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QuickBooks Tip: Reconcile Your Company Credit Card Charges Monthly

Posted on February 21, 2013 by Meredith Tucker

Reconciling your bank accounts monthly in QuickBooks is a must, but did you know that you should reconcile your credit card accounts monthly too? Doing so will ensure that common errors, such as misposted or forgotten charges, are corrected in your company’s file as the year progresses. No one enjoys the daunting task of cleaning up 12 months’ worth of transactions at the end of the year – except maybe your accountant!

As with bank reconciliations, the credit card reconciliation feature is accessed by going to the “Banking” drop-down menu at the top of your screen and selecting the “Reconcile” option. And, as with the bank register, your credit card accounts also have registers available where all charges and payments can be entered.

Unless you pay your company card in full each month, entering credit card charges on the date incurred is important. Here’s why: taxpayers are entitled to a deduction for business expenses when charged to their cards. If you make a large purchase at Office Depot on December 28^th while out for your after-Christmas shopping spree, you are permitted to deduct the expense on your 2012 tax return, even if you don’t pay the bill until January 2013. If you’re always waiting to record your credit card charges until you pay your bill, you’re inadvertently missing out on significant deductions.

The correct way to account for spending on your company card is to use the credit card register or the “enter credit card charges” option under the “Banking” pull down menu. Purchases you make throughout the month will be reflected on your company’s profit and loss statement as your credit card liability balance grows. Then, in the next month, as you start to pay down your outstanding balance, your American Express payment, for example, will be posted to the credit card liability account, reducing the balance QuickBooks shows for your card (as well as your bank account for that check you just wrote!).

Many business owners run a significant portion of their monthly business expenses through company credit cards. Those cash back offers and frequent flier miles are just too good to resist. Follow these simple steps to reconcile your charges monthly, and you’ll be able to enjoy all the perks of being a platinum card holder without the headache of a major year-end clean-up.

Contact Kaufman, Rossin’s QuickBooks ProAdvisors to learn how you can better use QuickBooks for your business needs.

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Meredith Tucker is an accounting services manager at Kaufman, Rossin’s Ft. Lauderdale office, and a QuickBooks ProAdvisor. Kaufman, Rossin & Co., one of the top CPA firms in the country, offers QuickBooks training and consulting services. She can be reached at mtucker@kaufmanrossin.com.

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How Will New Tax Changes Affect Your Business?

Posted on February 12, 2013 by Dennis Fitzpatrick

With the recent passage of the American Taxpayer Relief Act of 2012, many of our clients are asking us what tax changes they should be aware of and how these changes will affect them. While we recently shared an overview of the 2013 tax changes affecting individuals, Congress also extended several popular business tax benefits that were set to expire. Here’s a look at some of the new tax provisions affecting businesses:

Business Asset Expensing

Section 179 Deduction. The Act extends Section 179 small business asset expensing through 2013. The Section 179 deduction is available for most new and used capital equipment and also includes certain software. For tax years 2012 and 2013, businesses can expense up to $500,000 of qualifying purchases with a $2 million investment limit. In addition, the Act includes a two-year extension of Section 179 expensing of up to $250,000 for qualifying leasehold improvements, restaurant property, and retail improvement property through 2013.
Bonus Depreciation. The 50% bonus depreciation is extended through 2013; some transportation and longer production property is eligible through 2014. Qualifying property includes most new equipment that is depreciable under the Modified Accelerated Cost Recovery System (MACRS) with a depreciation period of 20 years or less. Original use of the property must begin with the taxpayer claiming the bonus depreciation, and the property must be placed into service during the tax year.
Cost Recovery Periods. The Act extends through 2013 the 15-year cost recovery period for qualified leasehold improvements, restaurant property and retail improvement property.

R&D Tax Credit

Congress extended the research and development tax credit retroactive to January 1, 2012. Businesses can claim the incremental credit for increases in business-related, qualified research expenditures. Companies developing new or improved products or outsourcing product testing may be eligible.

Work Opportunity Tax Credit

The Work Opportunity Tax Credit (WOTC) is extended through 2013. Employers who hire veterans and other individuals from certain target groups who face barriers to employment are eligible for a credit with a maximum range from $2,400 to $9,600, depending on the employee hired.

Other Business Tax Benefits

Congress also extended the following business tax provisions through 2013:

The 100% exclusion for gains on a sale of small business stock
Special tax incentives for businesses located in empowerment zones
Rules on S corporations making charitable donations of property

If you have questions about the American Tax Relief Act of 2012 or want to learn more about how your business may be affected by these tax changes, please contact us.

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Dennis Fitzpatrick, J.D., is a tax principal at Kaufman, Rossin’s Miami office. Kaufman, Rossin & Co. is one of the top CPA firms in the country. Dennis can be reached at dfitzpatrick@kaufmanrossin.com.

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QuickBooks Tip: Set a Closing Date Password to Protect Prior Year Data

Posted on January 23, 2013 by Terri Richards

It is that time of year again: time to reconcile your bank accounts and review your QuickBooks file, before sending it off to your accountant for year-end closing.

The file you send is going to be the basis for your tax return and/or financial statements, so it is critical that the QuickBooks file remain unchanged once it is sent to your accountant. QuickBooks has a built-in safeguard to prevent users from accidently changing closed periods – a closing date password.

Consider setting a closing date password when you send your QuickBooks file to your accountant. It will help ensure that no one inadvertently makes a change that affects a closed period. In fact, this step is so important, Intuit has made it very easy for users to perform.

Here’s how to set a closing date password in QuickBooks:

Go to “Company”
Select “Set Closing Date”
Select “Set Date/Password”
Choose your closing date and password and click “OK”

Each time you set the closing date, any period prior to that date will be password protected from changes. Anyone trying to make a change to a closed period will have to enter the password to save the transaction in QuickBooks. We recommend, at a minimum, setting a closing date at year-end, however you may consider setting interim closing dates to prevent unintentional changes to reconciled periods throughout the year.

Contact Kaufman, Rossin’s QuickBooks ProAdvisors to learn more about protecting your prior year data.

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Terri Richards is an accounting services manager at Kaufman, Rossin’s Boca Raton office, and a QuickBooks ProAdvisor. Kaufman, Rossin & Co., one of the top CPA firms in the country, offers QuickBooks training, accounting and consulting services for a variety of industries, including construction. Terri can be reached at trichards@kaufmanrossin.com.

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IRS Foreign Account Reporting Requirements

Posted on January 18, 2013 by Dara Green

If you have a foreign bank account, brokerage account, mutual fund, trust or other type of foreign financial account, you may be required to report the account to the Internal Revenue Service. Failing to do so will result in significant penalties.

All U.S. taxpayers, including U.S. entities, must report their interest in foreign financial accounts if the combined balance in the foreign accounts exceeds $10,000 during the tax year. This requirement also applies to U.S. taxpayers who have a signature authority over such an account, even if they do not own the assets in the account. You must report the foreign financial accounts on Form TD F 90-22.1, the Report of Foreign Bank and Financial Accounts (FBAR), by June 30^th following the tax year, and no extensions are allowed.

The IRS requires individuals to file the FBAR because foreign financial institutions may not be subject to the same reporting requirements as U.S. financial institutions. The FBAR helps the U.S. government identify or trace unreported income maintained or generated abroad.

In addition to the FBAR, all U.S. taxpayers are obligated to report their interest in certain foreign financial assets on Form 8938 (Statement of Foreign Financial Assets). Unlike the FBAR, Form 8938 is filed with the taxpayer’s annual income tax return (i.e. April 15^th of the following tax year). Form 8938 is used to report an interest in certain foreign financial assets with an aggregate value above $50,000 on the last day of the tax year or $75,000 at any time during the year (higher thresholds apply for married individuals or taxpayers living outside the United States).

If you believe that you may have a financial interest in or signature authority over a foreign account or asset that meets the above criteria, please contact us to determine whether the FBAR or Form 8938 rules apply to you.

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Dara Green, J.D., LL.M., is a director of international tax in Kaufman, Rossin’s Miami office. Kaufman, Rossin & Co. is one of the top CPA firms in the country. Dara can be reached at dgreen@kaufmanrossin.com.

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Congress Extends Popular R&D Tax Credit

Posted on January 14, 2013 by Sean Haggard

In a boon for entrepreneurs and the technology industry, Congress’ last-minute, “fiscal cliff” compromise included an extension of the much-loved research and development tax credit retroactive to January 1, 2012.

“We can’t keep cutting things like basic research and new technology and still expect to succeed in a 21st-century economy,” President Obama said after Congress passed the American Taxpayer Relief Act.

You don’t need to have a lab and a team of scientists to claim the R&D tax credit, which was created in 1981 to encourage companies to innovate, invest in research and hire workers to perform R&D. Small and medium-size businesses developing new or improved products, or companies that outsource product testing are eligible, says Sean Haggard, CPA, a tax manager in Kaufman, Rossin’s Boca Raton office.

The R&D tax credit has generally been extended every year, and in recent years, it has become more attractive for smaller companies. There are three main reasons for its increase in popularity: 1) the credit is simpler now; 2) it can be transferred in an acquisition; and it can be taken retroactively. This tax credit presents a unique opportunity for startups because R&D costs incurred in the early years of a business when the company has no income can be carried forward 20 years to offset taxes on future profits, Haggard says.

However, as he told Bloomberg Businessweek, 80% of R&D tax credits currently go to companies with $250 million or more in gross receipts mainly to the fact that smaller companies believe they do not qualify or believe the credit is too complicated. The retroactive extension of this tax credit to January 1, 2012 is a good sign that there’s always room for more innovation and the government is willing to subsidize it.