Professional Bookkeeper and QuickBooks Certified Consultant

Copyright 2008 D. L. MacMillan and Bookkeeping R Us All Rights Reserved

If you prepared and put into place a budget for this year and have not compared your actual income and expenses yet, now is the time to do so. Most small companies’ fiscal year is based on the calendar year and the end of June is a great time to see how you are doing. Of course if you have performing this check at the end of each month, you get a gold star!

The first task that needs to be done is to print out a Budget Report for the end of June that shows your actual vs. budget. You can do this easily in QuickBooks by accessing the Reports menu, choosing the Budgets and Forecasts selection (in the Pro edition QuickBooks this selection will be labeled Budgets) and then click on the Budget vs. Actual Report. The first screen will ask you to choose the fiscal year you would like to view. Click Next.

The next screen will show you the report layout as it will appear in your report. Accept the default and click Next. And then click Finish on the next screen. You will see a listing of all of Income and Expense accounts with the actual amounts incurred for each month of the year along with columns and figures for your Original Budget amount, your Over or Under in dollar amounts and what percentage of the yearly budget you have used for each account within each month.

This report can be modified to show just the year to date amounts. Click on the Modify Report button on the top left and on the Display Tab make sure the From and To Dates are for the period you would like, which for our purpose today would be from January 1st through June 30th of the current year. Under the section titled Columns and Rows change the Display Columns By replacing Month with Year. This will give you a budget vs. actual report for each income and expense account as of the end of the reporting period you have chosen.

Other reports available are the Budget Overview, a listing of all your Income and Expense accounts with the budget amounts you have assigned when you first set the budget. The Profit and Loss Budget Performance report is a P&L statement that includes the budget amounts for the current year, the year to date and the annual amounts. This report does not make a comparison between actual and budget, however. You also may choose to show your progress through a graph by choosing the Budget vs. Actual Graph selection.

If you take the time to review your budget now you will take advantage of a powerful tool that can help you plan for the remaining six months of the year. A budget is a goal to work towards and if your budget is vastly overstated or understated when compared with your six month actual figures you will first want to discover why and then perhaps adjust your budget to reflect a more realistic overview.

Please note that the Budget feature is only available in QuickBooks Pro, Premier and Enterprise Editions.

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Copyright 2008 D. L. MacMillan and Bookkeeping R Us All Rights Reserved

You are starting up a new business. Congratulations. This is a very exciting time but it is also a time to make many decisions. This could possibly be a time when you will make more decisions at one time in the entire duration of your business. And one of those decisions will be the structure of your business.

There are several choices available to you and all have pros and cons to consider. You can choice from Sole Proprietorship, General Partnership, Joint Venture, Limited Partnership, Limited Liability Partnership or LLP, Limited Liability Company or LLC, Corporation, S Corporation, Not-For-Profit Corporation or a Professional Corporation. So what is the right structure for your business?

The first step is understanding what defines each of these business structures. A sole proprietorship is operated by a single person and that person is not considered an employee. It can be set up by an individual with little legal requirements and depending on the business may or may not require business licenses or permits. The owner reports the income or loss on their personal income tax return using a Schedule C.

A General Partnership requires at least two partners and should be defined by a legal partnership contract. Partners, like sole proprietors are not employees. Both personal and the partnership assets may be at risk. No separate income taxes are paid as income flows through the individual partner’s tax returns. Although a separate return (1065) must be filed. As with all business structures, certain permits and/or licenses may be required.

A Limited Partnership contains one or more general partners and one or more limited partners. A limited partner differs from a general partner in that they are only personally responsible up to the amount of capital they contributed to the business. They are also not directly involved in the management of the business.

A Limited Liability Company combines the advantages of a corporation and a partnership but maybe more complicated to set up. It also allows for a choice of how it will be taxed – as a partnership with income flowing through the individual partner’s returns or a corporation. Also non-U.S. citizens, resident aliens and other business entities can participate as partners. An unlimited number of partners are allowed and its owners are not usually held responsible for the entity’s debts.

A Corporation gives the participating owners some protections from the entity’s debts. Only one person needs to be a shareholder. This structure must be set up under the state law by filing documents. The corporation files and pays its own income taxes. Any income the corporation earns that is distributed to the shareholders is called a dividend and the shareholders must pay a tax in addition to what the corporation pay.

A S-Corp provides many of the same protections for its shareholders as a C-Corporation. However the income the S-Corporation earns flows through the individual shareholders returns with the business filing an informational return but not paying any taxes. This is true even if the business does not distribute any funds to the shareholders. The limit for shareholders is 100 individuals who are either U. S. citizens or Resident Aliens. There are no Social Security taxes due on the income flowing from the business to the individual shareholders

A Not-Profit Corporation is just what its name implies. This is a company formed for the express purpose of is to not earn a profit. They may pay employees including the organizers of the business and expense those expenses against funds earned or collected. There are forms and permits required and you should confer with your individual state for their requirements.

Professional Corporations or PLLC’s are created under their state’s legal requirements and provide limited protections for its members against personal responsibility for the business’s debts. All the partners must be licensed to practice the profession the business is set up to provide and all partners are liable for their own malpractice insurance and any possible liabilities incurred from malpractice. This business entity can be set up as a regular corporation or a professional corporation.

The choice you make is dependent on whether you are going alone or choosing to have partners or investors, how much protection you want or need from having your personal assets protected and how the tax requirements effect your personal or your partners own tax situations. This is not a decision to take likely. You can change the format of your business structure in the future, but making a change after you have been in business may require you to meet certain legal and tax requirements.

It’s not as hard as it may seem. And the people at

can guide you in your decision with making the right choice.

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Copyright 2008 Bookkeeping R Us All Rights Reserved

March 3

Farmers and Fishermen: File your 2007 income tax return (Form 1040) and pay any tax due

March 5

Deposit Payroll Tax for payments on Feb 27-29 if the semiweekly rule applies

March 7

Deposit Payroll Tax for payments on Mar 1-4 if the semiweekly deposit rule applies

March 10

Employers are required to report to you tips of $20 or more earned during February

March 12

Deposit Payroll Tax for payments on Mar 5-7 if the semiweekly deposit rule applies

March 14

Deposit Payroll Tax for payments on Mar 8-11 if the semiweekly deposit rule applies

March 17

Deposit Payroll Tax for February if the monthly deposit rule applies

Corporations - File a 2007 calendar year income tax return (Form 1120 or 1120A)

S Corporations - File a 2007 calendar year income tax return (Form 1120-S) and provide shareholders with a copy of Sch. K-1

S Corporation Election - File Form 2553 to choose to be treated as an S Corporation beginning the calendar year 2008

Electing Large Partnerships: Provide each partner with a copy of Sch K-1

March 19

Deposit Payroll Tax for payments on Mar 12-14 if the semiweekly deposit rule applies

March 21

Deposit Payroll Tax for payments on Mar 15-18 if the semiweekly deposit rule applies

March 26

Deposit Payroll Tax for payments on Mar 19-21 if the semiweekly deposit rule applies

March 28

Deposit Payroll Tax for payments on Mar 22-25 if the semiweekly deposit rule applies

March 31

Electronic filing of Forms W-2, W-2G, 1098, 1099 and 8027

File Form 730 and pay the tax on wagers accepted during February

File Form 2290 and the tax for vehicles first used in February

This listing represents the most common filing and deposit requirements for small businesses, but is not intended to cover every tax and tax filing due for every business or individual. Should you have any questions regarding your individual situation, please consult with your accountant, your tax preparer or the Internal Revenue Service.

You may also have state and/or local returns and deposits due doing the month of March depending on the location of your business. Check with your local and state government agencies for more information.

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Copyright 2008 Bookkeeping R Us All Rights Reserved

February 1

Deposit Payroll Taxes for payments on Jan 26-29 if the semiweekly deposit rule applies

February 6

Deposit Payroll Tax for payments on Jan 30-Feb 1 if the semiweekly deposit rule applies

February 8

Deposit Payroll Tax for payments on Feb 2-5 if the semiweekly deposit rule applies

February 11

Employers are required to report to you tips of $20 or more earned during January

File Forms 940, 941, 943, 944 and/or 945 if you timely deposited all required payments

February 13

Deposit Payroll Tax for payments on Feb 6-8 if the semiweekly deposit rule applies

February 15

Secure a new Form W-4 from employees claiming “exempt” during 2007

Deposit Payroll Tax for January if the monthly deposit rule applies

Deposit Payroll Tax for payments on Feb 9-12 if the semiweekly rule applies

Begin withholding income tax from employees who claimed exemption from withholding in 2007 but did not submit a new Form W-4 on Saturday February 16th

February 21

Deposit Payroll Tax for payments on Feb 13-15 if the semiweekly deposit rule applies

February 22

Deposit Payroll Tax for payments on 16-19 if the semiweekly deposit rule applies

February 27

Deposit Payroll Tax for payments on Feb 20-22 if the semiweekly rule applies

February 28

File information returns (Forms 1098, 1099 and W-2G) for certain payments made during 2007

February 29

File Form W-3 “Transmittal of Wage and Tax Statements” along with Copy A of all Forms W-2 you issued in 2007

File Form 730 and pay the tax on wagers accepted during January

File Form 2290 and the tax for vehicles first used in January

File Form 8027 if you are a large food or beverage establishment

Deposit Payroll Tax for payments on Feb. 23-26 if the semiweekly deposit rule applies

This listing represents the most common filing and deposit requirements for small businesses, but is not intended to cover every tax and tax filing due for every business or individual. Should you have any questions regarding your individual situation, please consult with your accountant, your tax preparer or the Internal Revenue Service.

You may also have state and/or local returns and deposits due doing the month of February depending on the location of your business. Check with your local and state government agencies for more information.

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Copyright 2008 Bookkeeping R Us All Rights Reserved 

 January 1

Stop payment of the earned income credit for any employee who has not submitted a Form W-5 for 2008

January 4

Under the Semiweekly rule payroll taxes for January 1st payroll are due to be deposited

January 9

Under the Semiweekly rule payroll taxes for January 2-4 payroll are due to be deposited

January 10th

Filing by an employee that received $20 or more in tips during December to their employer using Form 4070 Employee’s Report of Tips to Employer is due

Communications and air transportation taxes under the alternative method are to be deposited for amounts billed or tickets sold during the first 15 days of December

January 11

Under the Semiweekly rule payroll taxes for January 5 - 8 payroll are due to be deposited

January 14

Regular method taxes for communications and air transportation are due for the period covering the last 16 days of December are due

January 15

Filing of Estimated Taxes for 2007 is due

If you are a monthly depositor of payroll taxes your payroll tax liability for December is due

Nonpayroll withholdings are due for December payments

January 16

Under the Semiweekly rule payroll taxes for January 9-11 payroll are due

January 18

Under the Semiweekly rule payroll taxes for January 12-15 payroll are due

January 24

Under the Semiweekly rule payroll taxes for January 19 - 22 payroll are due

January 25

Under the Semiweekly rule payroll taxes for January 19 - 22 are due

Communications and air transportation taxes under the alternative method are due to be deposited for amounts billed or tickets sold during the last 16 days of December

January 29

Regular method taxes for communications and air transportation taxes are due for deposit for the period covering the first 15 days of January 2008

January 30th

Under the Semiweekly rule payroll taxes for January 23-25 payroll are due

January 31

Filing of Individual Income Tax Return if you did not file and pay all Federal income tax by January 15th to avoid penalty for not paying estimated income taxes

W2’s are due to employees.  If an employee has agreed to receive their W2 electronically have it posted on a web site and notify the employee of the posting

Payers of gambling winnings report winnings or withheld income tax from winnings and give the winners their copies of Form W2-G

File Form 941 for the fourth quarter of 2007 and deposit any undeposited tax.  If the tax liability is under $2500 you may pay it in full with a timely filed return.  If you deposit the tax for the quarter in full and on time you have until February 11 to file the return

Certain small employers will Form 944 to report social security, Medicare and federal income taxes withheld in 2007.  If your tax liability is $2500 or more for 2007 but less than $2500 for the fourth quarter, deposit any undeposited tax or pay it in full with a timely filed return.

Farm employers file Form 943 to report social security, Medicare and withheld income taxes for 2007.  If your tax liability is less than $2500 you can pay with a timely filed return.  If you deposited the tax for the year in full and on time you have until February 11 to file the return

1099’s are due to recipients of non-employee income, interest, rent, dividends, real estate transactions, royalties, amounts paid in broker and barter exchange transactions, payments to attorneys, payments of Indian gaming profits to tribal members, profit-sharing distributions, retirement plan distributions, original issue discounts, prizes and awards, medical and health care payments, debt cancellations, and cash payments over $10,000.  Choose the appropriate 1099 form based on the type of payment

File Form 720 (Quarterly Federal Excise Tax Return) for the fourth quarter of 2007

File Form 730 and pay taxes on wagers accepted during December of 2007

File Form 2290 and pay the use tax for heavy highway vehicles first used in December 2007

This listing represents the most common filing and deposit requirements but is not intended to cover every tax and tax filing due for every business or individual.  Should you have any questions regarding your individual situation, please consult with your accountant, your tax preparer or the Internal Revenue Service. 

You may also have state and/or local returns and deposits due doing the month of January depending on the location of your business.  Check with your local and state government agencies for more information. 

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Copyright 2007 Bookkeeping R Us All Rights Reserved

 Are you confused by all the acronyms used for payroll?  Here a few of the most common and what they stand for.

• EIN- Employer Identification Number which is issued by the IRS upon request.  This should be issued for every company, but is mandatory for any company with employees.

• SSN- Employee’s Social Security Number which is issued to any employee who is legally eligible to work in the United States.

• W4- The form filled out by a new employee showing the employee’s name, address, social security number and the marital status of the employee as well as the number of dependents he/she wishes to have their FIT based on. This form is kept on file by the company.

• W2- The form an employer issues to every employee at the end of each calendar year or if the employee leaves during the current year at the end of their employment.  This form shows the company’s name, address and EIN number as well as the employee’s name, address and SSN.  It also lists the wages earned that are subject to FIT, FICA and state withholding and the amounts withheld.  This form may also include such items as deferred deductions such as employee contributions to pension or retirement plans and employee health benefits withholdings as well as other withholding or income items that affect the employee’s taxable wages.  This form consists of several copies, one for the Social Security Administration, one for your state, employee copies for Federal, state and if appropriate local government filings and copies to be kept by the issuing company and the employee.

• FIT– Federal Income Tax.  This refers to the Federal Income Tax withheld from an employee’s paycheck. This tax is based on rates set by the IRS and is affected by an employee’s marital status and number of dependents.

• FICA– Federal Insurance Contributions Act which includes Social Security and Medicare tax withholdings from an employee’s paycheck.  The Social Security portion is applied to 100% of an employee’s wages, however the Medicare portion is applied only to the amount of wages set and changed yearly by the IRS.  The employer is required to match the total amount of FICA taxes withheld from each employee.

• SIT– State Income Tax which refers to your state income tax withholding from an employee’s paycheck.  These withholdings are based on rates set by each individual state.  Some states do not have income taxes for individuals.

• SUTA- State Unemployment Tax Act.  This is a tax that the employer pays and is based on your state’s rate per a stated amount of wages per employee.

• FUTA- Federal Unemployment Tax Act.  This is an employer paid tax that is based on a stated wage per employee and the rate may be adjusted based on the amount contributed to your state fund.

• 941- A Federal form filed quarterly to report wages paid, FIT and FICA wages withheld as well as the employer’s contributions to FICA, and the dollar amount of deposits made and the dates these deposits were made.

• 940- A Federal form filed yearly to report wages paid, amount and date of state SUTA contributions made and any FUTA deposits made during the calendar year.

Please refer to the IRS and your state’s web sites or publications for Federal, state and local rules and regulations to determine the current rates in effect, when and how to make your deposits and what reports are required and their due dates.

         

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Copyright 2007 Bookkeeping R Us All Rights Reserved

At the end of an accounting period entries are often needed to reflect a more accurate picture for that month or year.  However some of these entries are made on assumptions.  These entries are often made to reflect revenue and expense matching. 

One example of this is in the construction business.  A construction company may determine that a project is completed up through a particular phase.  The foundation and rough framing is done for example.  There are costs that have been expensed on their books but maybe revenue has not been billed as of yet.  And so in order to match income with expense this company would determine what percentage of revenue should be recognized in the current period based on what expenses were incurred and how much work was actually completed.  Once this determination was made, an entry crediting the income and debiting a Work In Process asset account would be made.  However, remember this was an estimate not an actuality.  Once the job was completed the estimated income figure may be higher or lower.  And so a reversing entry would be made on the first day of the following accounting period to negate this adjusting entry. 

At the end of the second accounting period another analysis of cost vs revenue would be made and the adjusting entry to WIP would be made with the new determination and reversed in the following period.

Construction is not the only type of industry that uses WIP (Work In Process), manufacturing and any company that maintains inventory are other examples.

Whenever you have receipts or payments taking place in future accounting periods that need to be recognized in the current period you will use this technique of booking an adjusting entry in the current period and reversing that entry on the first day of the following period. 

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