Month: May 2018

Quickbooks

Getting Ready for Payroll in QuickBooks Online

Payroll is probably the most complex element of small business accounting. Not only are you directly responsible to your employees, but you also need to make sure you are handling everything related to benefits and payroll taxes correctly.

Whether you are switching from a manual system to QuickBooks Online, or you have just hired your first employee, you will soon discover that the site can make your payroll-related tasks much more organized and accurate–speeding up the process tremendously.

But before you start getting ready for your first payroll run, you have a lot of setup work to be done. Be sure to leave yourself time before those first paychecks are expected. This is not meant to be a payroll setup tutorial. While some step-by-step instruction is provided, initially, we just want you to see what information you will need to have available and how QuickBooks Online handles it.

Building a Backbone

There is no particular order set in stone for your payroll preparation tasks, although you will need to provide some background information about your company and its policies before you can start creating employee records.

QuickBooks Online does not walk you through the steps required; however, it does display a page with links to all of the data that you will have to enter. Click the gear icon in the upper right, and then click Payroll Settings. You will see this screen:


Figure 1: QuickBooks Online’s Payroll Settings screen displays links to the pages where you will manage your setup tasks.

You would have entered information about your Contact Informationand Work Locations (under the Business Information heading) when you first signed on to QuickBooks Online. At the same time, you would have been exposed to the Chart of Accounts, which already has accounts designated for payroll. You can see them by clicking Preferences | Accounting, but please do not customize these. If modifications are needed, we will do them for you.

Payroll Policies

How often will you pay your employees? Go up to the Payroll heading in the upper left and click on Pay Schedules. Click Createand open the drop-down list next to Pay Period to select the frequency desired. Then enter the date for the first payroll you will run in QuickBooks Online and the end date for the period that it covers. Click the box below if you want this to be the default setting for all employees. Then click OK to return to the previous page.

Open the Vacation and Sick Leave Policies window. If you do not yet have accrual rules for these paid days off, let us help you here. It is complicated. When you are done, click the back arrow to return to the Pay Policies window and select Deductions/Contributions. Are you offering benefits like health insurance? You will need to have your paperwork and information handy before you start completing this section.


Figure 2: Before you can pay employees, you will need to have entered information about the benefits you offer so you can withhold dollars for them.

Click the plus sign (+) in front of Add a New Deduction/Contribution and complete the fields here, then click OK. You will assign these deductions to employees on their individual records in QuickBooks Online. If there are any Employee Garnishments needed (like child support), click the down arrow next to Add Garnishment for and select the worker from the list. You will provide details for these in the window that opens. This information was most likely provided to you by the agency requesting it. When you are done, click OK.

Taxes and More

If you are new to payroll and have never dealt with payroll taxes before, you are going to need our help getting this complicated element set up correctly. Even if you have, we would recommend that you call and set up a consultation with one of the QuickBooks Online experts in the office. QuickBooks Online does a good job of providing guidance here, but failure to submit payroll taxes (or pay them incorrectly) can lead to penalties and fines–or worse.

In addition, there are other setup tasks you will need to complete, such as:

  • Connecting your payroll bank account to QuickBooks Online.
  • Creating employee records.
  • Setting payroll production preferences.

Setup is by far the most challenging part of processing payroll in QuickBooks Online. Once that is done, you will just be entering hours and making modifications. Please contact the office if you are planning to take this on or have any questions.

Tax

Taxpayer Rights: Audits and the Right to Finality

An IRS audit is a review/examination of an organization’s or individual’s accounts and financial information to ensure information is reported correctly according to the tax laws and to verify the reported amount of tax is correct. IRS audits are conducted either by mail (e.g., you receive a letter in the mail that you must respond to) or through an in-person interview.

Taxpayers who have been audited or otherwise interacted with the IRS should know that they have the right to know when the IRS has finished the audit. Known as the right to finality, it is one of ten basic taxpayer rights–known collectively as the Taxpayer Bill of Rights. All taxpayers dealing with the IRS are entitled to these rights. If you’ve been audited, here are seven things you should know about the right to finality.

1. Taxpayers have the right to know:

 

  • The maximum amount of time they have to challenge the IRS’s position.
  • The maximum amount of time the IRS has to audit a particular tax year or collect a tax debt.
  • When the IRS has finished an audit.

 

2. The IRS generally has three years from the date taxpayers file their returns to assess any additional tax for that tax year.

3. There are some limited exceptions to the three-year rule, including when taxpayers fail to file returns for specific years or file false or fraudulent returns. In these cases, the IRS has an unlimited amount of time to assess tax for that tax year.

4. The IRS generally has 10 years from the assessment date to collect unpaid taxes. This 10-year period cannot be extended, except for taxpayers who enter into installment agreements or the IRS obtains court judgments.

5. There are circumstances when the 10-year collection period may be suspended. This can happen when the IRS cannot collect money due to the taxpayer’s bankruptcy, or there’s an ongoing collection due process proceeding involving the taxpayer.

6. A statutory notice of deficiency is a letter proposing additional tax the taxpayer owes. This notice must include the deadline for filing a petition with the tax court to challenge the amount proposed.

7. Generally, a taxpayer will only be subject to one audit per tax year. However, the IRS may reopen an audit for a previous tax year, if the IRS finds it necessary. This could happen, for example, if a taxpayer files a fraudulent return.

If you have any questions about this topic, help is just a phone call away.

Tax

Sinai Combat Zone Tax Benefits Retroactive to 2015

Under the Tax Cuts and Jobs Act (TCJA) enacted in December 2017, members of the U.S. Army, U.S. Navy, U.S. Marines, U.S. Air Force, and U.S. Coast Guard who performed services in the Sinai Peninsula in Egypt can now claim combat zone tax benefits. As such, eligible service members may be able to exclude part or all of their combat pay from their income for federal income tax purposes. Excluding combat pay from a taxpayer’s income can result in a lower tax bill. These combat zone tax benefits are retroactive to June 2015.

How Armed Services members can claim a refund

Service members who previously paid tax on this income may be owed a refund. They may file an amended tax return, Form 1040X, Amended U.S. Individual Income Tax Returnif they already filed a tax return for tax years 2015, 2016 and 2017.

Combat pay received on or after January 1, 2018, will be correctly reported on any W-2 forms issued to any service member who serves in the Sinai Peninsula. Service members who served in the Sinai Peninsula in 2015, 2016, or 2017 can provide documentation of their service to their finance officer and ask for a Form W-2c, Corrected Wage and Tax Statement.

However, an eligible service member who is unable to secure a corrected Form W-2c may still claim the combat pay exclusion by attaching to their Form 1040X copies of official documents showing they served or worked in the Sinai Peninsula. These documents should indicate the area, theater or military operation and the approximate entry date.

Acceptable documents include military orders, letters of authorization (civilians), hospital discharge papers, discharge from active duty, official letterhead memorandum from a military department or civilian employer, or a request and authorization for temporary duty travel of Department of Defense personnel (civilians and military).

Electronic filing is not available and amended returns can only be filed on paper. Amended returns may take up to 16 weeks to process; however, within approximately three weeks after mailing an amended return, taxpayers can track the status online using the IRS “Where’s My Amended Return?” feature.

Please contact the office if you would like more information about requesting a refund based on combat service in Egypt’s Sinai Peninsula.

Scroll to top