Month: July 2019

QuickBooks is very good at helping you get paid by your customers. It comes equipped with customizable invoice templates for billing customers and sales receipts for recording instant sales. It supports online payments, so you can accept debit or credit cards and electronic checks. It simplifies the process of recording payments and it offers reports that let you keep track of it all.

There are times, though, when you have to issue a payment to a customer. QuickBooks provides forms that allow that transfer of funds: credit memos and refunds. Do you know when and how they should be used? Here are the basics:

Credit Memos

A credit memo is just what it sounds like. A customer returns an item for which they’ve already paid, and you have to credit him or her for its cost. This is the more complicated of the two and requires more bookkeeping since you’re tracking the sale, its payment, and the returned item. You can deal with the amount of the credit by:

• Retaining the funds in the customer account.
• Issuing a refund.
• Applying it to the next open invoice.

Figure 1: When you issue a credit memo to a customer, you have three options for returning the money they paid.

To create a credit memo, click Refunds & Credits on QuickBooks’ home page or open the Customers menu and select Create Credit Memos/Refunds. The Credit Memo window opens. Select the correct Customer:Job. In the line item section of the form, choose the merchandise returned in the Item column and enter a quantity. Repeat the process if more than one item was returned, then click Save & Close. The Available Credit window, pictured above, will open. Click the button in front of the option you want.

Select the first option if that’s what you want and click OK. The window will close, and the customer will have had that credit amount applied to his or her own account. You can see this in the Customer Center if you click on Customers in the navigation toolbar (or Customers | Customer Center). You can then either click on the Customers & Jobs tab and scroll down until you can highlight your customer’s record or click on Transactions | Credit Memos.

Click on Give a Refund to open the Issue a Refund window. Everything should be filled in here except for the payment method. If you select Cash from the Issue this refund via drop-down list and then pick the correct account from the list that opens, the refund amount will be subtracted from the account. Select Check and then the Account, and check the box in front of To be printed. That refund will be in the list the next time you open the File menu, then Print Forms | Checks. Choose a credit card and check the box in front of Process credit card refund when saving box to issue a credit card refund automatically.

Tip: If you can’t work with credit cards because you don’t have a merchant account, please call and have a QuickBooks professional help you set this up.

Figure 2: The Issue a Refund window.

If there is an open invoice, the Apply Credit to Invoices window will open, containing a list of unpaid bills. If there isn’t already a checkmark in front of the invoice you want to apply it too, click in the first column to create one. QuickBooks will tell you how much credit was applied and whether any remains. When you’ve checked the screen for accuracy, click Done.

Dealing with Overpayments

Let’s say a customer is catching up on multiple outstanding invoices and he or she sends you a check for the total but overpays you. Open the Receive Payments window by going to Customers | Receive Payments or clicking Receive Payments on the home page. Select the customer and enter the Payment Amount and Check #. QuickBooks will have put a checkmark in front of all the outstanding invoices listed to indicate they’ve been paid.

In the lower left corner, you’ll see a section titled Overpayment. The extra amount and your two options for dealing with it appear here. You can either credit the customer or issue a refund. Click the action you want to take, then save the transaction.

Figure 3: If a customer overpays you, you can use QuickBooks’ built-in tools to credit him or her.

You can also issue refunds through the Write Checks window, but this is a more complicated procedure. It’s easier to process a credit memo.

If you’re at all unclear about what is described here, please contact the office for assistance. Refunds or credits that come through incorrectly (or not at all) can make customers very unhappy and may affect future sales. Why not let a QuickBooks professional help you get it right the first time?

• By Leon Clinton
• July 30, 2019

Under tax reform, many tax laws changed, including those affecting itemized deductions. While many people no longer need to itemize due to the nearly doubling of the standard deduction, certain taxpayers whose total deductions exceed the standard deduction may still want to consider itemizing. As a reminder, here is quick summary of how tax reform affected four itemized deductions used by many taxpayers in prior years:

1. Medical and Dental Expenses. Taxpayers can deduct the part of their medical and dental expenses that are more than 7.5 percent of their adjusted gross income.

2. State and Local Taxes (SALT). The law limits the deduction of state and local income, sales, and property taxes to a combined total deduction of $10,000. The amount is $5,000 for married taxpayers filing separate returns. Taxpayers cannot deduct any state and local taxes paid above this amount.

3. Home Equity Loan Interest. Taxpayers can no longer deduct interest paid on most home equity loans unless they used the loan proceeds to buy, build or substantially improve their main home or second home.

4. Miscellaneous Deductions. The new law suspends the deduction for job-related expenses or other miscellaneous itemized deductions that exceed two percent of adjusted gross income. This includes, among other things, unreimbursed employee expenses such as uniforms, and union dues.

If you have any questions or would like more information about itemized deductions after tax reform, don’t hesitate to call.

• By Leon Clinton
• July 26, 2019

Due to ongoing efforts to protect taxpayers from identity thieves, the Internal Revenue Service no longer offers tax transcript faxing service and third-party mailing of tax returns and certain transcripts. These measures are effective June 28 and July 1, 2019 respectively, and affect individual and business transcripts.

Background

Tax transcripts are summaries of tax return information and have increasingly become a target of criminal activity. Identity thieves impersonate taxpayers or authorized third parties and use tax transcripts to file fraudulent returns for refunds. These fraudulent returns are difficult to detect because they mirror a legitimate tax return.

In September 2018, the IRS began to mask personally identifiable information for every individual and entity listed on the transcript and works with tax professionals like me to make sure that we have what we need for tax preparation and representation for our clients.

Here is what is visible on the new tax transcript:

• Last four digits of any SSN listed on the transcript: XXX-XX-1234
• Last four digits of any EIN listed on the transcript: XX-XXX1234
• Last four digits of any account or telephone number.
• First four characters of the last name for any individual (first three characters if the last name has only four letters).
• First four characters of a business name.
• First six characters of the street address, including spaces.
• All money amounts, including wage and income, balance due, interest and penalties.

Faxing Service Ends June 28

Starting June 28, 2019, the IRS will stop faxing tax transcripts to both taxpayers and third parties, including tax professionals. This action affects individual and business transcripts. Several options remain, however, for obtaining a tax transcript, including using the IRS2Go app to get transcripts online or by mail. Taxpayers can also call 800-908-9946 to access an automated Get Transcript by Mail feature, or submit Form 4506-T or 4506T-EZ, Request for Transcript of Tax Return, to have a transcript mailed to the address of record.

Certain Third-party Mailings Stop July 1

Effective July 1, 2019, the IRS will no longer provide transcripts requested on Form 4506, Form 4506-T and Form 4506T-EZ to third parties. These forms are often used by lenders and others to verify income for non-tax purposes and have been amended to remove the option for mailing to a third-party. Taxpayers may continue to use these forms to obtain a copy of their tax return or a copy of their tax transcripts.

Among the largest users are colleges and universities verifying income for financial aid purposes. This change will NOT affect use of the IRS Data Retrieval Tool through the Free Application for Federal Student Aid (FAFSA) process.

Third parties who use these forms for income verification have other alternatives such as Income Verification Express Service (IVES). Taxpayers may choose to provide transcripts to requestors instead of authorizing the third party to request these transcripts from the IRS on their behalf.

Because the taxpayer’s name and Social Security number are now partially masked, the IRS also created a Customer File Number space that can be used to help third parties match transcripts to taxpayers. Third parties can assign a Customer File Number, such as a loan application number or a student identification number. The number will populate on the transcript and help match it to the client/student.

If you have any questions about tax transcripts, don’t hesitate to call.

• By Leon Clinton
• July 21, 2019