for business expenses on your tax return, and definitely how States will handle the forgiveness as well.

Information about PPP Programs

To download the PPP Loan Forgiveness Application - Click Here

To download the PPP Loan Forgiveness Application Instructions - Click Here

Contact us for additional information and support.

Financial Insights & Improving Your Business

If you are a Collision Shop, we would like to give you our latest eBook titled, Financial Insights & Improving Your Business... For The Collision Industry Owner.

This valuable resource is specifically designed for the Collision Industry Owner.

The Second Quarter eBook will be released soon. It will build upon the basics covered in this eBook ... so if you haven't already read this one, you should before the next becomes available.

Just click the cover below.

(Click the Image)

Please take the time to review this new resource, as well as the other free eBooks we have created to help you. This latest eBook includes additional tools we are sure your will find valuable.

Our company AEII, QuickBooks R Us, is always here to assist any small business with a full range of services, and provide the training and support needed to achieve excellent results. We have assisted businesses worldwide ... And we specialize in the collision repair and service industry

Schedule a free session to discuss any QuickBooks or small business needs you may have below:

We have a large library of helpful QuickBooks Tips & Tricks, you can catch up on past issues by Clicking Here.

We also have a free self-help site with helpful procedures and videos at: QbHelp.us

Thank You and I look forward in sharing small business and QuickBooks Tips and Tricks with in the future ...

As this year passes the mid-point, we are wishful it can'r get any more crazier than it is now, but it certainly looks like it hasn't stopped ... 
This month's QuickBooks Tips & Tricks will actually focus on some of the government programs that have been put in place that certainly have changed your accounting practices as well as your payroll. We know it's been a trying last several months in regards to all the new payroll & tax legislation coming to the forefront.
We will begin with the most recent changes, and move through other changes back to the introduction of the Payroll Protection Loan and the Economic Injury Disaster Loan.
 
The CARES Act Extension
With the House and Senate unable to come to an agreement on many fronts, President Trump signed an executive order to extend the benefits and to include several other areas. Whether this Executive Order is constitutional or if it will be blocked is not the scope of this article.
 
A lot of clients have reached out to me concerned about the new payroll tax deferment executive order set to start on September 1st. I wanted to put together a quick email that gives you a 1,000 foot overview of what we know as of August 14th.
 
Payroll Tax Deferment:
To note: our payroll partners are working directly with the IRS to advise their clients and partners with the most current updates as this situation unfolds.
 
What we know now:
 
  • Employees pay a 6.2% Social Security tax on wages up to an annual limit, which is $137,700 in 2020.
         - For example, an employee earning $137,700 or more would pay $8,537.40 in Social Security taxes in 2020.
  • Employees also pay Medicare tax, but this is not affected by the executive memorandum.
  • Deferral of employees' portion of payroll taxes (social security) will take place between 9/1/2020 - 12/31/2020
    • Note: this relates to the employee portion of payroll taxes only and is a deferral
    • It is Not (currently) an elimination.
           - It is still unclear when these payroll taxes would have to be paid by employees.
  • It's also unclear whether this will be automatic, or something an employee has to opt into.
        - This is an important point and one that I will let you know as soon as we know.
  • As long as your business is currently in good financial standing, it may not be beneficial to take advantage of   
         these deferrals. As there are no current plans for these deferments to be forgiven. 
 
We are going to keep you in the loop as more updates are provided. The situation is fluid and not all the details are final. 
 
Also here is a link to a quick three page overview from Wolters Klewer that goes a bit deeper on the topic. Please don't hesitate to reach out if you need clarification on anything.
 
 

 

Special Corona Virus Family Leave
Another twist in the normal payroll processing includes The Families First Coronavirus Response Act (FFCRA or Act) which requires certain employers to provide employees with paid sick leave, or expanded family and medical leave for specified reasons related to COVID-19.
This new mandated benefit provides employers with wage and tax credits for providing employees with special family leave as well as personal leave if they test positive for the virus, someone in their immediate family tests positive, or if they have to take care of a family member as a result of the virus.
 What mad this more difficult is that some payroll programs were not updated quick enough to have this established properly at first. This did cause some issues with the filing of the second quarter Federal 941s.
 The following link below will explain in detail the circumstances related to this benefit from the Federal perspective. Keep in mind, your individual State may enact additional guidance and benefit levels, so check with your state website on this as well.

Payroll Protection Loan
The final unprecedented program that was available until August 8th. This program was designed to assist employers to support their employees, even if the business was either not in operation due to the virus, or sales were affected that normally would cause the business to release employees.
The scope of this brief article is not designed to discuss the challenges that sever small businesses had with applying and receiving the loan from their banks, or the abuse that several larger companies took advantage of their banking relationships.
This program is still in flux for a number of reasons, but the requirements for allowing the loan to be forgiven have been loosened in many ways.
If you received a PP Loan prior to June 5th, you can opt to apply for forgiveness using the eight week period, or you can use the new 24 week period. It is advised to review these options now to determine the best for your business.
To learn more and get the insight on how to calculate and apply for forgiveness see below:

Important Information:
First, the forgiveness is only for Federal Tax purposes. It is still unclear if States will provide relief as well. Typically, if a loan is forgiven, the amount forgiven become Income, hence increasing the Business overall profit.
To forgive a loan and not cause it to become Income is very unusual practice, and it appears a number of States may not forgive the loan on the State level.
However, another issue has arisen, that makes whether the SBA forgives the loan almost mute. The IRS has recently stated that the payroll and expenses paid for with the loan proceeds are not deductible as normal business expenses. This may have the same effect as not forgiving the loan at all.
This was not the intention of Congress, and with skeptical hope, they will establish better clarification in the regulations.

 

Economic Injury Disaster Loan
Another unprecedented program rolled out by the Small Business Administration (SBA) is the Economic Injury Disaster Loan (EIDL). This is a low interest loan from the SBA that normally was designed for losses from loss from catastrophic events. This normally was reserved for losses due to natural events such as storms, tornadoeshurricanes, and floods.
However, this was extended to small businesses that have been economically damaged by the pandemic. This is a loan and is not designed to be forgiven unlike the Payroll Protection Loan. The repayment is also deferred until next year.
This has been a life saver to many businesses across the Country.

 

 

Bad Risks Cause Wasted Costs

An Area Collision Shop Owners Almost Never Think About 

Of course, it will never happen to you ... right ? But those that it has, know how much costs in money, time, and frustrations it caused ... and they were not prepared when it happened.

What am I referring to ? I am talking about when your computer system crashes, you accidentally deleted an important file, you get the "Ransomware Virus", or someone sabotages your data. These things happen regularly, and when they do, it can be devastating and sometimes not recoverable.

This small area of your business, can essentially bring it down or minimally causing you losses you simply should never be exposed to. However, most collision shop owners never think about the consequences until it happens.

There are hundreds of solutions for this possible catastrophe, but where to start ?

The Old Way Never Worked
In the past we intended to use Tape Backup Systems, thumb drive transfers, and other hardware options that often were not kept up diligently. At the time of need ... no current backup was available.

This system relied on one to perform as scheduled, and most importantly take the backup media off site after every backup, so just in case of a fire or theft of your system, your data was safe.

Let's face it ... who is diligent enough to do this as scheduled every day ? No one!

Cheap is Not the Best Option
If you Google, Backup Options, there are hundreds of options and companies that provide a wide range of products and services.

There are systems that use "appliances" that act like the tape backup units backing up the data almost at real time, and then transferring it to online storage area. These systems are usually very expensive and are designed for much larger data processing companies rather than the typical collision repair shops worldwide.

In recent years companies like Google and even Microsoft have created Online storage space programs such as Google Drive and One Drive.

Unfortunately these systems are "real time transfer programs" that are known to slow your whole system down due to the bandwidth they require along with the processing load.

Then there are the low cost providers of online storage space that take very long to sync every evening. Many of these can act like the "real time" models with the same issues with slowing down your systems. They also can be configured to operate at night as well. However, you are on your own when there is a loss and you need recovery assistance.

What we have found to be the best approach is to provide a solution that not only backups up very efficiently every evening, but also includes the service to restore your data when you need it.

Critical Backup Solutions
Several years ago, we found that our clients were taking risks for loss of their critical data that just should not be happening. We also found that when they did have a loss, they often did not have any idea how to restore their backup data, or where to begin.

Our solution incorporates not only a software solution, but a monitoring process as well as a restoration team even if it just an accidentally deleted file.

We:

  • Centralize your critical data to be backed up every evening
  • Monitor the backups every day and send you messages of their completion
  • If needed we assist in the restoration of a single file (7 versions saved) to a complete system loss restoration.
  • Automated and very quick backups in evening.

Don't Make the Mistake that Costs

The risk of important documents, images, accounting data, program settings, and a host of other key files being lost, corrupted, or accidentally deleted is not worth it.

Check out the options by clicking below:

In Review:

  • There are hundreds of products out there ... but not services that monitor and assist in recovery
  • Real time systems slow your system excessively
  • Centralize data to allow backups to be efficient
  • The risk of loss is far greater than the cost

S-Corp Officer Medical Insurance

One of the Most Common QuickBooks Payroll Mistakes

Many Collision Repair Companies are structured as a S-Corp (Sub S Corporation) for at least tax purposes. 

Even if your company is a LLC (Limited Liability Company) you still need to determine how you will be filing taxes. This would be either as a Sole Proprietorship, Partnership, or either a Regular Corporation, or Sub-S Corporation. 

There are major advantages to S-Corps, but this is not the focus of this post. This post is designed for those that are S-Corps and the company pays for or at least contributes to the costs for medical/dental/vision insurance and/or life insurance for officers that own at least 2% of the stock.

This scenario requires some special setup of the payroll so that these benefits are properly reported on the Officer's W-2 at the end of the year.

QuickBooks Payroll can handle this automatically in the background if it is set up properly. What is unfortunate is that many CPAs and Accountants are not only able to set this up, but many are not even aware of this requirement.

 

Setting Up QuickBooks Payroll

If you use QuickBooks Enhanced Payroll setting this up properly is pretty straight forward once you are shown how.

Step 1: Payroll Items Are Key to the Success 

  • Setup Payroll Item - S-Corp 2% Medical Contribution
    - Add New > Company Contribution
    - Do not use E-Z Method

Step 2: Vendor and GL Account Setup

  • Enter the Vendor you pay the premium to as well as your account number for the vendor
  • Select the Current Liability Account and Expense Account from the Drop Down Menu
    - Payroll Liability Account can be the same account as for any other medical insurance contribution made by the company 
      for any employees.
    - Expense Account would be Officers Benefits - Medical Insurance

Step 3: Select the Proper Tax Tracking Type

This is a critical step often not completed correctly...

  • The Tax Tracking Default will be "None". This must be changed to "SCorp Pd Med Premium"
    - This will begin to track this cost properly, otherwise it will not.

Step 4: Taxes Affected

  • QuickBooks will automatically select what is normally affected.
    - If you are sure that the amount of Federal and State Taxes will be sufficient for the year without extra deductions, you can
      deselect the Federal and state taxes checked.
    - You should either contact us to discuss this deselection.

Step 5: Calculated Based on Quantity

  • Select "Neither"
    - This is not applicable for this Payroll Item

Step 6: Default Rate and Limit

This is the second most critical input for allowing this Payroll Item to work properly.

  • In this example the monthly premium paid by the company for this officer's insurance is $865.00
    - This company payroll is "weekly"
  • Divide the monthly premium by 4 ... equals $216.25
    - If the amount does not divide evenly adjust the amount by +$.01 ...
  • Enter in the Total Premium for the month in the next box.
    - This allocates $216.25 each of the first four weeks monthly, and nothing the fifth week becasue it has reached the limit.
    - This is why you round the weekly payment up by .01 so the fourth week will correctly adjust to the limit.
  • Make sure to select "Monthly - Restart Monthly"
    - This will then allow a monthly limit to begin again.
  • Select "Finish"

Final Step: Set up Officer's Payroll Information in each record

  • Go to each Officer (Must Own at least 2% Stock)
    - On Payroll Info Tab - Make sure item is listed in the right section, and the amount and limit are listed properly.

That is it !

In Review:

  • The Key Points to This Process Are:
  • Set up the Payroll Item Properly
  • Add the Item to All Officers that own at least 2% stock and the company is paying at least partially their medical/dental/vision insurance.

I hope this explained a more streamlined process to follow tracking this for S-Corps.

Handling Short Pays & Sales Tax Credits

Another Important Process to Follow That Most Do Incorrectly

In the Collision Industry there seems to always be times where the amount expected to be paid is shorted by scores of reasons. For this reason shops with management systems have often "held" Repair Orders open waiting for the final confirmation of what the actual payment will be. This is simply not the correct practice or procedure to handle these situations.

There are basic rules that are necessary to allow for timely and accurate information during the month close. If these rules are not followed, it delays the ability to achieve the goal of the final financial statements being made available by the 5th of the following month. It is important to understand that the later in the following month the final financial statements are produced, the less valuable they are to the business. Accounting statements are always "history", they need not be ancient history.

Rule 1:

Repair Orders should be closed when the customer leaves the parking lot with their vehicle. - The repair order should be closed with the amount you expect to be paid

Rule 2:

If the amount you are paid differs from what it was closed for, do not change it in either the management system or your accounting system.

Rule 3:

The management system sales report and the accounting system sales report should match at the end of each month.

Both the management system and your accounting system require some setup to be able to follow these procedures. However, this process will require much less time than changing the repair orders to match what has been "Short Paid. In addition, if the repair order is just left open or changed after it has been exported, you will never be able to actually track and determine how often or how much this may be costing your business.

Management System Setup

Additional Payment Types must be added to the management system to indicate the type of Short Pay the transaction represents. The typical additional Payment Types are: Short Pay, Customer Goodwill, Warranty, Coupon, Gift Certificates, Collections, Discount, Contra/Barter, Refunds/Rebates. However, this can vary based on your needs.

Depending on the management system, how the payment type is identified, not as a payment but an adjustment can streamline this process even further. For this document, we are assuming that the new payment type will be a payment and not an adjustment entry. If the management system allows for adjustment entries several of the following steps will be eliminated.

Step 1: Receive the deficit balance in the management system with the appropriate payment type.

  • In this document we are using "Short Pay".
  • Other types will have different distribution accounts used in the accounting system.
  • Send this into the accounting system.

We will be using QuickBooks in this document for this process, but the process is basically the same regardless of the accounting system. They also require some setup for this process.

In this example, we will using a simple single job, Repair Order 59140, with a total of $318.00. When payment was received it was Short Paid by $43.00 and we do not expect additional payment.

The process that follows will properly address the Accounts Receivables Balance, track the Short Pay, and allow for a Sales Tax Adjustment.

Step 2: Deposit the Short Pay in Adjustment Bank Account *

  • Note: Item clearly identified "Short Pay"

This Step is not needed if management system can create an adjustment rather than a standard payment type.

This process is used regardless for Short Pay, Customer Goodwill, Coupon, etc.

*The Adjustment Bank Account is part of the necessary QuickBooks setup process.

Step 3: Open Adjustment Bank Account Register

  • Add an entry on the same date as the Deposit redistributing the same
    amount to the proper General Ledger (GL) Account.

The account being used is a COGS Account 5575.00 - Adjustments and Shortages
- It is can be setup as a Contra Income Account on the financial statements and it will
be a negative Income Account. I just prefer the number listed as a positive in COGS.

At this time the Account Balance for the Customer is zero, the Adjustment Account is zero, and the amount of the Short Pay is being tracked in the 5575.00 Account.

This account should be reviewed monthly to determine the extent and costs Short Pays are having in your business.

In addition, the sales report from the management system will match accounting; the Accounts Receivables report of both systems will also match.

Sales Tax Adjustments

Over the years, some shops have indicated that this method will require them to pay Sales Tax on sales they do not collect and has been their justification for leaving Repair Orders open and not closed.

How big of a problem is it really?

Depending on the extent of Short Pays that occur in each month typically this is a very small amount. You should determine if these few dollars is worth the time to calculate the credit for Short Pays on your Sales Tax returns.

There are some additional considerations such as whether all income accounts are taxable or not to consider as well. In some States only certain items are taxable such as Parts and Paint/Materials, while other States have additional taxable items, and some tax all income items.

For instance if the total amount of Short Pays for the month total to $500.00 and your State taxes everything, is the time required to do this worth $22.50 - $45.00 (Depending your tax rate) ? If you do not tax all income items this would be even a smaller amount.

For this above reason, we have seen shops use Credit Memos in QuickBooks to handle Short Pays. Keep in mind, using a Credit Memo will affect the Total Sales Amount, and then cause the management system sales report to not match the accounting report. This then requires adjusting the management system Accounts Receivables as well.

The only exception to this is if the Credit Memo is dated in the following month instead of the same month. This is simply not worth the time required, and is not the best method to use.

How to Adjust the Sales Tax

There is a fairly easy and straight forward method of taking the credit for the "Short Pays" when paying the Sales Tax through QuickBooks.

Sales Tax should always be paid through the Sales Tax process built into QuickBooks.

Go to: Vendors Menu > Sales Tax > Manage Sales Tax

Here access the Sales Tax Liability Report, Pay Sales Tax, and Adjust Sales Tax.

In this simple example there was a total of $1100.00 in total sales.
The tax rate is at 4.5%
The total tax the system thinks you have collected is: $66.00.

Step 1: Run a Monthly Report on 5575.00

Adjustments and Shortages Account to determine the amount of sales tax credit.

This will reflect the total dollars for the month that you were Short Paid.

If you also utilize other accounts to track Customer Goodwill, Coupons, Discounts, Warranty, etc., you must total all these accounts. This can easily be done by creating a memorized report that includes all the accounts that you utilize.

In this example the $43.00 represents the total dollar shortage and the State taxes all income accounts. Keep in mind, this report amount includes sales tax.

To determine the amount of sales tax it includes, divide the total amount by 1."your tax rate" (1.045 in this example).

Tax Rate is 4.5%, so divide $43.00 by 1.045 which equals $41.15 ... then the difference is sales tax ... ($43.00 - $41.15) ... $1.85.

Step 2: Select Adjust Sales Tax Due (Manage Sales Tax) and complete the Adjustment

This Example:

  • Entry No. Tax Adj
  • Vendor Your Sales Tax Vendor
  • Account 5575.00 Shortage Account
  • Reduction $1.85
  • Memo Uncollected Sales Adjustment

This will create a Journal Entry in the 2200.00 Sales Tax Payable Account as well as the 5575.00 Adjustments and Shortages Account indicating the amount of Sales Tax Credit being taken.

Step 3: Pay Sales Tax

The Pay Sales Window will include the original tax amount on the first line and the credit being taken on the second line.

Be sure to check both lines

In this example you should also notice that "EFT" is in the check number field.

This is because most States I am aware of now require Sales Taxes Paid Online. This online form often allows for a credit for paying on time as well.

(See below Online Form Example - item 5. Collection Allowance)

If your State does offer a credit, you will need to enter the information from our now updated Payroll Liabilities Report to determine your credit, then just add another Sales Tax Adjustment.

This type of adjustment is typically distributed to an Other Income Account such as Rebates and Refunds, or Accounting Discounts.

QuickBooks does not automatically add these credits to the non-taxed column in the Sales Tax Liability Report. You must include the $1.85 (This example) in the Non-Taxable Sales Total but use a positive number.

Once you have paid the Sales Tax Online, review your Pay Sales Tax Screen, make sure all credits are checked and save.

State Online Payment Screens

Some clients have asked where the Uncollected Sales Adjustment Credits go on the State's Sales Tax Forms. Most States have similar forms, but they are not exactly the same.

The Amount of the Credit should be added to any other Exempt/Deductions/Non-Taxable Sales.

Other Considerations:

In this example, we took the Short Pay in the same month as the invoice closed. Most likely in the majority of cases, you will be taking the Short Pay in a later month. In these cases, the credit will be taken in the current month and the Payment Dates should be the current month you are taking the credit.

If the management system is capable of sending adjustments into QuickBooks, the process of Depositing the Short Pay into the Adjustment Account and then distributing the amount to the proper account is not necessary, it is done automatically.

State Taxes Do Not Tax All Income Accounts

If your State does not tax all items determining how much of the total Short Pay includes Sales Tax is very subjective. Was it all parts, then it is all taxable. If it was labor, it may not be taxable in your State.

As a general rule Part + Materials usually represent close to 50% of the sales invoice, so if you State only actually does tax Parts and Materials, you may decide to use this as a basis to calculate the Sales Tax credit.

Sales Tax - Accrual or Cash Basis

In QuickBooks, in the Sales Tax setup, the default setting is to pay sales tax on an accrual basis. In other words you take the sales tax liability as soon as you invoice the job. Many States require this.

However, there is a setting to pay sales tax on a "cash basis".

Preferences > Sales Tax > Company Preferences Tab

With this setting, you take the sales tax liability as you receive payments. The system in fact on an individual Repair Order basis determines the ratio of taxable verses non-taxable dollars for the job, and uses this ratio to determine your sales tax liability as you receive payments.

If your State taxes all income accounts the ratio would be 100% taxable. This setup when your State doesn't tax everything can be very confusing to an auditor, but you can create a few memorized reports that clearly shows that the proper taxes have been paid.

Even with this setup, the same Short Pay Process should be used and the credits taken the same. It however is not going to be easy to calculate the exact ratio as QuickBooks does automatically if your State does not tax everything. In these cases, I would suggest resorting back to the split as explained earlier.

In Review:

  • The Key Points to This Process Are:
  • Close RO's When the Vehicle Leaves and Send to Accounting
  • Do Not Readjust RO's or QuickBooks
  • Invoices for Deficits
  • Track Deficits in Categories in QuickBooks
  • Use the QuickBooks Process to Pay Sales Tax
  • Take Credits Based on the Reports in QuickBooks

I hope this explained a more streamlined process to follow when it is regards to Short Pays and other deficient payments.