Is Cloud-Based Accounting Right for Your Small Business?

Accounting Works specializes in helping small business owners set up easy to use software for everyday accounting needs.  If your business involves being out in the field or multiple employees conducting transactions, Cloud-based tools might be the right option for you!  Since everything can be accessed from anywhere your expenses and invoices can always be up to date even with multiple users.  One of the benefits of a subscription-based service is that updates will be available regularly at your normal subscription cost rather than purchasing updated software every few years.  This article from Entreprenuer.com goes into detail about how Cloud-based accounting could benefit you.

3 Benefits of Cloud-Based Accounting Tools for Small-Business Owners
By: Jen Cohen Crompton

What do a pastry chef, a construction project manager and a creative design director have in common? As small-business owners, each opened up shop to serve customers and do what they love -- not to spend hours on accounting or bookkeeping.

Fortunately, today’s small-business owner can take advantage of an ever-growing suite of organizational tools and technologies to reduce the headaches of managing invoices, bills and receipts while increasing the time spent pursuing new business opportunities. These tools are increasingly available as cloud-based offerings, and most small businesses should consider migrating their current accounting workflows to the cloud.

What, exactly, is the cloud? Cloud-based software, or software as a service (SaaS), offers users access to technology on a subscription basis. The software provider securely hosts all necessary databases and servers, and small-business owners access their data anytime, anywhere via internet connection.

Many small-business owners may wonder if they can expect the same functionality from cloud-based accounting programs that they’re accustomed to with traditional desktop versions. While it’s true that cloud-based versions of tools like QuickBooks may provide slightly different functionality compared with a desktop version, what current versions of cloud tools lack in functionality they make up for in versatility and long-term viability.

Software providers are likely to continue phasing out desktop solutions and limiting or discontinuing support, which means that customers who migrate accounting workflows to the cloud today won’t be stuck with an unsupported product in the future. Additionally, small businesses that upgrade accounting workflows to the cloud can also enjoy a number of other benefits that SaaS models allow. Here are a few:

1. Enable smart organization for a distributed workforce.
Since accounting information stored in the cloud can be added or accessed anywhere, team members can quickly and easily complete their work regardless of their physical location. Whether a sales rep needs to add expense receipts or a project manager needs to check an invoice for a supplier, having cloud-based tools in place makes organizing and accessing important information as easy as taking a picture of a document or searching by vendor, amount or date.

2. Maintain relationships and easily verify discrepancies.
Relationships with vendors and distributors play an enormous role in the success of many small businesses. When a vendor or distributor questions why a bill hasn’t been paid, small-business owners that leverage cloud-based tools can quickly search for invoices. Advanced cloud tools allow team members to search by virtually any term to locate a bill and identify whether it was missed and pay for it quickly to preserve the vendor relationship.

3. Use a broader suite of secure apps.
Cloud applications such as QuickBooks Online and Neat not only provide access to information and documents from any device, but they also integrate with other cloud-based tools. As soon as a small business starts using one cloud-based accounting technology, it’s easy to extract and leverage data across a number of different platforms and reduce time spent on manual data entry.

Small-business owners start businesses because of passion for what they do -- not to spend time managing paperwork. Migrating traditional accounting workflows to cloud-based solutions enables small-business owners to reduce time spent managing information and improve overall operational efficiency.

For the original article, click here.

Helping Businesses Get Started; A Compass Home Solutions Story!

Charles Williams is a local Richmond small business owner.  His company, Compass Home Solutions, specializes in home organization of every variety.  From decluttering a home room by room when everyday life just gets out of hand, to implementing an organized schedule when there are not enough hours in the day— his goal is to reduce stress for his clients.  After being in the industry for 4 years, Charles decided to take a chance and open his own business on January 1st, 2015 and thus was born Compass Home Solutions!

Being an organizational zealot, Charles knew the importance of keeping his finances in order when starting this new venture.  He will be the first to admit that he is horrible at math, so he knew he needed help.

“If there’s anything math related, I want nothing to do with it,” he admits.  “I knew that before I started my business I needed to find someone,” so he sought the help of Stephen Fishel of Accounting Works.

Stephen initially started working with Charles on setting up a software system to stay organized for invoicing and tracking expenses. “He got me to the point where I could handle my day to day accounting,” he says when recalling starting to work with Stephen. “I’ve absolutely saved money not paying for programs I didn’t need, paper stock, supplies I would’ve never needed without his guidance.”  Not having a lot of start-up capital, it was important to Charles to save as much as he could in initial expenditures.  

“The first year I was in business, we didn’t set up quarterly estimated [tax] payments, because we weren’t sure how much I’d bring in, but this year we’ve set them up.”  Compass Home Solutions has grown a lot in just one year of business expanding to services for Realtors and prepping homes for sale.  As Charles’ business expands and his accounting questions get bigger he knows he won’t have any trouble tackling accounting problems. “[Stephen[ is always in his office and accessible.  If something doesn’t sound right, I still call him up."

If you’re looking to start your own business or need help organizing a system for your daily accounting issues, Accounting Works is there for you! 

Help Keep Richmond Wildlife Center Open!

The Richmond Wildlife Center is currently running a GoFundMe drive to keep the Wildlife Center open. 

The Richmond Wildlife Center has been an all volunteer, non-profit hospital for critically ill or injured wildlife as well as abandoned exotics found in the wild.  Each year they service anywhere from 300 to 500 animals not including outside calls for assistance, they monitor trends in their patient intake which helps monitor important public safety issues like disease control. 

The founder, executive director, wildlife rehabilitation and veterinary assistant, Melissa Stanley has poured endless amounts of time and energy into the Richmond Wildlife Center since founding it in 2010, and dedicated her life to the rehabilitation of wildlife.  

Read more about the Richmond Wildlife Center, Melissa’s work, and see lots and lots of great photos, too, by visiting their site and donate today!  From an accountant’s perspective, all donations are 100% deductible!  So get the best of both worlds and help save the Richmond Wildlife Center today!

GoFundMe Richmond Wildlife Center

DIY Tax Software, Not So User Friendly

This article from AccountingToday is a great read! It not only outlines the benefits of using a tax professional versus tax software, it explains that the taxpayer is still liable for any filing mistakes and NOT the software company itself.  Even though you've followed all of the prompts and double checked everything, it doesn't mean your purchased software covers the intricacies your individual circumstances.  In most cases you can find your tax bill a little lighter by using a professional who is aware of tax law and every exemption you qualify for.  If you owe less by using DIY software, it is most likely a mistake and could end up costing you a lot in the long run!

Cleaning Up the Mess Left By DIY Tax Software
By Greg Freyman

More and more taxpayers are turning towards do-it-yourself tax software to prepare and file business and individual income tax returns.
With every passing year, our offices receive an ever-increasing number of calls asking for help fixing previously self-filed returns. Consumers of these products are beginning to treat tax preparation software as virtual tax return preparers. As the IRS has focused on increased regulation for paid providers of tax return services, I believe the Service’s scope should include tax preparation software providers as well.

The security of taxpayer accounts and personal information has been a top priority of the IRS for e-file providers since the electronic filing program’s inception. Publication 4557, Safeguarding Taxpayer Data, and Publication 4600, Safeguarding Taxpayer Information were published to provide guidance and best practices. However, in 2015, Intuit’s TurboTax systems were hacked, leading to many fraudulent returns being filed without the taxpayers’ knowledge, due to poorly designed security measures. The repercussions of the fraudulent returns left fraud victims having to manually file their tax returns, file police reports detailing possible identity theft, and monitor their credit reports for any other signs of their information being used. Despite the security breach, no penalties were imposed against Intuit. The company was only instructed to prepare a list of changes to reduce tax fraud by the next filing year.

Tax preparation software providers need to apply the same strict data-handling guidelines to self-preparation tax software as do the professional tax preparers.

Another significant issue with do-it-yourself software is the consumer’s reliance on it to do the impossible and apply the voluminous amount of tax law to their individual scenario. Without a firm grasp of the ever-changing tax law, individuals are relying heavily on the automated prompts within the system to help guide them, further creating the illusion that preparing and filing income tax returns is simple in all cases.

Granted, a tax return may be simple, and the software utilized may be sufficient, in some cases. However, even in straightforward scenarios, costly mistakes can and do happen. A client of ours, for example, forgot to enter the city tax that was withheld from them, costing them approximately $4,000 while self-preparing a very simple return. Additionally, what most fail to realize about tax audits and proceedings is that the burden of proof, unlike the legal system, fall on the taxpayer to show the reason why certain deductions were taken or key information was omitted from the return. Consumers of these tax products need to be reminded that relying on prompts from the software does not constitute a viable defense.

Another case involved both a business and a personal income tax return, and arose from the taxpayer’s limited knowledge of Schedule K-1s, the IRS’s ability to cross-reference documents, misclassifying large expenses, and misrepresented 1099 filings. The taxpayer had not included Schedule K-1’s on his personal return after preparing his own business’s return. The taxpayer failed to realize that the IRS operates on a matching system in which it matches third-party filings with an individual’s return. The mismatch of the K-1 that was present on the S corporation return, but not found on the client’s 1040, triggered a correspondence audit. In yet another example, the client incurred over $161,000 worth of penalties and interest over multiple years, and had to spend over $30,000 in accounting fees over a number of years, working with the IRS and states, to remove the incorrect penalties and amend six years of business and individual tax filings.

The cause? The client used self-preparation tax and payroll software, and assumed their company was correctly filing partnership and payroll forms for years. In fact, the client had been sending in payroll tax deposits, but not filing all of the forms consistently, omitting filing for the periods where no payroll tax was due. The client was unaware of a requirement that mandated taxpayers to file zero payroll forms. Since the IRS had not received zero payroll forms, the tax liability from prior periods was assumed for the periods with missing tax forms. Aside from missing forms, the client was also unaware that an employee had a certain type of visa status that exempted an employer from certain payroll taxes. Presenting this information helped to show that a payroll tax overpayment existed on the account, helping to reduce their penalties and interest.

Taxpayers should be made aware that the software they are using and relying on to prepare and file their taxes may not adequately report their tax liability to comply with tax laws. Furthermore, taxpayers may inadvertently be leaving more of their money on the table due to the automated software. ABC News recently showed a segment on how one family’s refund amounts differed when using do-it-yourself tax software, a storefront tax preparer and a tax accountant. Their highest refund was calculated by the tax accountant. The family admitted to having overlooked a key item within the tax software, which the tax accountant had found for them. By engaging in an open dialogue with a tax professional, the family was able to more than double their tax refund amount.

Until the IRS requires all tax preparation software providers be held to the same standards of paid tax professionals, we must continue to advocate for our clients and those burned by do-it-yourself software. It is up to us to remind taxpayers to seek professional help with their tax issues to avoid costly mistakes. The services of tax professionals may seem more expensive upfront than do-it-yourself tax software at first glance. To overcome this obstacle, it is important to showcase the value in choosing tax professionals who not only provide peace of mind, quality of service, and thorough investigation and resolution of their tax issues, but also perform in-depth tax research and perform representation services. As tax professionals, we need to keep the dialogue open with our clients and those attempting to navigate through tax laws on their own, and remind them of the value we bring.

The original source of this article is found at AccountingToday.com

3 Tips to Spring Clean Your Business Plan

Spring cleaning isn’t just for your home.  If there are things you need to do to get your house in order, now is the time to do it before it's too late. Refresh your plan for the year!  Taxes are over and it’s time to start planning for next year.  Get your quarterly and yearly goals in order and you can maximize profit, minimize spending and get your small business finances running smoothly. Not to mention be able to fully relax on your summer vacation!

Quarterly Tax Payments

You probably already pay quarterly tax estimates as a small business owner. If you don’t already do that, you should.  It keeps that one BIG bill at bay in the long run.  If you are already doing that, make sure to established a separate account just for the funds going towards your tax bill. It’s also imperative to keep your business accounts away from personal ones.  This helps you keep more accurate records of business income or expenses and minimizes confusion about how much your quarterly payments should be.

Cash Flow

Spring is an amazing time for any business.  People are starting to get out and about, reemerging from their winter funk and non-spending habits.  It’s time for updates to wardrobes, houses, and finances!  A good tip is to check your cash flow every week.  This will let you know if your cash flow is stuck in accounts receivable and more accurately time income and expenses. 

Update Your Plan

Take the time to write down a formal business plan.  If you don’t have one in place, there are no goals to reach with no direction to achieve them.  Take the time to do this because it will make a difference.  If you already have one in place, but it’s from last year, review it!  Do you still have the same goals as last year, or do you want to aim a little higher for the next?  This will help you prioritize time and money in order to curb extraneous spending.  Strategizing your business is a productive task and can really increase profits.

Spring cleaning is a really great way to start fresh not only in your personal life but for your business, too!  So get motivated this season and take these steps towards organizing your business!

Premium Tax Credits Being Reviewed by IRS

An article on AccountingToday.com, by Michael Cohn, recently highlighted how the IRS has been advised to review the Premium Tax Credits due to the fact that "the IRS is unable to ensure that individuals claiming the PTC met the most important eligibility requirement: that insurance was purchased through an exchange."  The IRS has updated procedures to spot fraudulent claims, but not without stretching its resources.

IRS Miscalculating Tax Credits for Obamacare
By  Michael Cohn

The Internal Revenue Service’s computer systems miscalculated the allowable Premium Tax Credits for more than 27,000 taxpayers who received subsidies for health insurance under the Affordable Care Act, according to a new report.

The report, from the Treasury Inspector General for Tax Administration, evaluated the effectiveness of the IRS’s verification of health care tax credit claims during the 2015 filing season. According to the IRS, almost $11 billion in Advance Premium Tax Credits were paid to insurers in fiscal year 2014.  As of June 11, 2015, the IRS processed more than 2.9 million tax returns involving the Premium Tax Credit, and taxpayers received approximately $9.8 billion in PTCs that were either received in advance or claimed at filing.

The ACA requires health insurance exchanges to provide the IRS with information regarding individuals who are enrolled by the exchange on a monthly basis. The data is referred to as Exchange Periodic Data, or EPD. TIGTA’s analysis of more than 2.6 million tax returns with a PTC claim that were filed between January 20, 2015, and May 28, 2015, for which the IRS had EPD, found that the IRS accurately determined the allowable PTC on more than 2.4 million (93 percent) returns.

TIGTA said, however, that it is continuing to work with the IRS to determine the cause for calculation differences in 150,385 of the remaining 182,884 (7 percent) tax returns. Computer programming errors resulted in an incorrect computation of the allowable PTC for 27,827 tax returns. For 4,672 tax returns, the IRS did not have the authority to correct the PTC claim during processing.

The Affordable Care Act created the health insurance marketplace, also known as an exchange. The exchange is where taxpayers find information about health insurance options, purchase qualified health plans, and, if eligible, obtain help paying premiums and out-of-pocket costs. The ACA also created a new refundable tax credit, the Premium Tax Credit, to help offset the cost of health care insurance for those with low or moderate income. Individuals can receive the PTC in advance or can claim the PTC on their tax return. Individuals who received the PTC in advance are required to reconcile the amount paid on their behalf to the allowable amount of the PTC on their tax return.

The House Committee on Appropriations requested that TIGTA evaluate the IRS processes to ensure that unauthorized payments or overpayments of the PTC are fully recouped.

The exchanges did not provide the EPD to the IRS prior to the start of the 2015 filing season as required. In addition, IRS system issues prevented the IRS from being able to use most of the EPD received between Jan. 20, 2015, and March 29, 2015, according to TIGTA.

Without the required EPD, TIGTA noted, the IRS is unable to ensure that individuals claiming the PTC met the most important eligibility requirement: that insurance was purchased through an exchange. TIGTA’s analysis of tax returns filed between Jan. 20, 2015, and May 28, 2015, identified 438,603 tax returns for which the IRS did not have EPD at the time the tax returns were processed or the EPD were incorrect.

“The IRS did develop manual processes in an effort to verify Premium Tax Credit claims associated with Exchanges that did not provide the required Exchange Periodic Data,” said TIGTA Inspector General J. Russell George in a statement. “However, these processes resulted in the IRS having to suspend tax returns during processing, which uses additional resources and increases the burden on taxpayers entitled to these claims.”

TIGTA verified that the IRS processes to identify potentially fraudulent PTC claims are operating as intended. In addition, the IRS corrected programming errors identified by TIGTA that resulted in tax returns not being identified for further review during processing.

TIGTA recommended the IRS review the 27,827 tax returns that TIGTA identified to ensure that these individuals receive the correct PTC, and that the IRS modify the income and family size verification processes to use the most current information available when determining if a taxpayer has reconciled APTCs received in the prior calendar year.

The IRS agreed with both of TIGTA’s recommendations and said it will review the 27,827 tax returns to prioritize them against existing workload demands and resource constraints so that they may be addressed accordingly. The IRS also said that implementation of agreed changes to the income and family size verification process is subject to budgetary constraints, limited resources and competing priorities.

“For those 27,827 returns where the PTC claim may have been incorrectly verified, due to the reliance on projected partial-year data and programming errors, it is important to note that the IRS does not have statutory authority to correct discrepancies without following deficiency procedures,” wrote Debra Holland, commissioner of the IRS’s Wage and Investment Division, in response to the report. “Deficiency procedures, also known as audit procedures, are costly and compete with other enforcement priorities for scarce resources. We will review those returns to identify those that merit appropriate follow-up activity.”

For the full article, click here.

Post Traumatic Tax Season

     Everyone finally gets to take a moment to catch their breath after all the preparation they put into (or paid for) preparing their tax return.  Finalizing the paperwork is both scary and relieving.  But now that it’s over, what to do next?  Just sit around for another 12 months until its time to start scrambling forms together again?  No.  Whether you are stressed about your tax liability or wondering what to do with that large sum of money, here are 5 things you can do to prepare for next year.

Refinancing

The Real Estate industry is all abuzz about how rates are still low into 2016.  Remember though, a financial move that could reduce your payments or interest affects your tax liability at the end of the year.  Reducing your interest rate reduces your itemized deductions, this could lead to a larger amount owed to Uncle Sam come next April 18.  If you do some preemptive accounting, you can suitably tailor your withholdings or estimated tax payments throughout the year.  Avoiding that jaw dropping liability takes a little more planning than crossing your fingers and hoping for the best.

Installments

If your tax bill is too large for you to be able to pay it all in one lump sum, you can request an installment agreement or payment plan.  If you’re unable to pay your tax bill because of a singular event, filling out the proper forms should be enough.  If you often find yourself falling short of your tax bill, it’s time to start thinking of increasing your estimated payments or withholdings.  The IRS has been willing to combine previous installment plans with new ones, but the third time is not the charm in this case.  To read about these plans visit http://www.irs.gov/Individuals/Payment-Plans-Installment-Agreements.

Secure Your Income for Retirement

Why not make the maximum contribution to your retirement fund.  Whichever works best for you, either a traditional IRA or a Roth IRA, you’ll save money in taxes by allocating the funds to your retirement.  A Health Savings Account (HSA) is also a savvy way to increase your deductions and put your hard earned money to work for you.

Unintended Savings 

Keep saving that big return!  Uncle Sam held on to it for you all year,   if you can live without it, a big return can be good for putting away in your emergency fund, college savings for your child or a large home repair you know is coming down the road.

Unemployment

Unfortunately, if you’re collecting unemployment checks, you still have to pay taxes on that income.  You can request federal withholding from these checks to cover that amount.

     As long as you do a little preparation throughout the year, paying taxes won’t be as much of a burden come April.  Tax laws are ever-changing, so being up to date on what’s relevant this year will help you plan according to their benefits or disadvantages.