Important: The 2016 Tax Season Process

As taxes are right around the corner, I’d like to brief you on what to expect for this year’s tax preparation process.

First, please be aware that you may hear from any of the following staff about your return:

Second, you can upload documents to the firm by clicking here. No password is required. If you want to upload documents to a specific CPA whom you’ve corresponded with, look in their e-mail signature for an upload link or contact them directly.

YOUR INDIVIDUAL TAX RETURN

We ask that you send us your tax documents once you have all or most of the documents, versus sending us documents one-by-one over a period of time.  This results in better quality control, less time spent organizing, faster preparation and lower preparation cost.

A common question this time of year is “how do you want us to send information?”  We want the tax preparation process to be as easy as possible and have multiple ways you can send us information.

First, we ask that you fill out a tax organizer and include it with the tax documents you give us. This will remind you of documents and deductions we’ll need, which will help decrease your tax liability and the time it takes to prepare your return. The organizer is easy to fill out. Please download a PDF organizer by clicking here.

We also have an identical online, web-based organizer that you can use by clicking here.

Once you have all your 2016 tax documents together, fill out the web based or PDF tax organizer and send us your document package.

Here are the ways to send us your documents:

  • Electronically: The link to upload documents is in the organizer, or click here.
  • By Mail: Please mail to our Colorado Springs office (5030 Boardwalk Drive, Suite 250, Colorado Springs, Colorado, 80919).
  • In Person: Information can be dropped off at our Colorado Springs or Denver
  • By Fax: Our fax number is 719-470-0111

Please expect that it will take 1-2 weeks to prepare your return, and up to three weeks as the deadline nears. We will contact you with questions or for additional information.

YOUR BUSINESS TAX RETURN

If you are a tax planning client of ours, we’ve been working with you throughout the year to keep your books in shape. You’ll receive communication directly from your CPA regarding your books and preparation of your business returns.

If you use a bookkeeper, please contact your bookkeeping company directly and ask them when your books will be done for 2016. The sooner your books are updated and in our hands, the sooner your return will be done.

If you put together your own books, please complete all bank and credit card reconciliations through 12/31/2016 and let us know when the books are ready. Please note that we may ask for the following:

  • Your 12/31/2016 bank statement
  • Your 12/31/2016 credit card statement
  • Any line of credit or loan statements through 12/31/16, if applicable
  • W-2’s for 12/31/16 – if applicable – or year-end payroll reports from your payroll company. If you use ADP, we already have this info.
  • A summary schedule of any personally paid business expenses paid during 2016
  • A list of any bank deposits that were capital contributions, not income to the company
  • Anything else specific to your account that is relevant to your books.

Whatever your situation, let us know when your QuickBooks file is ready to be used for your business tax return.

If you have any questions, please contact us.  We are here to help!

Regards,

Luke Gheen

Gheen & Co., CPA, LLC

QuickBooks Year-end Tasks

The close of business for the year brings about a few simple Quickbook tasks that will make like much easier if completed on a timely basis.  Not all businesses will need to complete all of the following items:

  • Create and send customer statements
  • Make final owner distributions
  • Reconcile all bank and credit card accounts
  • Run Balance Sheet and Profit & Loss reports
  • Prepare for taxes by giving your accountant access to your data
  • Prepare and file 1099s*
    • If you use unincorporated vendors, such as outside consultants or subcontractors, you need to send a 1099-MISC form to those who are paid more than a specific amount per year.
    • Select the vendors who might need 1099-MISC forms
    • Decide whether to e-file or print 1099s
    • Order 1099 forms, if printing
    • Set up and prepare 1099-MISC forms
    • Assign accounts to 1099 boxes
    • Check names, addresses, and Tax IDs
    • Print 1099s
    • Mail 1099s to vendors
    • Print a 1099 report
    • File forms with the IRS
  • Close the books
    • Choose the Gear icon > Company Settings
    • Choose  Advanced
    • In the Accounting section, click on the Edit icon
    • Click to mark the Closing The Books checkbox
    • Enter a closing date. Transactions dated on or before the closing date cannot be changed without warning
    • Decide what you want users to see if they try to save a transaction that is dated prior to the closing date
    • Choose Allow changes after viewing a warning to make a warning message appear
    • Choose Allow changes after viewing a warning and entering a password to make the user also enter a password. Then enter the password in the two password fields below.
    • Click Save then Done

Many accounting tasks are understandably beyond the comfort zone of the average Quickbooks user.  Gheen & Co.’s knowledgeable staff can help take the pressure off of you!  Contact us today for a free consultation.

Deducting Gifts to Charity

The holiday season is one of largest fundraising periods for many charities in the United States. If you plan to give and want to claim a tax deduction, there are a few tips you should know before you give. For instance, you must itemize your deductions. Here are six more tips that you should keep in mind:
1. Give to qualified charities. You can only deduct gifts you give to a qualified charity. Use the IRS Select Check tool to see if the group you give to is qualified.
2. Keep a record of all cash gifts. Gifts of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. You must have a bank record or a written statement from the charity to deduct any gift of money on your tax return. This is true regardless of the amount of the gift. The statement must show the name of the charity and the date and amount of the contribution. Bank records include canceled checks, or bank, credit union and credit card statements. If you give by payroll deductions, you should retain a pay stub, a Form W-2 wage statement or other document from your employer. It must show the total amount withheld for charity, along with the pledge card showing the name of the charity.
3. Household goods must be in good condition. Household items include furniture, furnishings, electronics, appliances and linens. These items must be in at least good-used condition to claim on your taxes. A deduction claimed of over $500 does not have to meet this standard if you include a qualified appraisal of the item with your tax return.
4. Additional records required. You must get an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. Additional rules apply to the statement for gifts of that amount. This statement is in addition to the records required for deducting cash gifts. However, one statement with all of the required information may meet both requirements.
5. Year-end gifts. Deduct contributions in the year you make them. If you charge your gift to a credit card before the end of the year it will count for 2015. This is true even if you don’t pay the credit card bill until 2016. Also, a check will count for 2015 as long as you mail it in 2015.
6. Special rules. Special rules apply if you give a car, boat or airplane to charity. If you claim a deduction of more than $500 for a noncash contribution, you will need to file another form with your tax return.
The CPAs at Gheen & Co. can help you navigate the complex rules regarding deductible charitable donations. Contact us to learn more about our services!

End of Year IRA Tips

Individual Retirement Accounts, or IRAs, are important vehicles for you to save for retirement. If you have an IRA or plan to start one soon, there are a few key year-end rules that you should know. Here are the top year-end IRA reminders from the IRS:

  • Know the contribution and deduction limits.  You can contribute up to a maximum of $5,500 ($6,500 if you are age 50 or older) to a traditional or Roth IRA. If you file a joint return, you and your spouse can each contribute to an IRA even if only one of you has taxable compensation. You have until April 18, 2016, to make an IRA contribution for 2015. In some cases, you may need to reduce your deduction for your traditional IRA contributions. This rule applies if you or your spouse has a retirement plan at work and your income is above a certain level.
  • Avoid excess contributions.  If you contribute more than the IRA limits for 2015, you are subject to a six percent tax on the excess amount. The tax applies each year that the excess amounts remain in your account. You can avoid the tax if you withdraw the excess amounts from your account by the due date of your 2015 tax return (including extensions).
  • Take required distributions.  If you’re at least age 70½, you must take a required minimum distribution, or RMD, from your traditional IRA. You are not required to take a RMD from your Roth IRA. You normally must take your RMD by Dec. 31, 2015. That deadline is April 1, 2016, if you turned 70½ in 2015. If you have more than one traditional IRA, you figure the RMD separately for each IRA. However, you can withdraw the total amount from one or more of them. If you don’t take your RMD on time you face a 50 percent excise tax on the RMD amount you failed to take out.
  • IRA distributions may affect your premium tax credit. If you take a distribution from your IRA at the end of the year and expect to claim the PTC, you should exercise caution regarding the amount of the distribution.  Taxable distributions increase your household income, which can make you ineligible for the PTC.  You will become ineligible if the increase causes your household income for the year to be above 400 percent of the Federal poverty line for your family size. In this circumstance, you must repay the entire amount of any advance payments of the premium tax credit that were made to your health insurance provider on your behalf.

The CPAs at Gheen & Co. can assist you and maximize your IRA tax savings.  Please feel free to contact us to learn more about our services or ask any questions!

Working in Multiple QuickBooks Online Companies Simultaneously

There are many times when office personnel, accountants, managers, and small business owners may need to in more than one QBO company at a time.  QBO won’t allow you to open multiple companies in the same internet browser, however, using multiple works just fine. For example, you can open one company in Chrome, one in Firefox, and one in Internet Explorer or Safari.

If you’re using Google’s Chrome browser, another way to do it is to use an Incognito Window.  From the Chrome menu (the 3 horizontal bars in the right corner) select new incognito window.  You will notice the “spy” icon in the upper left corner when the browser opens.  You could log in to a second QBO company here in the incognito window.

The best tip for working in multiple QBO companies is to use Chrome’s User or “People”. This allows you open an unlimited number of different QBO companies — one in each Chrome User at the same time.  From the Chrome menu go to Settings and scroll down to People.  Add as many new Users as you need.  Give them a name and pick an icon.  Click Create.

Once you have more than one Chrome user, the user icons show in the upper left corner of the browser. You can open new Chrome users by clicking the icon.  Each Chrome user session will allow you to log in and open a different QBO company.  You can work on these side-by-side or on separate monitors.

All of us at Gheen & Co., CPA enjoy helping small business’ become more efficient in their accounting tasks. Click here to schedule an initial consultation today!

Benefits of Connecting Accounts to Quickbooks Online

Connecting your bank, loan, and credit card accounts to QuickBooks Online helps you do much less manual data entry, faster account balancing, and keeps you always ready for tax time.

Connecting Bank Accounts

QBO keeps track of all your ATM purchases and withdrawals, plus all direct online funds transfers. Instead of methodically entering every single transaction you make, you download them straight from the bank, which saves you a lot of time.

Connecting Credit Cards

If you share business credit cards with your colleagues, organizing everyone’s receipts can be complicated. When you connect your credit card accounts to QuickBooks, you can download all of these purchases without worrying about who bought what.

Connecting Loan Accounts

Although not always available, some lenders do provide the ability for customers to connect their loan account directly to Quickbooks.  This is an excellent way to ensure that payments are being made on time and accounted for correctly.

Reconciling Made Easy

Reconciling accounts is one of the most laborious tasks small business owners have to deal with. Once you connect your accounts to QuickBooks, every time you work with your downloaded transactions you’re teaching QuickBooks about your business. QuickBooks will now recognize some of these transactions for you and save you time. When you have to file your taxes, your transactions will already be categorized, which makes reconciling that much easier.

Gheen & Co., CPA can come alongside you and your business to provide the guidance needed to excel.

Click here and contact us today!

Tax Tips for New Business Owners

One of the keys to success in any new business ventures is understanding your federal tax obligations. Here are some basic tips to get you started in the right direction.

Business Structure

As you start out, you’ll need to choose the structure of your business. Some common types include sole proprietorship, partnership and corporation. You may also choose to be an S corporation or Limited Liability Company. You’ll report your business activity using the IRS forms which are right for your business type.

Business Taxes

There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. The type of taxes your business pays usually depends on which type of business you choose to set up. You may need to pay your taxes by making estimated tax payments.

Employer Identification Number

You may need to get an EIN for federal tax purposes. Search “do you need an EIN” on IRS.gov to find out if you need this number. If you do need one, you can apply for it online.

Accounting Method

An accounting method is a set of rules that determine when to report income and expenses. Your business must use a consistent method. The two that are most common are the cash method and the accrual method. Under the cash method, you normally report income in the year that you receive it and deduct expenses in the year that you pay them. Under the accrual method, you generally report income in the year that you earn it and deduct expenses in the year that you incur them. This is true even if you receive the income or pay the expenses in a future year.

Employee Health Care

The Small Business Health Care Tax Credit helps small businesses and tax-exempt organizations pay for health care coverage they offer their employees. A small employer is eligible for the credit if it has fewer than 25 employees who work full-time, or a combination of full-time and part-time. Beginning in 2014, the maximum credit is 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers, such as charities.

For 2015 and after, employers employing at least a certain number of employees (generally 50 full-time employees or a combination of full-time and part-time employees that is equivalent to 50 full-time employees) will be subject to the Employer Shared Responsibility provision.

Here at Gheen & Co., CPA, we specialize in helping the small business owner succeed.  This is accomplished by working with our clients throughout the year, not just at tax time!  Click here to learn more about what we can do for you and your business.

Overlooked Tax Deductions

Forgetting to include, or not realizing you should have included, items that would have lowered your tax bill or increased your tax refund can be a frustrating realization. In the rush to get your tax return completed by the deadline, it’s all too easy to miss avenues that might lower your taxable income. Here are some common deductions that many overlook:

  1. Sales Taxes

You have the option of deducting sales taxes or state taxes off your federal income tax. In a state that doesn’t have its own income tax, this can be a big money saver. Even if you paid state taxes, the sales tax break might be a better deal if you made a big purchase like an engagement ring or a car. You have to itemize to take the deduction, but the IRS provides tables to use as a guide.

  1. Health Insurance Premiums

Medical expenses can blow any budget, and the IRS is sympathetic to the cost of insurance premiums – at least in some cases. For most taxpayers, medical expenses have to exceed 7.5 percent of your adjusted gross income to be deducted. However, if you’re self-employed and responsible for your own health insurance coverage, you can deduct 100 percent of your premium cost. That gets taken off your adjusted gross income rather than as an itemized deduction.

  1. Tax Savings for Teacher

It’s the rare teacher who doesn’t have to reach into her own pocket every now and then to purchase items needed for the classroom. While it may sometimes seem like nobody appreciates such generosity, the IRS does. It allows qualified K-12 educators to deduct up to $250 for materials. That gets subtracted from your income, so you can take advantage of it even if you don’t itemize.

  1. Charitable Gifts

Most taxpayers know they can deduct money or goods given to charitable organizations – but are you making the most of this benefit? Out-of-pocket expenses for charitable work also qualify. For example, if you make cupcakes for a charity fundraiser, you can deduct the cost of the ingredients you used to bake them. It helps to save the receipts or itemize the costs in case of an audit.

  1. Paying the Babysitter

You might be able to deduct the cost of a babysitter if you’re paying her to watch the kids while you volunteer to work for no pay for a recognized charity. The federal Tax Court has ruled that it’s OK to list the cost of a babysitter as a charitable contribution on your return, if you can document that while she was performing her duties, you were volunteering.

  1. Lifetime Learning

The tax code offers a number of deductions geared toward college students, but that doesn’t mean those who have already graduated, don’t get a tax break as well. The Lifetime Learning credit can provide up to $2,000 per year, taking off 20 percent of the first $10,000 you spend for education after high school in an effort to give you new or improved job skills. This phases out at higher income levels, but doesn’t discriminate based on age.

  1. Unusual Business Expenses

If something is used to benefit your business and you can document the reasons for it, you generally can deduct it off your business income. A junkyard owner, for example, might be able to deduct the cost of cat food that encourages stray cats to hang around and keep the mice and rats away. A bodybuilder got approved to deduct the body oil he used in competition.

  1. Looking for Work

Losing your job is traumatic, and the cost of finding a new one can be high. But if you’re looking for a job in the same field, you itemize your deductions and these expenses exceed 2 percent of your gross income, any expenses over that threshold can be deducted. It may seem like a high bar, but those costs add up quickly – consider deducting the mileage you put on your car driving to interviews and the cost of printing resumes.

  1. Self-employed Social Security

The bad news about being self-employed: You have to pay 15.3 percent of your income for social security taxes, the portions ordinarily paid by both employee and employer. But there’s one small consolation – you do get to deduct the 7.65 percent employer portion off your income taxes.

Gheen & Co CPAs are very knowledgeable about common and uncommon deductions and are available to answer questions and to assist in tax preparation for business and personal tax returns. Please feel free to contact us with any questions or to learn more about our services!

Using Quickbooks Online to Create Estimates

In certain industries, customers will want time to think about how much your goods or services will cost before committing to a purchase.  In such situations, potential customers are more likely to buy if given something tangible to take with them for review.  A simple estimate created in Quickbooks Online can fulfill this purpose with very little time invested.

If the customer does decide to go forward with the purchase, the estimate can then be modified as necessary and converted into an invoice—all within QBO!

To create an estimate in QBO:

  1. Click on the + sign
  2. Under the Customers menu click Estimates
  3. Enter the line items
  4. Print (optional)
  5. Save and Close

Click here for a video of the full process of creating and using an estimate in QBO.

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The knowledgeable staff at Gheen & Co., CPA have hundreds of Quickbooks tips to make your life easier and move your business forward.

Click here and contact us today!

Tax Credits for Education

If you, your spouse or a dependent headed off to college this fall, some of your costs may save you money at tax time. You may be able to claim a tax credit on your federal tax return. Here are some key tips that you should know about education tax credits:

  • American Opportunity Tax Credit.The AOTC is worth up to $2,500 per year for an eligible student. You may claim this credit only for the first four years of higher education. Forty percent of the AOTC is refundable. That means if you are eligible, you can get up to $1,000 of the credit as a refund, even if you do not owe any taxes.
  • Lifetime Learning Credit.The LLC is worth up to $2,000 on your tax return. There is no limit on the number of years that you can claim the LLC for an eligible student.
  • One credit per student.You can claim only one type of education credit per student on your tax return each year. If more than one student qualifies for a credit in the same year, you can claim a different credit for each student. For instance, you can claim the AOTC for one student, and claim the LLC for the other.
  • Qualified expenses.You may use qualified expenses to figure your credit. These include the costs you pay for tuition, fees and other related expenses for an eligible student. Refer to IRS.gov for more on the rules that apply to each credit.
  • Eligible educational institutions.Eligible schools are those that offer education beyond high school. This includes most colleges and universities. Vocational schools or other postsecondary schools may also qualify. If you aren’t sure if your school is eligible:
    o Ask your school if it is an eligible educational institution, or
    o See if your school is on the U.S. Department of Education’s Accreditation database.
  • Form 1098-T. In most cases, you should receive Form 1098-T, Tuition Statement, from your school by Feb. 1, 2016. This form reports your qualified expenses to the IRS and to you. The amounts shown on the form may be different than the amounts you actually paid. That might happen because some of your related costs may not appear on the form. For instance, the cost of your textbooks may not appear on the form. However, you still may be able to include those costs when you figure your credit. Don’t forget that you can only claim an education credit for the qualified expenses that you paid in that same tax year.
  • Nonresident alien.If you are in the United States on an F-1 Student Visa, the tax rules generally treat you as a nonresident alien for federal tax purposes.  To find out more about your F-1 Student Visa status, visit S. Immigration Support. To learn more about resident and nonresident alien status and restrictions on claiming the education credits, refer to Publication 519, U.S. Tax Guide for Aliens.
  • Income limits.These credits are subject to income limitations and may be reduced or eliminated, based on your income. Visit IRS.gov and use the Interactive Tax Assistant tool to see if you are eligible to claim education credits. Visit the IRS Education Credits Web page to learn more.  Also see Publication 970, Tax Benefits for Education. You can get it on gov/forms at any time.

IRS YouTube Videos:

  • Education Tax Credits – English

IRS Podcasts:

  • Education Tax Credits – English

Do you have questions about how these education tax credits can reduce your personal tax burden as business owner? Contact us today for a free consultation.