Accounting

Accounting Tax

7 Tax Tips for Students with Summer Jobs

Are you a student with a summer job? Here are seven things you should know about the income you earn during the summer months.

1. All taxpayers fill out a W-4 when starting a new job. This form is used by employers to determine the amount of tax that will be withheld from your paycheck. Taxpayers with multiple summer jobs will want to make sure all their employers are withholding an adequate amount of taxes to cover their total income tax liability. To make sure your withholding is correct, call our office.

2. Whether you are working as a waiter or a camp counselor, you may receive tips as part of your summer income. All tip income you receive is taxable and is therefore subject to federal income tax.

3. Many students do odd jobs over the summer to make extra cash. If this is your situation, keep in mind that earnings you receive from self-employment are subject to income tax. This includes income from odd jobs like baby-sitting and lawn mowing.

4. If you have net earnings of $400 or more from self-employment, you also have to pay self-employment tax. (Church employee income of $108.28 or more must also pay.) This tax pays for your benefits under the Social Security system. Social Security and Medicare benefits are available to individuals who are self-employed just as they are to wage earners who have Social Security tax and Medicare tax withheld from their wages. The self-employment tax is figured on Form 1040, Schedule SE.

5. Subsistence allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay – such as pay received during summer advanced camp – is taxable.

6. Special rules apply to services you perform as a newspaper carrier or distributor. You are a direct seller and treated as self-employed for federal tax purposes if you meet the following conditions:

-You are in the business of delivering newspapers.

-All your pay for these services directly relates to sales rather than to the number of hours worked.

-You perform the delivery services under a written contract which states that you will not be treated as an employee for federal tax purposes.

7. Generally, newspaper carriers or distributors under age 18 are not subject to self-employment tax.

A summer work schedule is sometimes a patchwork of odd jobs – which makes for confusion come tax time. Contact us if you have any questions at all about income your child earned this summer season.

Accounting Tax Technology

Paperless Tax Workpapers

Today I attended a webinar hosted by Sureprep – the developer of a fantastic paperless tax workpaper software. The software is available in various versions, including 1040SCAN PRO, 1040SCAN ORGANIZE, 1040SCAN TRADES & SPBINDER (with 1040SCAN PRO being the most featured packed).

From their website (www.sureprep.com):

1040SCAN PRO is the most advanced OCR solution in the tax and accounting industry. 1040SCAN PRO automatically recognizes and transfers data from W-2s, 1099s, 1098s, K-1s, Organizer Pages, hundreds of Brokerage Statements and thousands of other document types into your tax software, significantly reducing the time spent preparing and reviewing 1040 and 1041 tax returns.

The version that I found to be the most applicable and have decided to be the focus of this post is SPbinder.

SPbinder is an electronic binder and workflow system that will drastically reduce the time you spend organizing your workpapers and the reduce the time you spend reviewing tax returns; making your tax season more profitable and less hectic than ever before.

SPbinder is a web based system that allows you to add your scanned tax workpapers (W2s, 1099s, organizer pages, etc.) to a client specific electronic binder then simply drag and drop them into an appropriate bookmarked section, making navigation and standardization a breeze. While working on your clients tax return you can utilize a comprehensive list of stamps, tick marks, sticky notes, communication notes, preparer and reviewer sign-offs and many other annotation tools. Once the tax return is finalized, the completely bookmarked and annotated electronic tax binder can be printed to PDF for document storage purposes.

SPbinder, as well as the 1040SCAN products are compatible with the following tax programs: GoSystem RS, ProSystem fx, Global fx, Lacerte and UltraTax.

Seeing this product in action (via the webinar) was very impressive. One of the features that I was most impressed by was the integration of MS Excel. The program allows you to add an excel worksheet (yes, the actual individual sheet and not an entire Excel workbook) to a clients electronic folder. Not only that but Sureprep adds full markup and cross-reference functionality to the documents in the electronic binder.

The focus of the webinar was the ease of use and time saving benefit of using the Sureprep software when compared to Adobe Acrobat. Sureprep makes the addition and organization of documents to your electronic file seamless and easy via familiar functionality like drag n drop. The user interface appears intuitive, making the learning curve minimal.

Currently, I am awaiting a call back from Sureprep to discuss their pricing structure.

For more information go to http://sureprep.com

Accounting

Internal Controls for Small Business – PART 1 – CASH

I’ve worked with many companies from small to large (from the World Bank to the local Church) and one area of accounting that all businesses (particularly the small business) need to be attentive is internal controls. I’m focusing here on small businesses because most larger companies undergo annual audits, in which, internal controls are reviewed/assessed and any shortcomings found are formally presented to management.

First off, If you are a small business owner and the whole concept of internal control is foreign to you, I highly suggest you go to our main site (http://accountantdirectory.com) and find a local accountant who can educate you and/or assist you in establishing proper internal control for your business.

The focus of this topical post is internal controls surrounding cash.  As you may or may not have heard, the old saying is true… ‘Cash is King’. As such there needs to be extra attention to ensuring that your cash is secure. In a one man operation this is done easily, but when additional employees are hired things can a get a bit tricky. The key behind all internal controls is segregation of duties. I think this point can be best explained via a few examples (all small business examples):

  • The individual writing checks (possibly an accounts payable clerk) should NOT be the person signing checks.
  • The monthly bank statement should be received and opened by the business owner
  • The monthly bank statement should be reviewed in detail  (I.e. all cancelled checks should be reviewed ensuring no signature forgeries, large unfamiliar transactions should be investigated)
  • If a material amount of the business’ revenues is from cash receipts, at least two people (custodians) must be handling cash at a time, a cash receipts log should be generated with the written verification of both custodians and a bank deposit slip should be generated by both . Cash deposits per bank statement should be verified with bank deposit slips generated by the cash deposit custodians.

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I hope these examples help you grasp the concept of internal control.

Stay tuned as I continue this discussion of internal control in forthcoming blog posts. 

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