Month: February 2019

Quickbooks

Applying Finance Charges in QuickBooks

There are myriad ways to bring in customer payments faster and improve your cash flow. You can:

  • Get a merchant account and let customers pay you electronically
  • Offer a discount for early payments
  • Shorten the payment due cycle (21 days instead of 30 days, for example)
  • Be more aggressive about collections

QuickBooks can help you take all of these steps. It also offers a fifth option: assessing finance charges for tardy remittances.

Maybe you don’t want to do this because it seems like a less-than-friendly way to treat customers – especially valued ones. But you’re not in the business of lending money, which is what you’re doing when you continue to let your accounts receivable slide. So, here’s how to do add finance charges to your payment policies.

Multiple Issues Involved

Before you can start adding finance charges to tardy payments, you will need to let QuickBooks know how you want them handled. Open the Edit menu and select Preferences. Click the Finance Charge tab in the left vertical pane, then the Company Preferences tab in the window that opens. You will see something like this:


Figure 1: You will need to decide on your QuickBooks Finance Chargesettings before you can begin to apply these late fees. 

What Annual Interest Rate will you charge? Will there be a Minimum Finance Charge? Do you want to offer a Grace Period? If you’ve never worked with finance charges before, you might be at a loss as to how you should answer these questions. If so, don’t hesitate to call a QuickBooks pro in the office who can help you make sure you’re selecting the correct Finance Charge Account. In this example, QuickBooks defaulted to 70100 – Other Income, which may be the best option for you.

The next question may require some research. Some jurisdictions don’t allow you to Assess finance charges on overdue finance charges; you’ll need to find out if this is the case. If there’s any doubt, make sure that the box in front of that option isn’t checked.

QuickBooks also needs to know on what date it should start calculating finance charges: on the due date or invoice/billed date. Finally, check the box in front of Mark finance charge invoices “To be printed.” QuickBooks doesn’t include finance charges on invoices themselves; it bills them on separate invoices. Check this box if you want the software to print all of them as a batch.

When you’re done here, click OK.

Applying the Charges


Figure 2: By selecting an Assessment Date, you are telling QuickBooks how many late days should be included in its finance charge calculations.

When you are ready, open the Customers menu and select Assess Finance Charges. A window like the one in the image above will open.

QuickBooks, of course, performs all of the required calculations in the background. But it must first know what specific date you plan to actually assess the charges so that it can determine the number of late days that should be included. This may not be the current date, so be sure the Assessment Date is correct before proceeding.

All you have to do here is make sure there’s a checkmark in front of every finance charge that should be invoiced (the check marks should already be there, but you should verify this). If you send statements, clear the box in front of Mark Invoices “To be printed. “ The finance charges will appear on the next statement.

When you are satisfied, click Assess Charges.

Dispatching the Charges

Your finance charges have now been recorded in QuickBooks as individual invoices. When it’s time to print, open the File menu and select Print Forms | Invoices. You will see your numbered finance charge invoices displayed like this:


Figure 3: You can see your finance charge invoices when you go to print them.

Of course, if you email invoices, you would click on File | Send Forms.

It is a good idea to notify your customers before you start assessing finance charges. This will give them a chance to catch up, and no one will be surprised to see the extra invoices.

QuickBooks does the heavy lifting as far as calculations are concerned, but it is important that you set your finance charges up correctly. Customers will be annoyed by mistakes, and it is much easier to get this tool set up right from the start than to have to go in and untangle errors. If you plan to start assessing finance charges but aren’t sure how to proceed, please call the office for assistance.

Tax

Penalty Relief for Witholding, Estimated Tax Shortfalls

The estimated tax penalty has been waived for many taxpayers whose 2018 federal income tax withholding and estimated tax payments fell short of their total tax liability for the year; however, there is a catch: the penalty is only waived for taxpayers who paid at least 85 percent of their total tax liability during the year through federal income tax withholding, quarterly estimated tax payments or a combination of the two. Typically, a taxpayer must pay 90 percent to avoid a penalty.

The waiver computation will be reflected in a revised Form 2210, Underpayment of Estimated Tax by Individuals, Estates and Trusts, and instructions.

This penalty relief is designed to help taxpayers who were unable to properly adjust their withholding and estimated tax payments to reflect an array of changes under the Tax Cuts and Jobs Act (TCJA), the far-reaching tax reform law enacted in December 2017. Although most 2018 tax filers are still expected to get refunds, some taxpayers will unexpectedly owe additional tax when they file their returns.

The updated federal tax withholding tables, released in early 2018, largely reflected the lower tax rates and the increased standard deduction brought about by the new law. This generally meant taxpayers had less tax withheld in 2018 and saw more in their paychecks.

However, the updated withholding tables were not able to fully factor in other changes, such as the suspension of dependency exemptions and reduced itemized deductions. As a result, some taxpayers could have paid too little tax during the year, if they did not submit a properly-revised W-4 withholding form to their employer or increase their estimated tax payments; i.e., a “Paycheck Checkup” to avoid a situation where they had too much or too little tax withheld when they file their tax returns.

Please call the office if you need assistance updating your withholding this year to make sure you are having the correct amount of tax withheld for 2019.

Tax

Five Facts about the Opportunity Zone Tax Incentive

Providing tax benefits to investors who invest eligible capital into distressed communities throughout the U.S. and its possessions, Qualified Opportunity Zones (QOZs) were created under the Tax Cuts and Jobs Act of 2017 to spur economic development and job creation. If you’re considering investing in a QOZ, here are five facts you should know:

1. Defer Tax on Capital Gains. Taxpayers may defer tax on eligible capital gains by making an appropriate investment in a Qualified Opportunity Fund (QOF) and meeting other requirements.

2. Partnerships. In the case of an eligible capital gain realized by a partnership, the rules allow either a partnership or its partners to elect deferral. Similar rules apply to other pass-through entities, such as S corporations and its shareholders, as well as estates and trusts and its beneficiaries.

3. Qualifying for the Deferral. To qualify for the deferral, investors must meet the following criteria:

  • Capital gains must be invested in a QOF within 180 days.
  • Taxpayer elects deferral on Form 8949 and files with its tax return.
  • Investment in the QOF must be an equity interest, not a debt interest.

4. Investment held 5 to 7 years. If a taxpayer holds its QOF investment at least five years, the taxpayer may exclude 10 percent of the original deferred gain. If a taxpayer holds its QOF investment for at least seven years, the taxpayer may exclude an additional five percent of the original deferred gain for a total exclusion of 15 percent of the original deferred gain. The original deferred gain – less the amount excluded due to the five and seven year holding periods – is recognized on the earlier of sale or exchange of the investment, or December 31, 2026.

5. Investment held 10 years. If the taxpayer holds the investment in the QOF for at least 10 years, the taxpayer may elect to increase its basis of the QOF investment equal to its fair market value on the date that the QOF investment is sold or exchanged. This may eliminate all or a substantial amount of gain due to appreciation on the QOF investment.

To view the current list of designated Qualified Opportunity Zones navigate to the Opportunity Zones Resources page at the Department of Treasury’s www.cdfifund.gov.

Questions about the Opportunity Zone Tax Incentive? Don’t hesitate to call.

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