2011 May | QuickBooks for Contractors blog

Monthly Archives: May 2011

QuickBooks Payroll Tip – Tracking Employee Advances or Loans

Published May 9, 2011 | By Nancy Smyth

Tracking employee advances or loans in QuickBooks on future paychecks is a must for those companies that has a policy that allows giving employees advances/loans for personal reasons.

There are three ways in which to record an employee advance or loan:

Including it with the employees regular paycheck
Writing a regular check
Giving the employee cash from the company Petty Cash account

Step 1 – Create an Other Current Asset Account to track employee advances/loans

The first thing that you need to do – or have in place – is an Other Current Asset type account in your QuickBooks Chart of Accounts to track the money that is given to the employee.

If you need to create the account:

From the Lists menu -> choose Chart of Accounts
Click the Account button at the lower left -> choose New
Click the radio button next to Other Account Types -> and from the drop down menu choose Other Current Asset -> click the Continue button
Complete the details for the account -> Account Name = Employee Advances/Loans -> Account Description = To record employee advances or loans and repayments on future earnings.

Important Note: If your company frequently provides employees with advances on future earnings, create sub-accounts for each employee advance or loan; including the employee name and loan date in the account name.

Issuing an Advance or Loan to the employee as part of his or her regular paycheck.

If you want to provide the advance or loan money with the employee’s regular paycheck you will need to have in place or create an “Addition” type payroll item to record the money given to the employee.

If you currently don’t have an item in place, you will need to create one.

From the Lists menu -> choose Payroll Item List
Click the Payroll Item button at the lower left -> and choose New
Choose Custom Setup -> and click Next
Click the radio button next to Addition -> click the Next button
In the Name field, enter the date, the employee’s name, and indicate if it is a loan or an advance. For example: 5/9/11 Mark Mason Advance. Click the Next button.
On the Expense Account window, using the drop-down menu, choose the appropriate “Advance” account -> click the Next button
On the Tax Tracking Type window, select None and click the Next button.
On the Taxes window, there should be no check marks -> click the Next button
On the Calculate based on quantity window, select Neither -> click the Next button
On the Gross vs. Net window, select net pay -> click the Next button
On the Default rate and Limit window, you can either leave both fields blank OR you can enter the full amount of the advance or loan in the first box -> click finish.

When you create the employee’s regular paycheck, from the Other Payroll Item box, select the “Addition” payroll item and enter the dollar amount.

recording a payroll advance with a paycheck

Right click on the image to enlarge it.

Providing an advance or loan by writing a check.

Create an entry for the employee in the Vendor Center or the Other Names List, use this newly created name when completing the QuickBooks Write Checks window and from the Expenses tab, select the appropriate Employee Advance/Loan account from your Chart of Accounts.

Right click on the image to enlarge it.

Giving the employee cash from the company Petty Cash Account.

You’ll want to make sure that the employee’s name exists in either your Vendor Center or in the Other Names List.

Open your Petty Cash Account register, select the Vendor or Other Name entry, enter the dollar amount given to the employee and select the appropriate “Advance/Loan” listing in your Chart of Accounts.

Right click on the image to enlarge it.

Repayment of employee advances can then be paid back to the company through payroll deductions, which is the subject of ~~tomorrow’s~~ Wednesday’s blog post.

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Freebie Friday – Microsoft Office 2010 Ultimate Tips & Tricks

Published May 6, 2011 | By Nancy Smyth

This week’s Freebie Friday is an eBook – from MakeUseOf.com – Microsoft Office 2010: Ultimate Tips & Tricks.

Learn to get the most out of the latest version of Microsoft Office with the latest free guide from MakeUseOf! Office 2010 includes many improvements over 2007. As with all Office releases, however, these improvements are far from obvious to the average user.

Enter Office 2010: Ultimate Tips and Tricks. This manual, by author Matt Smith, points out all the best new features of Microsoft’s latest office suite, and explains them all in one handy guide. In most programs, it’s not hard to find every single feature, but Office 2010 is so expansive that even veteran users will often find that they aren’t expert in even half of the capabilities the software offers.

Whether you recently purchased Office 2010 and want to get the most out of it, or are considering an upgrade, you don’t want to miss this free guide. There’s much to be learned here, so check it out!

This guide will show you how to:

Get the most out of 2010?s cloud capabilities.
Turn off the annoying file block feature.
Speed up document creation in Word with building blocks.
Present data at a glance with Excel’s new Sparklines.
Edit video from within PowerPoint.
Broadcast a PowerPoint presentation over the web, live.
Adding social functionality to Outlook.
and much more!

Download Microsoft Office 2010 Ultimate Tips & Tricks from MakeUseOf.com

Unraveling Certified Payroll Requirements On Federal Construction Projects

Published May 4, 2011 | By Nancy Smyth

Unraveling Certified Payroll Requirements On Federal Construction Projects webinar presented for L2 Federal Resources, LLC

Wednesday, May 18, 2011 • 1:00 – 2:30 PM EDT

Presented by: Nancy Smyth, Sunburst Software Solutions, Inc.

_____________________

Making the move from residential/commercial construction projects to government-funded construction projects, which have certified payroll reporting requirements, can be overwhelming for most contractors, their office staff, and the accounting professionals who support them. This often misunderstood requirement can lead to major problems, including non-approval of payment requisitions, denial of payment for change orders and claims, and contract termination. Don’t get caught in a payroll certification trap; learn the ins and outs of federal certification payroll requirements and get all your questions answered.

Our live, instructor-led, on-line training class focuses on the following:

What government agencies make the laws behind certified payroll reporting requirements?
How to comply with Labor Standards & Payroll Reporting requirements
How to complete a Certified Payroll Report & Statement of Compliance
Common methods for creating Certified Payroll Reports, Statements of Compliance, EEOC, ARRA and Fringe Benefit Reports
State prevailing wage vs. Davis-Bacon forms and which form applies
Electronic certified payroll filing requirements
Ways contractors pay fringe benefits and how to report them
Tracking employee time and work classifications
Requesting additional “trade/work classifications” and wage rates
Typical errors that require correction
Don’t forget to include your subcontractors
What happens when things go wrong
Automating these time-consuming, error-prone tasks
And much, much more!

In addition, a 10-to-15 minute period has been reserved at the end of the speaker’s presentation for an interactive question-and-answer session so you can discuss specific issues or gain additional knowledge about topics discussed.

Who Will Benefit?

Contractors who are currently (or are interested in) contracting with the federal government, and who want to better understand and improve their certified payroll processes. Certified payroll is everyone’s business; gather your whole team, including:

Owners
Estimators
Controllers
CFO’s
Payroll processors
Office managers
Business development experts
Accounting & Consulting professionals
Union and non-Union Contractors

Register ONLINE, at the L2 Federal Resources, LLC registration page.

Why Does the IRS Want to Audit My QuickBooks File?

Published May 4, 2011 | By Matt Clark

If you are reading this article then it is likely that you or your client has received a request to submit a QuickBooks file in conjunction with an IRS Audit or an audit by another government agency. The Internal Revenue Service started this new level of enforcement in 2010 in which their agents are now requiring the actual accounting database (be it QuickBooks or another accounting software) as a part of the audit process. Certainly, government revenue departments can use information to gather any sort of data relevant to an audit. In my role in helping clients prepare their files for submission to these governmental agencies I have noticed some patterns in what the IRS seems to be looking into and I wish to share that with you here.

Improper Payments to Owners

Throughout the history of S corporations (can apply to LLCs also) there has been an undefined area in the IRS code relative to wages vs. dividends. Typically the owner/s of an S corporation (which are generally small in nature) earns ordinary income as the manager of the business and earns dividends as an investor in the business. There is an incentive from a tax perspective for the owner to maximize his or her reporting of dividends because dividends are not taxed for payroll taxes (typically 15.3%) which can be a substantial savings to the owner. There is no direct guideline as to how much the owner must pay him or herself to be in compliance with the IRS, but the owner needs to earn a salary commensurate with what someone performing the same work would receive on the open market.

This opens up a large gray area that seems to be of particular interest to the IRS when reviewing your financial database. Additionally the IRS is looking for any improper payments that pass between the owner and the business that are not recorded in the data file. Prior to submitting a file to the IRS, review any such transactions and have an explanation of why they occurred and why you chose to report the transactions as you did.

Improper Payments to Employees

Likewise, improper payments to employees that are not properly recorded as wages are another area of concern. Especially if you or the client is using QuickBooks Payroll Services, you need to review all transactions between employees and the business to assert that all benefits to employees were correctly accounted for in conjunction with your representations on tax forms.

Make sure to also review any non-payroll transactions with employees and search for any transactions where the employee may have been listed as an “other name” or as a “vendor”, because these will certainly be scrutinized during the audit.

Real Estate Concentration

Nearly 70% of customers who contact us to help prepare their QuickBooks file for submission to the Internal Revenue Service are involved in the real estate industry. Whether they are real estate agents, mortgage brokers, construction companies, title companies or otherwise, This would seem to be a substantially larger percentage than chance would predict and so we need to ask ourselves why is the IRS focusing so heavily in this area.

Real Estate has obviously gone through a major boom bust cycle in the United States over the recent years, and it would seem that the IRS is reviewing QuickBooks files to locate significant transfers of money and whether that money was properly classified on the books of the organization. An example of such a misclassification might be taking what should be classified as a capital loss and reporting it as an expense. Additionally the IRS may be looking at transactions to make sure that the owner is materially participating in the business and thus can legitimately take certain deductions.

Whatever the basis for their inquiry may be, it would seem very important that you review all material transactions in detail before you submit your file to the IRS as these large dollar transactions seem to be of special importance in the evaluation process.

What are they not looking for?

Historically IRS audits have focused on businesses that have a large amount of small cash based transactions which can be easily hidden from reporting on tax returns. You may have encountered the occasional restaurant that will charge you $12 to use credit card vs. $9 if you pay cash. That’s because the credit card transaction can be easily traced by the IRS. These are just the sort of organizations that have classically been the focal point of IRS audits, however in our experience we see very few businesses that have an extensive amount of small transactions or businesses with an intensive use of inventory (i.e. retail in nature) among our customers. If you, or your client, are having the IRS request a QuickBooks file and that business has a large amount of transactional data, we would suggest that the IRS is more likely looking to review one of the above areas rather than the small individual transactions alone.

Note: This will not be true if you are being audited by a sales tax agency.

The possibilities of what the IRS is reviewing in your data file are infinite, but hopefully this can provide you a generalized guideline for what is likely going to be examined as a part of the audit process.