Employee gifts or awards, are often given in recognition for a job well done, however, some gifts are considered taxable and must be included in payroll. Keep the following in mind as you start a new payroll year.
Gifts, prizes, and awards for production, attendance, efficiency or other on-the-job achievements must be included when calculating overtime pay.
If the prize or award is a merchandise bonus, you must use the fair market value of the item – NOT the cost; to compute overtime pay.
If your company throws a holiday party – perhaps a Christmas party, for employees and their families; the company can deduct 100% of the cost at the end of the year on your tax return. The cost of the party is not taxable to employees or their families. And the same rules apply to a New Year’s Eve cocktail party.
Your company can give each employee a turkey, a ham, or a gift basket as a holiday gift without worrying about it becoming taxable or having to include it in payroll. On the other hand, if you give your employees a gift certificate for a turkey, a ham, a gift basket or even a $5.00 pen, then it becomes taxable.
Even a simple $10.00 bonus is subject to taxes and must be included when calculating payroll taxes.
Length of service awards, given before 5 years of service are taxable. The same award is not taxable for more than 5 years of service, but you cannot give them more frequently than every 5 years.
Rewarding your employees for a job well done is a good moral booster and makes them feel appreciated. Make sure that you know the rules regarding taxability; so nothing comes back to bite you later.
This week’s Freebie Friday eBook is all about Email Etiquette.
We all use email every day, as a matter of fact just about all of us live in our email InBox – it’s a fast and effective means of communication. But email is also cold, impersonal, unclear, and often used ineffectively. It lacks the interpersonal contact of the traditional way of meeting someone.
Email is also the source of many viruses, and is frequently used by spammers, so we should all pay close attention to how our email is perceived by the person receiving it.
We only get one chance to meet someone for the first time and “WOW” them with our products and/or services, so, it’s important to really put your best foot forward; whether that first meeting is in person, via email, through the use of a contact us form, or on the telephone.
With advances in technology, we are no longer limited to meeting prospective customers, clients, or referral partners face-to-face like we used to. Technology now allows us to meet these same prospects via email, phone, or through our websites.
With these advances, and the ever increasing fast-paced world that we live in, are we sacrificing good old fashioned common sense etiquette protocols?
Are we still making a good first impression with our potential clients, customers or vendors?
Are we identifying ourselves as professionals?
Are we clearly stating the reason for our contact?
Are we being clear and concise about the purpose of our inquiry – whether it’s a support question, or a request for additional information?
Are we clearly identifying ourselves and providing contact information?
Request our FREE Email Etiquette eBook (by completing a short form) for tips and suggestions on making sure that your email communications are professional.
HAPPY FRIDAY! Yes, I’m “yelling”, sorry about that, but it’s been a long week. Enjoy your weekend.
Handling employee reimbursements for business related expenses, including mileage, should not be run through payroll in QuickBooks.
When an employee uses his/her own money to pay for a business related expense it is money that they have loaned the company, and the company should account for those expenditures in the same manner in which they would if the company had made the expenditures themselves – in other words – those reimbursements should be correctly assigned to the appropriate expense or cost of goods sold accounts in QuickBooks.
As a bookkeeper handling reimbursement requests, not only do you need to make sure that the expenses are correctly recorded; you also need to make sure that the manner in which expense reimbursement requests from employees meet accountability standards by the IRS.
Every company should adopt an Accountable Plan for reimbursements. An accountable plan makes reimbursements non-taxable and is not reported on W-2, as long as the plan meets the following 3 IRS requirements:
- There must be a business purpose, meaning that the expense would be deductible if the company actually made the initial outlay of cash.
- The amount, time, use, and business purpose of the money spent must be substantiated within a “reasonable” amount of time; meaning that the employee should submit a written expense account detailing the money spent, the purpose of the expenditure, what job or customer the expenditure related to, and receipts that prove the expenditures.
- The employee must return the unsubstantiated amount within a reasonable period of time; meaning if the employee was given $1,000.00 but only provided documented receipts for $900.00, the remaining $100.00 would need to be returned to the company.
If these conditions are not, especially condition number 3 when an employee did not return the $100.00, you would then take that $100.00 and only then add it to payroll and withhold applicable taxes.
Recording the reimbursements in QuickBooks can be accomplished by using either the Write Checks window or the Enter Bills window, however, it is important to note that that John Doe the employee should also have a John Doe (Reimbursements) record in the Vendor List; using the John Doe record in the Employee List when issuing payroll and John Doe (Reimbursements) from the Vendor List when entering expenses for reimbursements.
Recording Reimbursements for Indirect Expenses, such as Telephone, Gas, Mileage, Purchase of Small Tools, Postage, etc.
When an expense report is submitted that includes any of the Indirect Expense items shown above, when you write the check or enter the bill, you will want to use the Expense Tab to record the amounts, if you will be including any of these costs on a customer invoice, click (check) the Billable option) and when you create the invoice, click on Time & Expenses to pull these costs onto the invoice. If these costs will not be billed to the customer, do not check the Billable column.
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Recording Expenses for Job Materials or other Direct Job Related Costs
When an expense report is submitted that includes any of the Direct Expense items shown above, when you write the check or enter the bill, you will want to use the Items Tab to record the amounts, if you will be including any of these costs on a customer invoice, click (check) the Billable option) and when you create the invoice, click on Time & Expenses to pull these costs onto the invoice. If these costs will not be billed to the customer, do not check the Billable column.
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This article provides you with basic guidelines for handling some types of reimbursements, however, it does not touch on handling reimbursements for travel, lodging, or meal reimbursements as they have far more stringent rules. Consult a local accounting professional for additional help.
Setting up and tracking Union Fringe Benefits in QuickBooks can be a fairly straightforward task, after all Union Fringes are just a specified hourly dollar amount that the company pays to the Union on behalf of the employee.
Union fringes often consist of contributions to Vacation/Holiday, Health & Welfare, Pension, Training, and sometimes Travel & Subsistence, Savings, or Fund Administration. Depending upon the Union that you are dealing with, some of the fringe benefits could be subject to payroll taxes, while others are not.
Most of the time fringes are calculated and paid based on the number of hours the employee works on the jobsite, occasionally, however, they are a based on a percentage of gross pay.
Regardless of how they are paid (based on an hourly amount or a percentage of gross) or if they are taxable or not; in QuickBooks, each of these specific types of hourly fringe benefits should be set up in the Payroll Item List as Company Contribution items.
Now that you know some basic information about Union Fringe Benefits and how you would track them in QuickBooks, let’s take it a step further and explore some of the more complex issues.
Not every employee will have the same fringe benefit package or the same fringe benefit rates. This is where it becomes more complex. So before you begin setting things up in QuickBooks; take the time to plan things out and ask yourself these questions:
- Do my employees ALWAYS perform work under the same Work Classification/pay rate/fringe rate combination?
- Is the Work Classification/pay rate/fringe rate combination the same for all the jobs that employees work on?
- Is the Work Classification/pay rate/fringe rate combination the same for each of our employees?
Below are basic setup instructions if ALL of your employees fall under a single Work Classification/pay rate/fringe rate combination, nothing changes from job to job. In QuickBooks:
- You create company contribution items for each specific fringe benefit.
- Check the “Track expenses by job” option in the item setup.
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- Create or choose the Union from the Vendor List.
- Assign appropriate Payroll Liabilities account, personally I like to create a Sub-Item of Payroll Liabilities called Union Fringes, and then create Sub-Items under that for each fringe item – it just makes it easy to see what your liability for each fringe item is at any given time.
- Assign the appropriate Expense or Cost of Goods Sold Account to record the company payments; personally I like to create a Sub-Account of Cost of Goods Sold called Union Fringes.
- Choose the applicable Tax Tracking Type, based on the information you’ve received from the Union Hall.
- If a specific fringe benefit is subject to payroll taxes, check which taxes are to be calculated on the Taxes window
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- Select how the calculations are to be be performed. If the fringe rate is paid on all straight time and overtime hours worked, choose “Calculate this item based on hours”.
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- Enter the hourly rate for the benefit item and make sure that the Annual Limit option is NOT checked (by default QuickBooks always has this option selected.
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- Edit employee records and add the fringe benefit company contribution items to the Payroll & Compensation Information tab in the Additions, Deductions and Company Contributions section.
- When you create paychecks, QuickBooks automatically calculates the amounts for each employee.
Use the instructions above as a guideline for your QuickBooks setup.
Upgrading to QuickBooks Premier Account 2011 caused some errors with my existing forms and form templates.
Earlier this week I had to bite the bullet and upgrade my own QuickBooks file, moving it from the 2008 Premier Accountant version to the 2011 Premier Accountant Edition; as part of our own move from Windows XP to Windows 7.
Yes, folks just like many of you we have been moving software and multitudes of data from XP machines to Windows 7 and updating our QuickBooks company data file. Not a fun task, but a necessary one.
Upgrading our QuickBooks file was an easy task, we have a rather large QuickBooks file and the time it took to do the actual update seemed to be much faster than with previous upgrades. Our file seemed to be in good shape after the update, numbers on my reports matched, nothing missing – so I’m thinking yeah, this was easy!
All seemed to be good — until I had to go look at a Customer Invoice and then the fun and errors began. We kept getting these odd, and very unhelpful, “Template Error” messages, but could view the invoice without a problem on our screens.
Now, I had seen posts on other forums and groups that I belong to, where people were having trouble importing a customized template from an older version of QuickBooks to the 2011 version, but this wasn’t what I was trying to do.
I just figured that for whatever reason our invoice templates didn’t upgrade correctly. A couple of rebuilds later, still no luck. Next I created a portable company file and then opened that portable file – still no luck. Next, I decided to start from scratch, chose one of the QuickBooks standard templates, made a copy of it, and set about to customize it – now bear in mind, I did little to customize it, mainly removed the print ability of some columns and changed some field headers. Still the same errors. By now I’m pretty darn frustrated, but decided to try one more thing — and that was to print the darn thing.
Trying to print the invoice, produced a much more helpful error message, it told me that I didn’t have an Arial W1 font installed on my computer. So now I turn to my trusty sidekick, Google, and do a search for an Arial W1 font. Come to find out, an Arial W1 font is a special font that you have to BUY! Uh, thanks — but NO THANKS!
So off I go to my Template, open it in the Layout Designer and begin to search for a section of my form that uses this font. Come to find out, in the Layout Designer, the form name (Invoice, Estimate, Purchase Order, Sales Order, etc.) if the field that used the Arial W1 font. A simple font change and a save solved the problem – but only after a couple of hours of frustration.
So, if you’ve recently upgrade to QuickBooks 2011 and are experiencing “Template Errors” or “Missing Arial W1 font” messages, it’s a quick fix.
- From the Edit menu, choose Templates
- Find the template(s) that you use all the time in your business. Select it, double-click to Edit.
- Click the Layout Designer button
- Find the form title (Invoice, Estimate, Purchase Order, etc.). Right click and choose Properties.
- Click the Font button, and change the font to something else, a standard Arial will do.
- Click the OK button 4 times.
- Try printing your form again.
I hope this article will save you from some of the frustration that I experienced or provide you with what is really a pretty simple fix, once you know what you need to fix!
