Saving for a comfortable retirement is up to you

If your employer offers a 401(k) plan, participating can mean the difference between having a sufficient nest egg and worrying about your expenses after you stop working. Tips for making the most of your 401(k) include contributing at least enough to receive the amount your company will match, and allocating your contributions between different types of investments in a way that meets your tolerance for risk while still allowing for the growth rate you need. The retirement clock is ticking. Contact us for more suggestions about ways you can save.

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Using a Vehicle for Business: Q&A

IRS rules and exceptions abound, but there are some questions we can answer simply.

Next to your home, your car is probably the most expensive investment you make. And the costs of paying for and maintaining it can be considerable. Can you recoup some of your investment by claiming vehicle expenses on your tax return?

Sometimes. The IRS has many restrictions on the business use of a vehicle, and those restrictions have many exceptions. Better to know these upfront than to have to correct a tax return after you’ve filed it. Here are some questions and answers that may help you decide whether you’re eligible.

How does the IRS identify a “vehicle”?

TaxPlan 0816 image 1_zpszgf1bqyaA car, van, pickup, or panel truck.

What are transportation expenses?

These are “ordinary and necessary expenses” incurred when you, for example:

  • Visit customers,
  • Attend a business meeting held at a location other than your regular workplace, or
  • Go from home to a temporary workplace that is not your company’s principal location.

The daily commute to and from your regular office is not deductible. The IRS considers this personal commuting expenses.

What if I’m on an overnight business trip away from home?

The IRS considers these travel expenses, and they’re reported differently. Your car expense deduction, though, is calculated the same way in both situations.

What if I use my car for both business and personal purposes?

You’ll calculate the expenses incurred for each by determining how many miles you drive for business and how many you drive for personal reasons.

I work in a home office. Can I deduct any driving expenses?TaxPlan 0816 image 2_zpsahketzsm

Yes, you can deduct the cost of driving to “another work location in the same trade or business.”

How do I calculate my deductible expenses?

There are two options. Using the standard mileage rate, you can claim 57.5 cents per mile (2015 tax year figure). You are required to use this method for the first year you use the vehicle for business purposes. After that initial year, you can choose between the standard mileage rate and actual car expenses. These include depreciation, oil and gas, insurance, and repairs.

Depreciation? Isn’t that difficult to calculate?

Yes, especially for cars. If you plan to take this kind of deduction, please let us handle your tax preparation for you. Depreciation is very, very complex, and sometimes requires more than one calculation method.

Can I take a Section 179 deduction for my vehicle?

Possibly, if you use the car for business more than 50 percent of the time — and only for the first year.

What kind of vehicle expense records do I need to maintain?

You know the drill here. If the IRS ever wants to examine your return, it will expect evidence like receipts, cancelled checks, and credit card statements. You’ll need to document the date and location where you incurred the expense. You’ll need accurate mileage records (miles driven, purpose of trip, etc.).

These requirements scream for some kind of organized computer log or written diary, along with a safe place for any paper receipts, bills, etc. There are numerous mobile apps that can help you with this task. We can steer you in the right direction.

TaxPlan 0816 image 3_zps0qfwweveIf you’re planning to deduct car expenses, it’s important that you keep careful paper or electronic records.

Where will I be reporting transportation expenses?

If you are self-employed, you will report business-related vehicle expenses on Schedule C or Schedule C-EZ (Form 1040). Farmers should use Schedule F (Form 1040). You’ll also want to complete a Form 4562, which is used to report depreciation and the Section 179 deduction.

Maintaining accurate records for car and truck expenses is time consuming and detail intensive. And that’s once you understand all of the IRS’s rules and exceptions surrounding this deduction. To avoid having to fix completed tax documents that the IRS has questioned, talk to us before you put a vehicle into business use. We’ll be happy to evaluate your transportation situation and guide you through the process.

Stock images courtesy of FreeDigitalPhotos.net

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Who pays for Social Security and Medicare?

According to the 2016 Summary of Annual Reports by the trustees, the major source of funding for the Social Security and Medicare programs is the payroll tax you and your employer pay, or that you pay as a self-employed worker. In addition, about 13% of the funding comes from the taxation of social security benefits – those taxes you pay with your federal income tax return when you collect social security benefits and your income is above a certain amount. Other sources of funding come from the interest earned from the Treasury on the program assets, monthly premiums paid for Medicare benefits, and general tax revenue.

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Prepare for new wellness plan notifications

Wellness programs, when provided as a fringe benefit as part of a cafeteria plan, can benefit both your company and your employees. But you may be collecting information about your employees that is regulated by several federal statutes, including rules on confidentiality and nondiscrimination. Beginning in January 2017, you’ll need to provide your employees with a notice stating what information you collect, and how it will be used, along with other details.

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Setting Up User Access in QuickBooks

Will multiple employees be working with your QuickBooks company file? You’ll need to define their permission levels.

If you ever did your bookkeeping manually, you probably didn’t allow every employee to see every sales form and account register and payroll stub. Most likely, you established a system that allowed staff to work only with information that related to their jobs. Even so, there may have been times when, for example, someone pulled the wrong file folder or was sent a report that he or she shouldn’t have seen.

QuickBooks helps prevent this by setting virtual boundaries. You can specify which features of the software can be accessed by employees who work with your accounting data. Each employee receives a unique user name and password that unlocks only the areas he or she should be visiting.

QBC 0816 image 1_zpsai8phrev

To help minimize errors, maintain data integrity, and preserve confidentiality, QuickBooks lets you restrict users to designated areas in the software.

Here’s how you as the Administrator can define these roles. Open the Company menu and select Set Up Users and Passwords | Set Up Users. The User List window opens. You should see yourself signed up as the Admin. Click Add User and enter a User Name and Password for the employee you’re adding. Confirm the Password and check the box in front of Add this user to my QuickBooks license. Click Next.

Note: You can have as many as five people working in your QuickBooks company file at the same time, depending on how many user licenses you’ve purchased. Not sure? Press F2 and look in the upper left corner. If you need more than five user licenses, talk to us about upgrading to QuickBooks Enterprise Solutions.

In the next window that opens (see above screen), you’ll be given three options. Probably you’ll most often select the second option, which lets you specify the screens this user can see and what he or she can do there. The first—All areas of QuickBooks—would seldom be granted. And the third allows us to come in and do whatever tasks have been outlined in our work relationship (troubleshooting, monitoring, creating and analyzing reports, etc.).

Click the button in front of Selected areas of QuickBooks and then Next. You’ll see the first in a series of screens that deal with the software’s functional areas: Sales and Accounts Receivable, Purchases and Accounts Payable, Checking and Credit Cards, Inventory, Time Tracking, Payroll and Employees, Sensitive Accounting Activities (funds transfers, online banking, etc.), Sensitive Financial Reporting, and Changing or Deleting Transactions.

QBC 0816 image 2_zpsscooy6vb

When you give employees Selective Access in a particular area, you can further define their roles there.

The Sales and Accounts Receivable screen is a good example. You can see the options offered in the above image. By clicking on the buttons pictured, you’re giving this employee permission to both create and print transactions. Below these options, you’ll be able to keep him or her from seeing customers’ credit card numbers in their entirety by clicking in the small box. When you’re finished, click Next.

Keep clicking Next and proceed through the rest of the screens. Your choices will be similar on each. But be sure to read all of the descriptive text very carefully. Keep in mind the importance of confidentiality issues and security as you go along.

The ninth screen, Changing or Deleting Transactions, deserves special attention. First, should this employee be able to change or delete transactions in his or her assigned area(s)? Even though you trusted these employees to work with finances when you hired them, consider this question carefully. Depending on the volume of transactions processed every day, you may want to reserve this ability for yourself.

We may or may not have established and password-protected a Closing Date for your company file. This is the date when the books for a specific time frame have been “closed,” meaning that transactions should not be entered, added, or deleted prior to it. We can talk with you about the pros and cons of such an action.

QBC 0816 image 3_zpsd5cdt2uy

A summary of user access rights

Here and on every other screen in this multi-step wizard, you can always click the Back button if you want to return to a previous window. When you’re finished, you’ll see a screen like the one in the above image that summarizes the choices you have just made.

If you’re feeling any uncertainty or confusion about the whole issue of access rights, we’ll be happy to go over your options with you. These are important decisions. You’ll want to stress to your employees that restricting their permissions does not signal a lack of your trust in them. Rather, QuickBooks provides these tools to protect everyone who uses the software as well as any external individuals and companies that might be affected.

 

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Take these steps to help prevent fraud in your business

How can you prevent employee fraud in your business? Here are four suggestions.

  • Screen job applicants. Check work references, criminal records, and professional recommendations. By instituting a screening policy, you may save a lot of cash and grief. Just remember to treat every applicant equally, and get written permission for background checks.
  • Reconcile bank accounts. A standard and simple internal control is to separate employees who pay bills and make deposits from those who reconcile accounts. As an owner, making time to personally review deposits and disbursements on a regular basis can deter fraudulent billing or cash skimming schemes.
  • Secure inventory and supplies. This can be as simple as regularly changing combinations on warehouse doors or locking supply cabinets. Laptop computers are especially vulnerable to theft, so make a priority of securing them.
  • Get a cash control review. Having a trained set of eyes inspect your books, records, and operations can pay for itself many times over. Skilled auditors can ferret out scams and help your business develop stronger controls against criminals, both inside and out.

If you’d like assistance with this or any of your business concerns, give us a call.

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Accountable plans are a win-win business idea

Are you looking for a way to give your employees a tax-free benefit that is also tax-deductible for your business? Consider an accountable plan. These arrangements let you reimburse your employees for expenses incurred on behalf of your company, such as driving to the post office or office supply store. With a properly administered plan, you can deduct the reimbursements on your business tax return, yet the payments are not considered income to your employees.

How can you make sure your plan qualifies? Here are three requirements.

  • The reimbursements must be for allowable business expenses. For instance, you can repay employees for hotel and other travel expenses when traveling to a trade convention.
  • Your employees need to keep records of the expenses, and provide those records to you.
  • If you pay or advance your employees more than the actual amounts spent on business items, the excess must be returned to you. Amounts not returned are income to your employee, and are subject to payroll taxes.

Contact us to discuss your policies for repaying employees’ business expenses. We’ll help you make your plan accountable.

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