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Have you been having trouble finding the areas of QuickBooks Online you need to use?  Are there just too many choices in the left side navigation menu?  Good news!  You can now customize the left side menu to make it easier to see what you need to see and to go the places you frequently visit.  This simplified navigation takes two forms – Bookmarking and Customizing.

BOOKMARKING

If there are areas of QuickBooks you frequently visit, you can now bookmark those areas, and a shortcut will be put at the top of the left side navigation menu under the heading Bookmarks.  Just hover over the menu section on the left side and when the page options appear for that section, click on the banner at the end of the page name.  That will create a bookmark or shortcut at the top of the left side menu.  This is similar to creating a favorite or bookmark in your web browser.  For some shortcuts, you can even change the name of that bookmark by clicking Edit Bookmark while you’re on the page.  If that option is available, you’ll see it at the end of your bookmark list.  So if you frequently use the Invoices or the Employees page, for instance, you can now have a shortcut or bookmark that will take you there is one easy click.

CUSTOMIZING THE MENU

A lot of options have been added recently to the QuickBooks Online menu, some of which may not apply to your business.  That can make it difficult to navigate to where you need to go in the software.  But you can change that!  Click on Menu Settings at the bottom of the left side navigation menu then click the Customize This Menu choice.  Once the list of areas comes up, uncheck to hide the areas you don’t use and leave the ones you do use checked.  When done, click Save.  This will allow you to see fewer options making it easier to navigate where you need to be.  If you ever find that you need to go to an area you can no longer see, just click on the More option under Menu on the left side and all of your hidden areas will be listed there.

For tax year 2023 information returns that will be filed in early 2024, the IRS has lowered the e-filing threshold from a total of 250 returns to a total of 10 returns.  What does this mean for your small business?  It means most small businesses will now be required to e-file their 1099 forms as well as their W-2’s with the government.  To figure out if you must e-file, add the number of information returns including W-2’s and any type of 1099’s you will issue for tax year 2023.  If you use a third-party payroll service that processes W-2’s for you, don’t forget to count those in your total!  If the total is 10 or more, you will no longer be allowed to file paper returns with the IRS or the SSA but instead will be required to file electronically even though you may continue to issue your payees or employees paper copies of these forms.

The good news is that there are many sources you can use to file electronically with the federal government.  There are a host of third-party services which are usually inexpensive and many not only e-file the forms with the government but will also print and mail copies to your recipients, saving you from having to buy any paper forms at all.  Check the platform you’re using to see if they will also e-file with your state(s) if required.  The IRS also offers a free e-filing service.  See https://www.irs.gov/filing/e-file-information-returns.  As always, consult your tax professional for questions about this change.

Preparing and filing 1099’s will be a little different this year because there’s a new form for tax year 2020 – the 1099-NEC.  NEC stands for Non-Employee Compensation.  This new 1099-NEC form will be used for amounts you previously reported in box 7 of the 1099-MISC form.  This includes amounts over $600 paid to independent contractors, subcontractors, accountants, lawyers, repair companies, cleaning services, commissions to non-employees, etc.  Basically, the rules for who does and doesn’t get a 1099 have not changed.  The only change is that if you previously sent 1099-MISC forms with amounts in box 7, then you will now send out 1099-NEC forms instead. 

Note that you may still need the 1099-MISC.  All payments you previously reported in other 1099-MISC boxes will still need to be reported on the 1099-MISC form.  For example, many small business owners will still need to report rent paid to landlords in box 1 of the 1099-MISC form or royalties in box 2.  That means you may need to order more than one type of form this year. 

Unbelievably, it’s almost the end of the year! Now is the time to think about your final payroll for the year. The list of items that might need to be addressed or reviewed for the final payroll may be lengthy depending on the type of business you have, how many employees you have, and what types of benefits you offer. But for the purposes of keeping things simple and short, I will focus mainly on issues that are special to small business owners, not on employee issues.

If you own a sole proprietorship or an LLC that is not taxed as a corporation, you should not be paying yourself with a payroll check and you should not get a W-2 from your business at the end of the year. While you should be paying your employees through payroll, you should be taking money out of the business with an owner’s draw or member’s draw. You should be sending in estimated tax payments to cover the income tax and self-employment tax you expect to owe for the year. Haven’t been sending in estimated tax payments? Now is the time! consult your CPA to see how much you should send in to avoid possible underpayment penalties.

If you own an LLC that has elected to be taxed as a corporation, in addition to paying your employees through payroll, you should be paying yourself through payroll and you should be getting a W-2 at the end of the year. You may also be eligible to deduct your health insurance premiums as a business expense as long as you report them properly through payroll. You may be able to take some money out of the business via a shareholder’s distribution in addition to what you pay yourself through payroll. This is the time of year to be calculating these items. Again, consult your CPA about how to report health insurance premiums you paid for yourself as well as whether or not taking a distribution out of the business makes sense. But now is the time! It is common to run these items through your final payroll of the year but waiting until January probably won’t work.

Also consult your CPA if you have or want to set up a company-sponsored retirement plan. Retirement plans can be a great way to save on taxes while you save for retirement. However, depending on the type of plan you already have or choose to set up, there may be implications for your payroll so again, now is the time to figure out what you can do!

One of the first things I look at when viewing a client’s QuickBooks file for the first time is the Opening Balance Equity account. The balance in this account should be zero, though that’s often not the case. This is an account that QuickBooks automatically sets up when a new company is created and you can’t get rid of it. So why is Opening Balance Equity there at all and why does it have a balance?

Opening Balance Equity should only be used to help input opening balances into your books when you switch from a different accounting software into QuickBooks. A trained professional will know how to do this for you. After the conversion process, the balance should be zero and should remain zero.

How do those amounts keep showing up in the account then? When a new customer or vendor is added, you have the option to input an opening balance for that customer or vendor. When an opening balance is specified during the customer or vendor setup process, that amount gets classified to Opening Balance Equity. So what should you do instead? If a new customer has an opening balance, you should enter a customer invoice for the balance. That will create a balance due and give you an invoice to receive payment against. If you have a balance with a vendor when you set them up in your QuickBooks, you should add a vendor bill for the amount. That will record the balance you owe the vendor and give you a bill to record payment against.

The same issue occurs when a new inventory item is added with an opening quantity or a new balance sheet account is added with an opening balance. Setting up bank feeds can also lead to an Opening Balance Equity transaction.

The good news is that all of these different types of transactions that may be recorded to the Opening Balance Equity account can be fixed properly so that the accuracy and integrity of your data is preserved. So take a look at your Chart of Accounts, find Opening Balance Equity, and if you have a balance other than zero now is a good time to reach out to a ProAdvisor for some help fixing the issues!

Many businesses use independent contractors to help them perform tasks or services the business owner and employees cannot perform themselves.  Examples of such contractors include, but are not limited to: lawyers, accountants, office cleaners, plumbers, electricians, IT help, repairmen & consultants.  Did you know that payments to these independent contractors may need to be reported to the government on a 1099-MISC form?  Also, payments to the landlord you rent or lease your business space from may also be subject to 1099-MISC reporting.

It’s best practice to make sure that you ask the contractor or landlord for a completed and signed W-9 before you pay them for the first time .  This W-9 form will tell you how the contractor or landlord is taxed which in turn tells you whether or not you will need to track payments to that business for 1099 purposes.  Basically, an individual or business  to whom you paid at least $600 for services and that is not taxed as a corporation may get a 1099.  So ask for the W-9 then take a look at what box they checked.  Any person or business that checks the individual/sole proprietor/single member LLC box, partnership box, or the Limited Liability Company box indicating they are taxed as a partnership may be eligible to receive a 1099 from you.

Remember it’s your responsibility as a business owner to make sure that people you are paying as contractors really are contractors and not employees.  See the IRS website (or many other websites such as those of CPA and HR firms) for more reading on the difference between employees and independent contractors.  Also remember that if someone really is an independent contractor, you should have a W-9 on file for them as well as anything else that may indicate this person or business performs services for other businesses, not just yours.  Other documentation you may consider keeping on file for the vendor includes invoices they send you, their business cards, certificates of insurance, etc.

The 1099-MISC laws and regulations can be complex and do contain some exceptions, including an exception for payments made to vendors using third party services like credit cards as well as some exceptions to the exemption for corporations.  When in doubt, consult an accounting or human resources professional.  See the Helpful Links & Documents page of this website for the most current W-9 form.

 

Your CPA and/or tax preparer needs good information in order to prepare accurate taxes or financial statements at year-end.  Providing records from your accounting system is not enough – these professionals will need to verify the accuracy of the numbers and make sure that all business-related transactions are accounted for properly.  To make this task easier, here is a short list of items that most CPA’s or tax preparers will need to see.  Now is a good time to start gathering this documentation!

1. Bank, credit card, and loan statements – at least the final one of each for the year
2. Mileage log and/or receipts or listing of actual auto expenses for vehicles used for business purposes
3. Payroll records including all quarterly and annual payroll reports filed with federal and state agencies
4. Receipts or listing of expenses for your home if taking the home office deduction – be sure to include maintenance, repairs, taxes, and insurance payments
5. Information for any new loans entered into during the year or security deposits paid
6. Listing of fixed assets (typically larger purchases like computers, furniture, cars, etc.) purchased and disposed of – be sure to include dates & amounts
7. Listing of money an owner, member, or partner put into the business from personal funds and took out of the business (as draws or distributions)
8. Accounting of any insurance expenses paid out of business funds for an owner, member, or partner – be sure to include all types of insurance such as disability, life, health, dental, vision, etc.
9. Receipts for any business expenses paid by an owner, member, or partner out of personal funds, especially if those amounts were not reimbursed to the person by year-end

Did you know that you can easily figure out what percent of your total income comes from product sales versus service sales or what percent payroll or office supplies are of your total expenses?  It’s quick and easy to find this information in QuickBooks Online by running some reports you might not realize you have!

If you want to see what percent each line on the P&L is of your total income or total expenses, you can run a Profit & Loss as % of Total Income report.  This is found in the Business Overview section of Reports.  Click on the report name then choose the dates you want to see in the top left of the report screen.  By default, this report shows the percent each line is of your total income which is great to help you see how your income is divided between the different types of services or goods you provide.

But a simple customization can tell you what percent of your overall expenses each line item makes up.  Click Customize in the top right of the report screen then expand the Rows/Columns choices.  Here you can check the % of Expenses box (instead of or in addition to the % of Income box that’s already checked).  This is a good way to see what proportion of your expenses each individual type of expense is.  For example, you might want to make sure your payroll expenses don’t exceed 50% of your total expenses and this is a great way to keep an eye on it.

Do you want to compare how things are going this year with the same time period last year?  Run a Profit & Loss Year-to-Date Comparison report also located in the Business Overview section of Reports.  Click on the report name to run it, then choose the date range you want to see (this year-to-date or this year to last month, for example).  To see the dollar amount or percent of change between the two years, customize the report.  Click Customize and expand the Rows/Columns options.  You can click the Previous Year box then either or both the $ Change and % Change boxes.  This a good way to see if you’ve managed to trim a certain type of expense compared to the same time period in the previous year or if you’ve increased a particular type of income over the same time in the previous year.

Just play around with checking the boxes in the Rows/Columns area of the various Profit & Loss reports and see what information you find useful.  You can check multiple boxes if you want to see multiple types of information.  Remember, if you find something helpful, you can click Save Customization and pull it up again later by looking under Custom Reports.

Do you ever need a little more information than the standard reports give you?  If so, you can easily and quickly customize many reports to show you a little more, or a little less, information.  This post will focus just on the P&L, also known as the Profit & Loss Statement or the Income Statement.

In QuickBooks desktop, run the P&L under Reports>Company & Financial>Profit & Loss Standard.  You can easily customize the date with the Dates drop down or the calendar selectors at the top of the report.  To see your P&L broken out by week, month, or quarter, choose the date of This Month or This Fiscal Year.  Next, at the top of the report, in the Show Columns drop down, choose the period of time you want to see in each column – Week, Month, Quarter, etc.  Changing the dates and the columns shown on the P&L will allow you to see data month to month, quarter to quarter, or even year to year.

Do you ever wonder what percent of your income you spend on different types of expenses?  It’s easy to see by customizing the P&L.  Run the P&L again and this time, click on the Customize Report button in the top left corner.  The first tab that shows up is the Display tab.  On the bottom half of this tab, you can click the box to show % of Income and that will put a percent next to each line of your P&L that tells you what percent of your income that line represents.  So if you see 5% next to Office Supplies, it means that 5% of what you make goes to pay for office supplies.  Also in the bottom half of the Display tab, you can check the box to show what your P&L looked liked in a Previous Period or Previous Year for comparison.

Maybe you really only want to see expense accounts at the moment, not the income accounts.  In that case, click Customize Report again and this time go to the Filters tab.  Click on Account in the filter area then in the drop down in the center of the box, choose Expense and other expense accounts (or whatever types of accounts you want to see).

When you’ve created a useful report that you think you’ll use regularly, you can click the Memorize button at the top of the report.  Give it a name that briefly explains what it shows then click OK to save it.  This customized report will now show under Reports>Memorized Reports for you to use again.

Just play with the display and filter choices until you find what you’re looking for.  Or, if needed, you can ask a QuickBooks ProAdvisor to help you customize a report that shows exactly what you want to see.  This is your accounting software so you need to be able to get the right information out of it to help you make the best business decisions.  Coming next time…how to make simple customizations to the P&L in QuickBooks Online.

My clients often ask if they need to save their receipts.  The answer is always YES!  Even if your bookkeeper doesn’t ask to see your receipts, you should always have them saved as backup or proof of the expenses you’re claiming on your tax return.  And sometimes just having the receipt isn’t enough.  Did you know that it’s best practice to notate the business purpose of the purchase and the person or people involved?  For instance, if you buy a tool it’s best to notate what the tool would be used for and who will be using it.  If you’re sponsoring a company picnic, notate when the picnic is and that it was for all employees.  Remember that more detail is better than less (or none at all).

Another often overlooked area of documentation is vehicle mileage.  If you use your personal car for business purposes, you need to log the mileage at the beginning and end of the year as well as all miles you drive for your business during the year and the destination and purpose of those trips.  Even if a vehicle is owned by a company and used exclusively for business, there should still be a mileage log where drivers note the starting and ending mileage of the trip as well as the destination and business purpose.  Whether you’re using mileage or actual expenses to figure out your vehicle expense for the year, you need to track your mileage either way.  Your log may be a spreadsheet, notebook, or other method as long as you track consistently throughout the year.

So what happens if you don’t keep supporting documentation such as receipts or mileage logs?  If you’re ever audited, the IRS may not allow you to take some of the expenses you claimed as deductions meaning you would owe more tax.  So now is a great time to get in the habit of saving receipts and writing down your mileage.  It can be as easy as keeping an envelope for receipts and a small notebook for mileage in your car!