Month: May 2019

One of the reasons we like QuickBooks is because it uses language and processes that are familiar to small business people. Instead of using the term “accounts receivable,” it has a menu label that says Customers and menu items that use phrases like Create Invoicesand Receive Payments. You would have to go into the Chart of Accounts to find standard accounting terminology – and we never recommend that you do that without consulting with a QuickBooks professional first.

Yet when you’re doing customer-related tasks, you’re following a traditional accounts receivable workflow, a series of steps that completes a sales cycle, like Estimate | Invoice | Payment | Deposit. QuickBooks keeps it simple for you and doesn’t often force you into unfamiliar territory.

One of the more pleasant elements of accounts receivable is the process of receiving customer payments. There’s more than one way to do this, and it’s very important that you use the correct way in each situation.

Payment Methods

Before you record your first payment, you’ll need to make sure that QuickBooks is set up to accommodate its Payment Method. QuickBooks comes with some standard types, but you can add, edit, and delete your own options (though not those that are built in to the software).

Open the Lists menu and click Customer & Vendor Profile Lists, then Payment Method List. This window will open:

Figure 1: You can work with Payment Method options in this window.

To use any of the commands in the Payment Method drop-down list, you’d highlight the method by clicking on it and opening the options list by clicking the down arrow in that field.

When you add or change an existing entry, the window that opens contains fields for both Payment Method and Payment Type. They should be identical or at least very similar.

Settling an Invoice

If your company sends invoices, you’ll need to record their matching payments in the Customer Payment window. Click Customer | Receive Payments or the Receive Payment icon on the home page. There’s also a button for this in the toolbar in an open invoice. However you get there, here is what it looks like:

Figure 2: You’ll record payments that customers send in response to invoices in this window.

Select a customer in the RECEIVED FROM field, and any outstanding invoices will appear in the table below. The CUSTOMER BALANCEappears in the upper right corner. Enter the PAYMENT AMOUNT and verify the date.

Click in the box for the correct payment method to the right. If it’s a check, enter the number in the CHECK # field. If you choose CREDIT DEBIT, you can enter the card details in the small window that opens. If you provided this information in the customer’s record and chose that as the PREFERRED PAYMENT METHOD, it should fill it in automatically.

To set a PREFERRED PAYMENT METHOD, which will save time, open the customer record and click the small pencil icon in the upper right. Click Payment Settings and complete the fields in that window.

If the customer has paid less than the balance due, you can either LEAVE THIS AS AN UNDERPAYMENT or WRITE OFF THE EXTRA AMOUNT. Select one of those two options in the lower left and save your work when you’re done.

Instant Payments

You’ll use a different form when a customer gives you a payment in exchange for the goods or services you provided, without receiving an invoice. Click Customers | Enter Sales Receipts to open a window like this:

Figure 3: If a customer gives you a payment without receiving an invoice, you’ll provide them with a Sales Receipt.

You’ll complete this form much like you did the CUSTOMER PAYMENTwindow, except you won’t be applying the payment to an existing invoice.

If you have a merchant account or are willing to get one, you can record payments and email sales receipts at remote locations on your mobile device. We can walk you through the setup.

Receiving payments from customers is one of the easier tasks you’ll do as a QuickBooks user, but if you don’t use the software’s tools correctly, your books will be difficult to untangle. To ensure that you’re doing this element of your work right from the start; contact the office to schedule a consultation.

• By Leon Clinton
• May 30, 2019

Starting May 13, 2019 only individuals with tax identification numbers may request an Employer Identification Number (EIN) as the “responsible party” on the application. An EIN is a nine-digit tax identification number assigned to sole proprietors, corporations, partnerships, estates, trusts, employee retirement plans and other entities for tax filing and reporting purposes.

The change prohibits entities from using their own EINs to obtain additional EINs. Individuals named as the responsible party must have either a Social Security number (SSN) or an individual taxpayer identification number (ITIN). The requirement applies to both the paper Form SS-4, Application for Employer Identification Number, and online EIN application.

A detailed explanation of who should be the responsible party for various types of entities is provided on the Form SS-4 Instructions, but generally, the responsible party is the person who ultimately owns or controls the entity or who exercises ultimate effective control over the entity. In cases where more than one person meets that definition, the entity may decide which individual should be the responsible party.

Certain Entities Exempt

Governmental entities (federal, state, local and tribal) are exempt from the responsible party requirement as well as the military, including state national guards.

No Change for Tax Professionals

There is no change for tax professionals who may act as third-party designees for entities and complete the paper or online applications on behalf of clients.

Purpose

The new requirement will provide greater security to the EIN process by requiring an individual to be the responsible party and improve transparency. If there are changes to the responsible party, the entity can change the responsible official designation by completing Form 8822-B, Change of Address or Responsible Party. A Form 8822-B must be filed within 60 days of a change.

Questions?

Call today and speak to a tax and accounting professional you can trust.

• By Leon Clinton
• May 25, 2019

As a reminder, individuals with “seriously delinquent tax debts” are subject to a new set of provisions courtesy of the Fixing America’s Surface Transportation (FAST) Act, signed into law in December 2015. These provisions went into effect in February 2018.

The FAST Act requires the IRS to notify the State Department of taxpayers the IRS has certified as owing a seriously delinquent tax debt and also requires the State Department to deny their passport application or deny renewal of their passport. In certain instances, the State Department may revoke their passport.

Taxpayers affected by this law are those with a seriously delinquent tax debt, generally, an individual who owes the IRS more than $51,000 in back taxes, penalties and interest for which the IRS has filed a Notice of Federal Tax Lien and the period to challenge it has expired, or the IRS has issued a levy.

Taxpayers can avoid having the IRS notify the State Department of their seriously delinquent tax debt by doing the following:

• Paying the tax debt in full
• Paying the tax debt timely under an approved installment agreement,
• Paying the tax debt timely under an accepted offer in compromise,
• Paying the tax debt timely under the terms of a settlement agreement with the
• Department of Justice,
• Having requested or have a pending collection due process appeal with a levy, or
• Having collection suspended because a taxpayer has made an innocent spouse election or requested innocent spouse relief.

However, a taxpayer’s passport won’t be at risk under this program if an individual:

• Is in bankruptcy
• Is identified by the IRS as a victim of tax-related identity theft
• Has an account that the IRS has determined is currently not collectible due to hardship
• Is located within a federally declared disaster area
• Has a request pending with the IRS for an installment agreement
• Has a pending offer in compromise with the IRS
• Has an IRS accepted adjustment that will satisfy the debt in full

For taxpayers serving in a combat zone, and who also owe a seriously delinquent tax debt, the IRS postpones notifying the State Department and the individual’s passport is not subject to denial during this time.

Taxpayers who are behind on their tax obligations should come forward and pay what they owe or enter into a payment plan with the IRS and may qualify for one of several relief programs, including the following:

• Taxpayers can request a payment agreement with the IRS by filing Form 9465, Installment Agreement Request. Taxpayers can download this form from IRS.gov and mail it along with a tax return, bill or notice. Some taxpayers may be eligible to use the online payment agreement to set up a monthly payment agreement for up to 72 months.
• Financially distressed taxpayers may qualify for an offer in compromise, an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. The IRS looks at the taxpayer’s income and assets to determine the taxpayer’s ability to pay.

If you owe back taxes and are worried your passport could be revoked because of unpaid taxes, please contact the office.

• By Leon Clinton
• May 20, 2019