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COVID-19 Tax Updates

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With the 2019 Tax Filing Season just behind us, it is difficult to think of the next filing season, however, there are many issues that need to be addressed now, rather than wait.

At this most difficult time for our taxpayers, we want to assure you that our firm is here to assist you with your questions and concerns.

Economic Impact Payment – Stimulus

Many of you received an Economic Impact Payment, known as the Stimulus.  Whether you received a direct deposit, a check or a debit card, you also received a letter from the Internal Revenue Service.  If you received this letter, Notice 1444 in the mail we will need it to prepare your 2020 U. S. Federal Income Tax Return to determine if you qualify for additional payment.

 

If you did not get your payment, you can check the Get My Payment tool on the IRS website to double-check that it has been issued.

 

You can initiate a trace on your payment by calling the IRS at 800-919-9835,expect long wait times, or submitting Form 3911.  The United States Department of Treasury has requested for any deceased taxpayer who received a stimulus, their estate should return the payment to the Internal Revenue Service.

 

Unemployment Compensation

According to the IRS, unemployment benefits are taxable income. This means that any unemployment compensation that you receive from a state or the federal government must be included in your income and will be taxed at your ordinary income tax rate

To access 1099-G tax statements, claimants can go to https://dwd.wisconsin.gov/uiben/1099.htm and then follow a few easy steps to obtain an electronic copy of their 2020 benefit payment records.

In response to customer service trends toward the convenience of online self-service, claimants who have logged onto UI’s online benefits services system are being notified their 1099-G statements for 2020 will be accessible online and that they should not expect to be mailed paper copies. DWD securely stores 1099-G forms online for all claimants to access and print for their records. Claimants’ statements are available online for the past six years, which is helpful if claimants have to file amended tax returns. The UI Division is required to send 1099-G information to the Internal Revenue Service and the Wisconsin Department of Revenue

This tax form shows the amount of unemployment benefits you received and the amount of taxes withheld.   Unemployment benefits will also be taxable to your state if you live in a state with state income tax.  We will need the Form 1099-G to prepare your 2020 tax return.

You may wish to have withholding taken from your payment or may make Estimated Tax Payments to the IRS and the State. If you received Unemployment benefits, you may want to plan ahead for the potential tax impact so that there are not any surprises when you file your 2020 tax return.

 

Payroll Protection Plan Loans

Payroll Protection Plan (PPP) loans obtained to assist you keep your business open and your staff employed will undoubtedly have some impact on your 2020 tax filing.  The United States Congress is considering additional legislation to determine if debt forgiveness will not allow deductions used to eliminate the debt to be deductible or if there will be a blanket allowance of up to $150,000 of the PPP to be considered a grant and non-taxable. Currently, the part of the loan that is forgiven will not be allowed as deductible expenses, i.e. payroll, rent, utilities. This may increase your profits subject to tax. Tax Planning will be very important if this legislation does not change.

 

RMDs – Required Minimum Distributions

The CARES Act enabled any taxpayer with an RMD due in 2020 from a defined-contribution retirement plan, including a 401(k) or 403(b) plan, or an IRA, to skip those RMDs this year. This includes anyone who turned age 70 1/2 in 2019 and would have had to take the first RMD by April 1, 2020. This waiver does not apply to defined-benefit plans.

In addition to the rollover opportunity, an IRA owner or beneficiary who has already received a distribution from an IRA of an amount that would have been an RMD in 2020 can repay the distribution to the IRA by August 31, 2020. The notice provides that this repayment is not subject to the one rollover per 12-month period limitation and the restriction on rollovers for inherited IRAs.

 

These issues and many others have impacted our clients so far this year including changes in the tax code that may require amendment of prior tax returns.

 

Additionally the Supreme Court is scheduled to hear oral arguments concerning the constitutionality of the Patient Protection and Affordable Care Act, ACA, case California vs. Texas.  Should the Supreme Court over-turn the ACA it will overturn such tax issues as the Additional Medicare Tax and the Net Investment Income Tax.  It remains to be seen the full tax scope of such a decision.

 

Again, we understand the need to stay safe and well, it is our priority for our firm as well.

We are taking the precautions to keep you, our staff and us safe during these times.

 

We are ready to serve you.  Please call our office for an appointment, either face-to-face or by telephone.

 

Our best of wishes for your health and well-being.

 

Team Hammernik

Milwaukee Restart Grant Program

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The goal of the Milwaukee Restart Program (Restart) is to help local businesses that suffered as a result of the pandemic to reopen and adapt to the “new normal”

Eligibility

Restart grants will assist for-profit businesses located in the City of Milwaukee that have 20 or fewer full-time or full-time equivalent employees and greater than $0 but less than $2 million in 2019 revenue. Restart grants shall be limited to one per business owner. All applicants must be current on property taxes owed to the City of Milwaukee up through the 2018 tax bill.

For-profit Daycares will be eligible if they can demonstrate they have not continued to receive W-2 allocations during the pandemic or federal assistance.

The following business types are NOT eligible to apply:
gambling or gaming, national franchises, adult establishments, massage parlors, pawn shops, pay day loan or auto loan stores, home-based businesses, not-for-profits, tobacco stores, home-based businesses and liquor stores

Eligible Expenditures

Businesses may apply for the following expenses associated with re-starting business operations:

  • Personal Protective Equipment for employees (Limit of $100 per FTE; maximum of $2,000.00)
  • Modifications to business space and operations to adapt to COVID-19 pandemic (Limit of $3 per square foot of business storefront space; maximum of $7,500.00)
  • Restock of perishable inventory (Limited to $7,500.00; purchase of alcoholic beverages shall not exceed 25% or $1,875.00)

These calculations are provided to assist applicants to understand the maximum amount allowed. However, please note that final allocations will depend on available funding and demand for the program.

How to apply

As part of the application process, applicants are required to upload electronic versions of these documents:

  • Tax Return and K-1s for the business for the most recently completed year, or company-prepared Financial Statements for 2019
  • Documentation indicating the number of employees who worked during 2019 (Form 941, payroll report, etc.)
  • A current W9 form Rev. Version 2018
  • Photos of the interior and exterior of the business
  • Plan for spending the grant for the eligible expenses, including estimated amounts and descriptions of the expenditures

Applications must be made online between 9:00 AM CDT on May 28, 2020 and will be accepting applications until 5:00 PM CDT on June 12, 2020. Applicants will need to create an account to apply. This will allow users to save progress on their applications should they need additional time to fill out the application. Please make sure to keep a note of your user name and password. Click here for the Milwaukee Restart Application.

Grant Follow Up 

All businesses receiving Restart assistance will be required to complete a follow-up survey after the grant is awarded. Grant recipients must keep detailed records on reopening dates, receipts for expenditure of grant funds, and staff and payroll records.

Additional Grant Becomes Available For Wisconsin Small Businesses

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Over the past few months COVID-19 has changed the way a lot of small businesses operate. Some have been unable to be open, some have adapted and changed, and some have even thrived. The Government had made a few loans available to try and help small businesses keep their employees employed and to also cover some overhead expenses. Now, locally, the State of Wisconsin is offering a grant of their own to local small businesses.

“We’re All In” is a pandemic relief grant for small businesses in the State of Wisconsin.

HOW IT WORKS

Funded by the federal Coronavirus Aid, Relief and Economic Security (CARES) Act, the We’re All In Small Business Grant Program will provide $2,500 to 30,000 Wisconsin small businesses to assist with the costs of business interruption or for health and safety improvements, wages and salaries, rent, mortgages and inventory.

ELIGIBILITY REQUIREMENTS

To be eligible, businesses must:

  • be a Wisconsin-based, for-profit business;
  • employ 20 or fewer full-time equivalent (FTE) employees, including the owner;
  • earn greater than $0 but less than $1 million in annual revenues (gross sales and receipts); and
  • have started operating prior to Jan. 1, 2020, and have been in business as of Feb. 2020. (Seasonal businesses should use the highest total FTEs employed during the season.)
  • APPLICATION PERIOD

    The online grant application will be accessible for one week from 8 a.m. Monday, June 15, through 11:59 p.m. Sunday, June 21.

  • BE PREPARED

    Applicants are encouraged to prepare for the one-week application period by gathering the following required documents:

    • 2018 or 2019 federal tax return for business (If you started your business in 2020, you are not eligible for this grant). Applicable tax returns are:
      • IRS form 1065 Partnership Return (no K-1s required)
      • IRS form 1120 Corporation Return (no schedules required)
      • IRS form 1120S S Corporation Return (no K-1s required)
      • IRS form 1040 (sole proprietors) and the following:
        • Schedule C, Profit and Loss from Business
    • Signed W-9 form available at www.irs.gov/pub/irs-pdf/fw9.pdf
    • A letter or email of acknowledgement from a community organization indicating your business was in operation in February 2020. The letter or email can be from any of the following:
      • Chamber of commerce
      • Main Street or Connect Communities organization
      • Local business improvement district
      • Neighborhood economic development association
      • Local economic development organization
      • County economic development organization
      • Municipality, including tribal government
      • County
      • Local bank, credit union or community development financial institution
      • Regional UW Small Business Development Center
      • U.S. Export Assistance Center – Wisconsin
      • Regional economic development organization
      • Regional Planning Commission
      • Trade association
    • Sample text for a letter or email can be downloaded here (file will be saved to your downloads folder automatically). An electronic letter submitted to you via email is acceptable.

Find out more information regarding the We’re All In Small Business Grant, please review this page of frequently asked questions.

Finding the Right Accountant to Successfully Guide You Through the Tax Maze

Choosing an Accountant Who Puts Your Goals First

There is an endless supply of do-it-yourself tax preparation tools and websites, and the sheer volume of options can lead you to believe the process of filing your returns is simple.

However, a DIY approach only works if you are satisfied with paying more than necessary. Tax preparation software handles all of the basics, importing income and considering common tax deductions. Unfortunately, when it comes to careful application of less-common tax-reduction techniques, these programs simply can’t compete with a skilled tax professional.

The Amazon Best Selling book, The Great Tax Escape, walks you through the process of choosing an accountant. Specifically, you will learn what to look for – and what to avoid – if you want a tax specialist who will help you keep your tax bill low.

Five Reasons to Hire a Highly-Qualified Accountant

As you know from your experience in business settings, companies that focus on their core mission are more successful. Devoting internal resources to creating excellent products and services, while outsourcing peripheral functions like IT and HR, makes it possible to innovate and deliver best-in-class solutions.

Focusing on your core mission is just as critical when it comes to tax preparation. The time you would spend trying to track down tax information is better applied elsewhere, and you are likely to pay more in the end anyway. These are five ways your accountant will free up resources for you to use in ways that will further your personal mission:

  • The tax code is constantly changing, and deductions that were available last year may not be appropriate today. Conversely, expenses you couldn’t deduct in previous returns may now be permitted. A skilled accountant stays on top of these changes and applies them to your situation, so you don’t have to complete extensive research.
  • Much of the tax code is spelled out and clarified based on specific cases. Unless you are following industry developments day in and day out, you are likely to miss all but the most significant decisions. Your accountant has years of experience with filing returns, and continuing education is required in every state. You can be sure that these professionals understand what works – and what doesn’t.
  • Experience also helps when it comes to developing your long-term tax savings strategy. Accountants have watched businesses grow and change, and they know how to get results. Their expertise in complex decisions like choosing a business entity or whether to consider cost segregation can be invaluable.
  • Different types of income are taxed at varying rates, and do-it-yourself filers often assume there is nothing that can be done to change their circumstances. Talented accountants know better. With the help of a skilled professional, it may be possible to move income from high-tax categories to low-tax categories, which can mean significant savings. .
  • Finally, timing is always important in the financial world, and that holds true when it comes to your tax strategy. Accountants have a deep understanding of the economy’s ebb and flow, and they notice patterns that have played out over the course of their careers. They use this experience to advise on when and how to apply tax strategies for maximum savings.

Learn more about why and how to choose the right accountant for all of your tax preparation needs by requesting a copy of The Great Tax Escape from our website.

Finding the right accountant to successfully guide you through the tax maze

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Choosing an Accountant Who Puts Your Goals First

There is an endless supply of do-it-yourself tax preparation tools and websites, and the sheer volume of options can lead you to believe the process of filing your returns is simple.

However, a DIY approach only works if you are satisfied with paying more than necessary. Tax preparation software handles all of the basics, importing income and considering common tax deductions. Unfortunately, when it comes to careful application of less-common tax-reduction techniques, these programs simply can’t compete with a skilled tax professional.

The Amazon Best Selling book, The Great Tax Escape, walks you through the process of choosing an accountant. Specifically, you will learn what to look for – and what to avoid – if you want a tax specialist who will help you keep your tax bill low.

Five Reasons to Hire a Highly-Qualified Accountant

As you know from your experience in business settings, companies that focus on their core mission are more successful. Devoting internal resources to creating excellent products and services, while outsourcing peripheral functions like IT and HR, makes it possible to innovate and deliver best-in-class solutions.

Focusing on your core mission is just as critical when it comes to tax preparation. The time you would spend trying to track down tax information is better applied elsewhere, and you are likely to pay more in the end anyway. These are five ways your accountant will free up resources for you to use in ways that will further your personal mission:

  • The tax code is constantly changing, and deductions that were available last year may not be appropriate today. Conversely, expenses you couldn’t deduct in previous returns may now be permitted. A skilled accountant stays on top of these changes and applies them to your situation, so you don’t have to complete extensive research.
  • Much of the tax code is spelled out and clarified based on specific cases. Unless you are following industry developments day in and day out, you are likely to miss all but the most significant decisions. Your accountant has years of experience with filing returns, and continuing education is required in every state. You can be sure that these professionals understand what works – and what doesn’t.
  • Experience also helps when it comes to developing your long-term tax savings strategy. Accountants have watched businesses grow and change, and they know how to get results. Their expertise in complex decisions like choosing a business entity or whether to consider cost segregation can be invaluable.
  • Different types of income are taxed at varying rates, and do-it-yourself filers often assume there is nothing that can be done to change their circumstances. Talented accountants know better. With the help of a skilled professional, it may be possible to move income from high-tax categories to low-tax categories, which can mean significant savings. .
  • Finally, timing is always important in the financial world, and that holds true when it comes to your tax strategy. Accountants have a deep understanding of the economy’s ebb and flow, and they notice patterns that have played out over the course of their careers. They use this experience to advise on when and how to apply tax strategies for maximum savings.

Learn more about why and how to choose the right accountant for all of your tax preparation needs by requesting a copy of The Great Tax Escape from our website.

Does my Rental Property Qualify for the New Section 199A Deduction Under Tax Reform?

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How do you know if your rental property qualifies for the 20 percent tax deduction under new tax code Section 199A? Just what we need–something else to learn along with all of the other tax code changes this year.

Well, maybe not.

There is a piece of good news: we won’t be required to learn this tax code because everything we need to know about it is in the new regulations proposed by the IRS. Existing rules govern.

Does the IRS deem your rental property a business? If so, then yes, your property qualifies for the deduction.

It might sound strange to think of your rental property as a business, especially if you now report the rental on Schedule E of your 1040.

If your rental property is carefully selected, maintained indoors and out, and managed efficiently, it can provide residual income, capital gains, and tax advantages, including the 199A deduction in many cases.

How Does a Rental Property Qualify as a Business?

If the rental property you own earns a profit, you own a business. Whether you manage it or you hire a company or individual to manage it, it still qualifies for the 199A deduction.

And the news gets better….

Schedule E rentals also qualify for even sweeter tax benefits. There are two ways the IRS treats rental activity as a business for the Section 199A deduction:

  1. Tax-favored Section 1231 treatment
  2. Businesses use an office in your home (and if it’s a principle office, and you have more than one rental property, you qualify for related business deductions for travel to and from your properties.)
    Your rental property will qualify for the 20 percent Section 199A deduction if you rent it to a commonly controlled trade or business, even if your rental property does not qualify as a Section 162 trade or business.

All of this can be confusing. Would you like help discerning whether your rental properties qualify for the new 20 percent Section 199A tax deduction? If so, please contact one of our qualified tax professionals. We can help with all of your Milwaukee rental property tax questions.

Do You Truly Know Your Business Costs? You Better!

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Your company’s profitability depends not only on sales, but also on effective cost management. Are you adequately addressing the cost side of the business equation?

Analyze Your Cost Structure

You probably can readily identify the products and/or services that are generating your greatest sales volume. But can you identify all the costs associated with providing each product or service? Only when you know your true costs can you effectively allocate resources to the work that is most profitable for your company.

Actively Monitor Operations

As the busy owner of a small business, you can’t be everywhere all the time. But you do need to stay in circulation, regularly observing the day-to-day operations of your business and talking to your managers and employees. By staying visible and encouraging an open dialogue, you’ll be in a better position to uncover costly problems before they seriously erode your company’s bottom line.

Solicit Bids

Even if you are satisfied with a current vendor, you may want to talk to the competition from time to time. You won’t necessarily want to switch vendors simply because you are quoted a better price. But you may be able to use that price in negotiating more favorable terms from your existing supplier.

Watch for Discounts

In the interests of cash flow, your company may routinely pay its bills only when they come due. While this generally is a sensible strategy, it may not be wise if you are passing up generous cash discounts for earlier payment. In the current low interest rate environment, borrowing the funds you need to take advantage of discounts may be a better move. For example, suppose a vendor offers your company a 2% discount for paying a $10,000 invoice 20 days early. Passing up the discount will cost you $200. Instead, you might borrow $9,800 from your bank, pay the discounted invoice, and repay the loan in 20 days. If the rate on your bank line of credit is 8%, you’ll owe about $45 of interest — for a net savings of $155 on just one invoice.

Effective cost management requires good information and careful planning.

2018 Tax Changes: Frequently Asked Questions

 

As we move closer to the tax filing season, the Tax Cuts and Jobs Act (TCJA) has raised many questions in regards to tax preparation for Milwaukee taxpayers. Below are answers to some of them.

Do I need to adjust my withholding allowances, given that tax brackets have changed?

You may notice a change in your net paycheck as a result of the tax law, which alters tax rates, brackets, and other items that affect how much tax is withheld from your pay. The IRS has already issued new withholding tables, and your employer should adjust its withholding without requiring any action on your part. But you may want to take the opportunity to make sure you are claiming the appropriate number of withholding allowances by filling out IRS Form W-4. This form is used to determine your withholding based on your filing status and other information. The IRS suggests that you consider completing a new Form W-4 each year and when your personal or financial situation changes.

Can I take advantage of the new deduction for pass-through business income?

The new rules for owners of pass-through entities — partnerships, limited liability companies, S corporations, and sole proprietorships — allow them to deduct 20% of their business pass-through income. The 20% deduction is available to owners of almost any type of trade or business whose taxable income does not exceed $315,000 (joint return) or $157,500 (other returns). Above those amounts, the deduction is subject to certain limitations based on business assets and wages. Different deduction restrictions apply to individuals in specified service businesses (e.g., law, medicine, and accounting).

Can I still deduct mortgage interest and real estate taxes paid on a second home?

Yes, but the new rules limit these deductions. The deduction for total mortgage interest is limited to the amount paid on underlying debt of up to $750,000 ($375,000 for married individuals filing separately). Previously, the limit was $1 million. Note that the new restriction will not apply to taxpayers with home acquisition debt incurred on or before December 15, 2017. Additionally, the deduction for interest on home equity loans (new and existing) is suspended and will not be available for tax years 2018-2025.

Note that the law also establishes a $10,000 limit on the combined total deduction for state and local income (or sales) taxes, real estate taxes, and personal property taxes. As a result, your ability to deduct real estate taxes may be limited.

Are there any changes to capital gains rates and rules that I should know about?

The rules concerning how capital gains are determined and taxed remain essentially unchanged. But since short-term gains (for assets held one year or less) are taxed as ordinary income, they will be taxed at the new ordinary income rates and brackets. Net long-term gains will still be taxed at rates of 0%, 15%, or 20%, depending on your taxable income. And the 3.8% net investment income tax that applies to certain high earners will still apply for both types of capital gains.

2018 Long-Term Capital Gains Breakpoints

Rate Single Filers Joint Filers Head of Household Married Filing Separately
0% Below $38,600 Below $77,200 Below $51,700 Below $38,600
15% $38,600-$425,799 $77,200-$478,999 $51,700-$452,399 $38,600-$239,499
20% $425,800 and above $479,000 and above $452,400 and above $239,500 and above

Can I still deduct my student loan interest?

Yes. Although some earlier versions of the tax bill disallowed the deduction, the final law left it intact. That means that student loan borrowers will still be able to deduct up to $2,500 of the interest they paid during the year on a qualified student loan. The deduction is gradually reduced and eventually eliminated when modified adjusted gross income reaches $80,000 for those whose filing status is single or head of household, and over $165,000 for those filing a joint return.

I have a large family and formerly got to take an exemption for each member. Is there anything in the new law that compensates for the loss of these exemptions?

The new law suspends exemptions for you, your spouse, and dependents. In 2017, each full exemption translated into a $4,050 deduction from taxable income which, for large families, added up. Compensating for this loss, the new law almost doubles the standard deduction to $12,000 for single filers and $24,000 for joint filers. Additionally, the child tax credit is doubled to $2,000 per child, and the income levels at which the credit phases out are significantly increased. Depending on your situation, these new provisions could potentially offset the suspension of personal exemptions.

I have been gifting friends and relatives $14,000 per year to reduce my taxable estate. Can I still do this?

Yes, you may still make an annual gift of up to $15,000 in 2018 (increased from $14,000 in 2017) to as many people as you want without triggering gift tax reporting or using any of your federal estate and gift tax exemption. But TCJA also doubles the exemption to an estimated $11.2 million ($22.4 million for married couples) in 2018. So anyone who anticipates having a taxable estate lower than these thresholds may be able to gift above the annual $15,000 per-recipient limit and ultimately not incur any federal estate or gift tax. Note, however, that the higher exemption amount and many of TCJA’s other changes to personal taxes are scheduled to expire after 2025, unless Congress acts to extend them.

This communication is not intended to be tax advice and should not be treated as such. Each individual’s tax circumstances are different. You should contact your tax professional to discuss your personal situation.

Take Advantage of Your Financial Statements

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Financial statement information is most useful if owners and managers can use it to improve their company’s profitability, cash flow, and value. Getting the most mileage from financial statement data requires some analysis. It is important that business owners understand what their financial statement actually means.

Ratio analysis looks at the relationships between key numbers on a company’s financial statements. After the ratios are calculated, they can be compared to industry standards — and the company’s past results, projections, and goals — to highlight trends and identify strengths and weaknesses.

The hypothetical situations that follow illustrate how ratio analysis can give company decision-makers valuable feedback.

Rising Sales, Rising Profits?

The recent increases in Company A’s sales figures have been impressive. But the owners aren’t certain that the additional revenues are being translated into profits. Net profit margin measures the proportion of each sales dollar that represents a profit after taking into account all expenses. If Company A’s margins aren’t holding up during growth periods, a hard look at overhead expenses may be in order.

Getting Paid

Company B extends credit to the majority of its customers. The firm keeps a close watch on outstanding accounts so that slow payers can be contacted. From a broader perspective, knowing the company’s average collection period would be useful. In general, the faster Company B can collect money from its customers, the better its cash flow will be. But Company B’s management should also be aware that if credit and collection policies are too restrictive, potential customers may decide to take their business elsewhere.

Inventory Management

Company C has several product lines. Inventory turnover measures the speed at which inventories are sold. A slow turnover ratio relative to industry standards may indicate that stock levels are excessive. The excess money tied up in inventories could be used for other purposes. Or it could be that inventories simply aren’t moving, and that could lead to cash problems. In contrast, a high turnover ratio is usually a good sign — unless quantities aren’t sufficient to fulfill customer orders in a timely way.

These are just examples of ratios that may be meaningful. Once key ratios are identified, they can be tracked on a regular basis.

Milwaukee small business accounting specialist, Hammernik & Associates, helps small business owners in Wisconsin understand their financial statements to maintain profitability and reduce tax burdens. Please contact our office to let us review your prior financial statements to make sure you are on the right track.

7 Best Practices for QuickBooks Online

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Even if you’ve been using QuickBooks Online for a long time, it’s good to step back and evaluate your actions.

Milwaukee small businesses have many different ways in which they keep track of their accounting. It typically depends on how the business owner prefers to operate. QuickBooks Online is the present and the future of bookkeeping. It allows a business owner to track their financial statements in real time, while also giving their accountant access to reconcile everything.

“Best practices” aren’t enforceable rules. They’re simply guidelines businesses commonly follow in one area or another. If you’re in retail, for example, one best practice might be to always ask customers checking out if they found everything they were looking for. This serves two purposes: It conveys a feeling of concern for the customer’s shopping experience, and it may also lead to increased sales.

QuickBooks Online has many best practices, some of which may serve multiple purposes, including these:

    • They keep your company data safe and clean.
    • They provide insight on your financial status.
    • They save time.
    • They can lead you to better relationships with customers and vendors.

Are any or all the following common practices for your business?

Reconcile accounts regularly.

One of QuickBooks Online’s most useful features is its ability to connect to your financial institution’s websites and download cleared transactions. QuickBooks Online also offers tools to help you keep your accounts reconciled online, like you used to do every month when your paper statement came. Reconciling accounts can help you uncover errors. It gives you a truer picture of your cash flow, and it improves the accuracy and timeliness of some reports.

It’s not a particularly pleasant process, but you should be reconciling your accounts regularly in QuickBooks Online. We can help.

Clean up your lists.

Some lists in QuickBooks Online aren’t overly long. You don’t have to worry about, for example, Payment Methods, Terms, or Classes. Your lists of customers and vendors, products, and services, on the other hand, can grow unwieldy over the years. This means it can take more time than it should to scroll through lists when you’re using those entities in transactions. It also puts unnecessary stress on your company file. If you can’t delete any, at least make them inactive.

Never leave QuickBooks Online open when you leave your work area.

This goes for everyone, even people who work alone and don’t access their company files away from their work areas. The obvious reason is to keep someone else from getting in and authorizing payments, for example, or otherwise compromising your financial information. It also protects the integrity of your data file in case your internet connection suffers some kind of outage.

Keep track of 1099 vendors.

Whether your company uses 10 vendors or a hundred or more, you may have to supply at least some of them with an IRS Form 1099 at about the same time you’re preparing W-2s for employees. Your 1099-related tasks will be much easier if those individuals and/or companies are earmarked. If you think vendors might need 1099s when you create their records in QuickBooks Online, click in the box to the left of Track payments for 1099 in the lower right corner. Not sure? Ask us.

Classify everything with care.

Every time you have to create a record or transaction where categories are involved (i.e., Classes, Customers and Vendors, Territories), check and double-check that you’ve assigned them the correct classification. Errors here can result not only in problems with daily workflow, but your reports will not be accurate. A related best practice: Create a meaningful group of Classes, and use them faithfully. They’ll help you make better business decisions.

To create your list of Classes, click the gear icon in the upper right and select All Lists | Classes | New.

View reports on a regular basis.

There are some advanced financial reports in QuickBooks Online that we should be creating for you on a regular basis, either monthly or quarterly. These include Profit and Loss, Balance Sheet, and Statement of Cash Flows. The mechanics of creating them aren’t difficult, but analyzing them is. You should be running reports on your own at frequencies that you think would be helpful, like A/R Aging Detail, Unpaid Bills, and Sales by Class Detail.

If you’ve been using QuickBooks Online for a while, you could probably come up with your own list of best practices. If you’re new to the site, consider scheduling some time with us to go over more of them. Develop good habits from the start, and there won’t be nearly as much need for troubleshooting down the road.

Hammernik & Associates has a certified QuickBooks Pro Adviser on staff to help you keep your QuickBooks accurate and compliant. We also are able to get subscriptions at a discounted wholesale rate. Please contact our office if you need help cleaning up your QuickBooks or if you are interested in converting to QuickBooks. Milwaukee small business accounting and QuickBooks Online go hand in hand.

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