Month: March 2018

Accounting Quickbooks

Tracking Time in QuickBooks, Part 1

When you sell a product to a customer, you know it. It goes away, and your inventory count in QuickBooks is reduced by one. This tracking helps you know what is selling and what is not, and it signals when a reorder is due.

If your business provides services to customers, though, you are selling your employees’ time and skills. There’s no inventory count; you can sell as many hours as you have workers to fill them. Tracking time accurately and comprehensively, though, is as important as knowing how many hard drives or tote bags you’ve sold.

QuickBooks contains tools to help you record the number of hours employees spend doing work for customers, so you can bill them for services rendered. You can also use these same features to enter employee time for payroll purposes. The software offers two options here: single-activity records and timesheets.

Building the Foundation

QuickBooks’ Preferences have been many times before. The software was designed to support small businesses with a wide variety of structures and needs, so it needs to be flexible. For that reason, we always recommend that you check in with your “Preference” options before you explore new features.

To get to the preference options open the Edit menu and select Preferences. In the left vertical pane, click on Time & Expenses, then on the Company Preferences tab at the top. Take a look at the top part of the window that opens:


Figure 1: The Company Preferences window for Time & Expensesdisplays multiple options.

To make sure that QuickBooks’ time-tracking features are turned on before you start, click the button next to Yes under Do you track time? Specify the First Day of Work Week by opening that drop-down list. If you know that all your time entries will be billable, click in the box in front of that statement.

The other options in that window will be discussed next month in Part 2.

Creating Service Items

Before you can start tracking billable time, you have to create a record for each service offered–just like you would for a physical product. Click the Items & Services icon on the home page or open the Lists menu and select Item List. The window that opens will eventually display a table containing all the items and services you’ve created.

To define a service item, click Item in the lower left corner, then New, to open a window like this:


Figure 2: You can create numerous types of items in QuickBooks; Service is one of them.

Click the down arrow in the field under Type to see your options here. There are many, ranging from Service to Inventory Part to Sales Tax Group. Select Service. In the field under Item Name/Number, enter a word or phrase and/or number that describes the service, and that won’t get confused with another.

If you had already created an item like “New Construction Services” and you wanted “Carpet Installation” to appear as a subitem of it, you would click in the box in front of Subitem of to create a check mark, then open the drop-down list below it and select “New Construction Services.”

Ignore the Unit of Measure section. If this designation is important to your business, call the office about upgrading your version of QuickBooks. You should also contact the office if the service you are defining is used in assemblies or is performed by a subcontractor or partner, as these are more advanced situations.

Enter a brief Description in that box and your hourly charge–to the customer–in the field to the right ofRate. Click the down arrow in the field next to Tax Code to select the item’s taxable status.

It is very important that you get the next field right. QuickBooks wants to know which account in your company’s Chart of Accounts should be assigned to this item. In this case, it would be “Construction Income.” If you are not yet familiar with the concept of assigning accounts, please call to set up a session with a QuickBooks pro in the office to deal with this and other basic knowledge you should have.

When you are done, click OK.

Stay tuned for next month when the focus is on entering time items in records and timesheets.

Tax

Hurricane Victims may Qualify for EITC

Taxpayers whose incomes dropped in 2017 due to last year’s hurricanes–especially those who lived in areas affected by Hurricanes Harvey, Irma and Maria–may be eligible for the Earned Income Tax Credit (EITC). The EITC is a credit for low and moderate income workers and families. Here’s how it works:

If you lived in one of the federally declared hurricane disaster areas during 2017, you may be able to use a special computation method that enables you to claim the EITC or claim a larger than usual credit. This special method is only available to people who lived in a hurricane disaster area.

Under this method, taxpayers whose incomes dropped in 2017 can choose to figure the credit using their 2016 earned income rather than their 2017 earned income. Eligible taxpayers should figure the credit both ways to see which yields the larger EITC.

About the EITC

The EITC helps working people who earned $53,930 or less for 2017 (adjusted annually for inflation). To claim the credit taxpayers must also meet other eligibility requirements.

The maximum refund is $6,318 refund for working families with qualifying children; however, actual credit amounts vary based on income, family size, and other factors. Workers without a qualifying child with incomes below $20,600 could also be eligible for a smaller credit of up to $510.

Because it is a refundable credit, those who qualify and claim it could pay less federal tax, pay no tax or may even get a refund. On average, EITC adds $2,445 to refunds. To take the credit, people must file a tax return, even if they owe no tax and even if they normally aren’t required to file.

To qualify for the EITC, an eligible taxpayer must meet basic rules and have earned income from working for someone, being self-employed or running a business or farm. This includes home-based businesses, the sharing economy, and employment in the service, construction and agriculture industries. In addition, certain disability payments may qualify as earned income for EITC purposes.

Reminder: By law the IRS cannot issue refunds before mid-February for tax returns that claim the EITC or the Additional Child Tax Credit (ACTC). The IRS must hold the entire refund–even the portion not associated with EITC or ACTC. This change helps ensure taxpayers receive the refund they deserve and gives the agency more time to detect and prevent errors and fraud.February 27, 2018, is the earliest EITC/ACTC related refunds arrive in taxpayer bank accounts or debit cards–if they chose direct deposit and there are no issues with the tax return.

For more information about the EITC and other refundable credits, don’t hesitate to call.

Tax

Do you Qualify for a Healthcare Exemption?

With the 2018 tax filing season in full swing, it’s not too early to think about how the health care law affects your taxes. The Affordable Care Act requires you and each member of your family to do at least one of the following:

  • Have qualifying health coverage called minimum essential coverage
  • Qualify for a health coverage exemption
  • Make a shared responsibility payment with your federal income tax return for the months that you did not have coverage or an exemption

If you meet certain criteria for the tax year, you may be exempt from the requirement to have minimum essential coverage. You will not have to make a shared responsibility payment for any month that you are exempt. Instead, you’ll file Form 8965, Health Coverage Exemptions, with your federal income tax return. For any month that you do not qualify for a coverage exemption, you will need to have minimum essential coverage or make a shared responsibility payment. You may be exempt if you meet one of the following:

  • The lowest-cost coverage available to you is considered unaffordable
  • You have a gap in coverage that is less than three (3) consecutive months
  • You qualify for an exemption for one of several other reasons, including having a hardship that prevents you from obtaining coverage or belonging to a group specifically exempt from the coverage requirement

The Federally-facilitated Marketplace is no longer granting exemptions for members of a health care sharing ministry, members of Indian Tribes, and incarceration. Eligible individuals can still claim these exemptions on a tax return. For a full list of exemptions and how to claim them, please call.

Federal tax returns that do not reflect at least one of these options–reporting health care coverage, claiming a coverage exemption or reporting a shared responsibility payment–will be rejected if the return is filed electronically. If filed on paper, tax returns that do not reflect at least one of these options will take longer to process and any refunds will be delayed. You should respond promptly to IRS correspondence about your health care coverage.

Questions?

To find out if you’re eligible for a coverage exemption or must make a payment, don’t hesitate to contact the office.

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