samarak blog

C-corp or S-corp?

Tue, 18 Nov 2008 00:00:00 -0800

While C corporations and S corporations have a lot in common, there are some significant differences that cause them to appeal to different businesses. First, some similiarities of C-corps and S-corps:

both provide protection against liabilities
recordkeeping requirements are the same

The decision to form a business as a C-corp or an S-corp usually coes down to 3 significant differences:

Qualifications
There are no restrictions for C corporations, which can be started by individuals, corporations and foreigners. There are, however, some important restrictions for S corporations:
- maximum of 100 shareholders
- Owners must be either US citizens, green card holders or have filed personal US tax returns for the previous 2 years
- Maximum of 25% passive income (income from rents/investments)
- S-corps can have only one class of stock, though they can still have both voting and non voting stock
Taxes
While S-corps file corporate tax returns, they do not pay corporate taxes. Instead, the profits are passed through to the shareholders who pay taxes with their personal returns. C-corps, however, are subject to double taxation - first the company pays taxes and then the shareholders pay taxes on dividends received.
Long-term plans
If you plan to go public, then a C corporation is the way to go.

The decision as to whether to form a corporation as an S corporation or a C corporation usually comes down to whether or not the company qualifies to be an S corporation. If you qualify, then an S-corp is generally the best choice.

Finally, choosing the best business structure for your business is not easy. While I hope this blog entry helps you understand and consider the differences between C-corps and S-corps, I recommend seeking guidance from your accountant or attorney before making a final decision.

Limitations of Using Billing Statements in QuickBooks

Mon, 17 Nov 2008 00:00:00 -0800

Some businesses choose to bill their customers via statements instead of invoices. While this is not the best choice for most businesses, it sometimes is for businesses that bill periodically (weekly, monthly, etc.). These businesses record charges to their customers in the customer register instead of creating invoices, and then create statements summarizing the entries made in the customer register to send to their customers. Before choosing to do this, it is important to be aware of the limitations of doing so:

Sales tax, percentage discounts, payment items, and group items cannot be recorded as separate charges on a billing statement. They can be recorded as separate charges on invoices.
You can't use multiple-paragraph descriptions of products sold or services provided on statments. You can on an invoices.
Related charges can't be grouped and subtotaled on statments. They can on invoices.
Each billing statement charge can only represent one item, meaning you have to enter separate statment charges for each product or service.
You can't add messages to billing statements. You can add messages to invoices.
The statement form does not allow for custom fields.

While these limitations do not preclude statements from being the best choice for some companies to bill their customers, they do preclude statements from being the best choice for most companies.

2009 Corporate Tax Rates

Fri, 14 Nov 2008 00:00:00 -0800

The corporate tax rate schedule has been the same for a number of years and President-elect Obama has said he has no plans to change corporate tax rates. Assuming the rates don't change, 2009 corporate tax rates will remain as follows:

Taxable Income	Tax
< $50,000	15% of the taxable income
$50,000 - $75,000	$7,500 + 25% of taxable income over $30,000
$75,000 - $100,000	$13,750 + 34% of taxable income over $30,000
$100,000 - $335,000	$22,250 + 39% of taxable income over $30,000
$335,000 - $10,000,000	$113,900 + 34% of taxable income over $30,000
$10,000,000 - $15,000,000	$3,400,000 + 35% of taxable income over $30,000
$15,000,000 - $18,333,333	$5,150,000 + 38% of taxable income over $30,000
Over $18,333,333	35% of the taxable income

If the corporate tax rates do change for 2009, we will update this blog to reflect the changes.

When to Use Statements in QuickBooks

Tue, 11 Nov 2008 00:00:00 -0800

The primary reason for using statements in QuickBooks is to remind delinquent customers that they owe you money and to summarize the amount they owe. However, some businesses use statements instead of invoices.

Using QuickBooks Statements as reminders
If you bill your customers via invoices, then a statement is a great way to summarize what a certain customer who is delinquent in paying you owes. Statements look similar to invoices, but they list each transaction (invoices sent, credits given, payments received) for which there is an outstanding balance, the date of the transaction and then the total amount due. Because statements simply summarize information already in QuickBooks, they do not require any data entry. Because they are very easy to create for one or all delinquent customers, I often recommend to my customers that they create statements for all delinquent customers on a regular basis, and then quickly review them to decide which ones to send out.

Using Statements instead of invoices in QuickBooks
Some businesses that bill periodically (weekly, monthly, etc.) choose to send statements to their customers instead of invoices. Instead of writing invoices, these businesses record charges to their customers in the customer register. Then on a regular basis they simply create statements which summarize the entries which have been made in the customer register. While this makes sense for some customers, using billing statements instead of invoices has significant limitations.

QuickBooks 2009 Live Community Makes Getting Help Easy

Fri, 07 Nov 2008 00:00:00 -0800

QuickBooks 2009 Live Community greatly simplifies getting help in QuickBooks. If you keep the Live Community/Help window open while you work in QuickBooks, it continually changes to suggest relevant topics to whatever it is in QuickBooks that you are currently working on. And you can choose between getting help via the standard QuickBooks Help (which is faster and easier to use than it used to be) or using Live Community to ask a question. If you choose to ask a question in Live Community, the first thing Live Community does is to check to see if your questions has already been asked and answered, in which case you can go right to the answer, as opposed to waiting for someone to answer your question.

In my opinion, Live Community is a significant reason for inexperienced QuickBooks users to consider upgrading to QuickBooks 2009. Experienced users generally don't require help very often, so Live Community will be less useful for them. However, the ease of use is likely to result in some experienced users looking into issues they previously didn't want to take the time to explore.

Choose whether or not to display Live Community in QuickBooks 2009 by checking or unchecking "Show Live Community" in the Desktop View Preference tab (Edit->Preferences->Desktop View->My Preferences).

As an Authorized QuickBooks Affiliate, Samarak is able to offer significant discounts on most QuickBooks products. If you are planning to upgrade, save money by purchasing QuickBooks from our site.

Finally, as a general rule, we recommend to our clients that they upgrade their version of QuickBooks every 2-3 years. Purchase QuickBooks now.

What Obama's Tax Policy Means For You

Wed, 05 Nov 2008 00:00:00 -0800

Now that the presidential election is over and Barack Obama has been elected to be the next President of the Unites States, it is time to look closely at President-elect Obama's economic and tax policies and think about what they really mean for you. To this end, a partial summary of President-elect Obama's tax policies follows.

How Obama's Tax Policies will affect Individuals:

cut taxes for lower and middle income families/households
- tax cuts for lower and middle income families will be made permanent
- child tax credits will be made permanent
- eliminate income tax for seniors with less than $50,000 of income
raise taxes on those with income of more than $250,000/year
- the highest tax rate would be raised to pre-2001 levels - 39.6%
increase capital gains taxes from 15% to 20%-28% & increase taxes on dividends
raise social security taxes for those with higher incomes
eliminate deductability of state and local income taxes

How Obama's Tax Policies will affect estate taxes:

make estate taxes permanent
$3.5M exemption and 45% rate

How Obama's Tax Policies will affect the AMT:

extend and index the 2007 AMT patch
no plans to reform AMT

How Obama's Tax Policies will affect corporate taxes:

corporate tax rate remains the same
make research & development credit permanent
make renewable energy production tax credit permanent
eliminate oil and gas loopholes
impose windfall profits tax on noil and gas companies

This is not an exhaustive list of Presiedent-elect Barack Obama's proposals, but it covers the big issues that affect most individuals and small companies.

QuickBooks 2009 Company Snapshot is Great

Tue, 04 Nov 2008 00:00:00 -0800

The QuickBooks 2009 feature that I am most excited about is the Company Snapshot. It doesn't really add any functionality, but it does make it really easy for a manager to quickly see key information that in the past they probably did not look at as often as they should. For this reason, I think the Company Snapshot alone is a reason to consider upgrading to QuickBooks 2009.

I trust my bookkeeper to handle the day-to-day bookkeeping for my company. However, there are a few things I always want to be on top of. I always want to know how much cash we have in the bank. I always want to know the balance of our accounts receivable and who owes us money, and when cash is tight I like to know who we owe money to. In the past I got this information from different places. I habitually look at the Chart of Accounts to see where cash stands and because it is a quick and easy way for me to see the balance on other accounts I am interested in. While I can see the AR and AP balances in the Chart of Accounts, seeing exactly who owes us money and who we owe money to required opening separate A/R and A/P reports, something I often neglected to do unless the balance in one of the accounts was unusually high. The QuickBooks Company Snapshot enables me to see all this information in one place in a very easy to see format.

The QuickBooks Company Snapshot includes five sections:

Income and Expense Trend Graph: a bar graph showing income and expenses for the period of time you select.
Reminders: you can choose what shows up in the list of Reminders that shows up in the Company Snapshot.
Account Balances: the Account Balances section is like a mini Chart of Accounts in which you can choose which accounts you want to see.
Customers Who Owe Money: a list of who owes you money, the amount and the due date. You can sort it by customer, due date, or amount due.
Vendors to Pay: a list of who you owe money to, the amount and the due date. Again, you can sort it by vendor, due date, or amount due.

Here's a picture of the QuickBooks Company Snapshot:

There are other good reasons to upgrade to QuickBooks 2009 (Live Community is the other one I'm most excited about), but the Company Snapshot is the enhancement I like the most.

As an Authorized QuickBooks Affiliate, Samarak is able to offer significant discounts on most QuickBooks products. If you are planning to upgrade, save money by purchasing QuickBooks from our site.

Finally, as a general rule, we recommend to our clients that they upgrade their version of QuickBooks every 2-3 years. Purchase QuickBooks now.

Small Business Tax Calendar for November 2008

Thu, 30 Oct 2008 00:00:00 -0700

The following list of November tax dates will be useful to accountants, bookkeepers and small business owners:

11/5/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between October 29th and October 31st.
11/7/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between November 1st and November 4th.
11/10/2008 - Employees who earned more than $20 in tips in October must report the total to their employers.
11/13/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between November 5th and November 7th.
11/14/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between November 8th and November 11th.
11/17/2008 - If you are subject to the monthly deposit rule, then deposit payroll taxes for October by November 17th.
11/19/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between November 12th and November 14th.
11/21/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between November 15th and November 18th.
11/26/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between November 19th and November 21st.

Towards the end of November we will post a similar list showing December tax dates for accountants, bookkeepers and small business owners.

QuickBooks 2009 Has Great New Features

Thu, 30 Oct 2008 00:00:00 -0700

QuickBooks 2009 has some great new features. The top six reasons Intuit touts to upgrade to QuickBooks 2009 are:

QuickBooks 2009 customers get a free, easy to create, website with fee hosting.
New Multi-user features in QuickBooks 2009.
QuickBooks 2009 includes a Company Snapshot showing you which customers owe you money, which vendors you owe money, what things you need to do today, and more.
New and easier Online Banking features.
QuickBooks 2009 includes multi-currency support.
Live Community makes getting accessing QuickBooks help easier than ever.

In my opinion, the top two reasons to upgrade to QuickBooks 2009 are the Company Snapshot and Live Community. I will post blogs about each in the next few days explainging how to use them and why I like them so much.

You can compare and/or purchase QuickBooks 2009 products on our site.

Accounting Internet Library Worth A Look

Wed, 29 Oct 2008 00:00:00 -0700

The Accounting Internet Library, put together by a retired accounting teacher - Walter Antoniotti, includes links to a vast amount of information for accounting students, teachers, and business professionals. The information is broken out into five main areas:

Help for Beginners
Advanced Accounting Courses Free Learning Materials
CPA Exam Resources, Career Information, Sites for a CPA, Scholarships, Free Accounting Software
Interesting Accounting Sites, Accounting Organizations and Blogs, Teacher Sites
Tax Sites, Tax Resources and more

If you are looking for accounting information, this is a great place to start. Check it out.

QuickBooks Tutorials: Memorized Transactions

Mon, 27 Oct 2008 00:00:00 -0700

We recently added a number of QuickBooks tutorials related to handling recurring and memorized transactions in QuickBooks. Each QuickBooks tutorial includes step-by-step instructions and screen shots.

Recently added QuickBooks tutorials include:

Check out our Quickbooks Tutorials page for QuickBooks tutorials on creating and using invoices in QuickBooks, QuickBooks classes, managing your chart of accounts in QuickBooks, and much more.

Maximum Wages Subject to Social Security Tax in 2009 Will be $106,800

Mon, 20 Oct 2008 00:00:00 -0700

The maximum amount of wages subject to social security taxes increases annually. It was $97,500 in 2007, $102,000 in 2008, and will increase to $106,800 in 2009. Over the past 10 years the maximum wages subject to social security taxes have been as follows:

1999: $72,600
2000: $76,200
2001: $80,400
2002: $84,900
2003: $87,000
2004: $87,900
2005: $90,000
2006: $94,200
2007: $97,500
2008: $102,000
2009: $106,800

The tax rates are 6.2% for FICA and 1.45% for Medicare, and there is no limit on the amount of wages which are subject to the Medicare tax.

2009 Tax Rate Tables

Mon, 20 Oct 2008 00:00:00 -0700

The IRS recently released the updated tax rate tables for calendar year 2009. The 2009 tax rate tables are as follows:

2009 Tax Rate Table for Married Individuals Filing Joint Returns and Surviving Spouses

Taxable Income	Tax
<$16,700	10% of the taxable income
$16,700 to $67,900	$1,670 + 15% of taxable income over $16,700
$67,900 to $137,050	$9,350 + 25% of taxable income over $67,900
$137,050 to $208,850	$26,637.50 + 28% of taxable income over $137,050
$208,850 to $372,950	$46,741.50 + 33% of taxable income over $208,850
Over $372,950	$100,894.50 + 35% of taxable income over $372,950

2009 Tax Rate Table for Heads of Households

Taxable Income	Tax
<$11,950	10% of the taxable income
$11,950 to $45,500	$1,195 + 15% of taxable income over $11,950
$45,500 to $117,450	$6,227.50 + 25% of taxable income over $45,500
$117,450 to $190,200	$24,215 + 28% of taxable income over $117,450
$190,200 to $372,950	$44,585 + 33% of taxable income over $190,200
Over $372,950	$104,892.50 + 35% of taxable income over $372,950

2009 Tax Rate Table for Unmarried Individuals (other than Surviving Spouses and Heads of Households)

Taxable Income	Tax
<$8,350	10% of the taxable income
$8,350 to $33,950	$835 + 15% of taxable income over $8,350
$33,950 to $82,250	$4,675 + 25% of taxable income over $33,950
$82,250 to $171,550	$16,750 + 28% of taxable income over $82,250
$171,550 to $372,950	$41,754 + 33% of taxable income over $171,550
Over $372,950	$108,216 + 35% of taxable income over $372,950

2009 Tax Rate Table for Married Individuals Filing Separate Returns

Taxable Income	Tax
<$8,350	10% of the taxable income
$8,350 to $33,950	$835 + 15% of taxable income over $8,350
$33,950 to $68,525	$4,675 + 25% of taxable income over $33,950
$68,525 to $104,425	$13,318.75 + 28% of taxable income over $68,525
$104,425 to $186,475	$23,370.75 + 33% of taxable income over $104,425
Over $186,475	$50,447.25 + 35% of taxable income over $186,475

2009 Tax Rate Table for Estates and Trusts

Taxable Income	Tax
<$2,300	15% of the taxable income
$2,300 to $5,350	$345 + 25% of taxable income over $2,300
$5,350 to $8,200	$1,107.50 + 28% of taxable income over $5,350
$8,200 to $11,150	$1,905.50 + 33% of taxable income over $8,200
Over $11,150	$2,879 + 35% of taxable income over $11,150

More information related to filing 2009 tax returns is available on the IRS web site.

IRS Announces 2009 Inflation Adjustments

Thu, 16 Oct 2008 00:00:00 -0700

The dollar amounts of many tax provisions are revised by law annually by the IRS. The major changes affecting 2009 tax returns are:

Personal and dependency tax exemptions will increase from $3,500 in 2008 to $3,650 in 2009.
The standard deduction for married couples filing jointly will increase from $10,900 in 2008 to $11,400 in 2009.
The standard deduction for singles and married individuals filing separately will increase from $5,450 in 2008 to $5,700 in 2009.
The standard deduction for heads of household will increase from $8,000 in 2008 to $8,350 in 2009.
Tax bracket thresholds will increase for each filing status.
The maximum earned income tax credit for low and moderate income workers and working families with two or more children will increase from $4,824 in 2008 to $5,028 in 2009. The income limit for the credit for joint return filers with two or more children will increase from $41,646 in 2008 to $43,415 in 2009.
The annual gift exclusion will increase from $12,000 in 2008 to $13,000 in 2009.

More information is available on the IRS web site.

Deleting Memorized Transactions

Wed, 15 Oct 2008 00:00:00 -0700

Deleting memorized transactions is easy and, if you use memorized transactions a lot, worth doing periodically. It is easier to find the memorized transactions you do use if you clear the ones you no longer use out every now and then.

To delete a memorized transaction, simply open the Memorized Transactions List by selecting Memorized Transactions List from the Lists menu.

Then select the Memorized Transaction you want to delete, click Memorized Transaction and then Delete Memorized Transaction.

Click OK to the Delete Memorized Transaction messagebox and you're done.

Editing Memorized Transactions

Fri, 10 Oct 2008 00:00:00 -0700

If you need to edit a memorized transaction, you can do so. If you are making significant changes, then it might be worth simply deleting the memorized transaction and re-entering it. However, editing the memorized transaction is easy, so both options are fine. To edit a memorized transaction, simply:

Open the Memorized Transactions List from the Lists menu.

Open the memorized transaction you want to edit by double clicking it.

Edit the transaction.
Select Memorize Bill from the Edit menu to rememorize the transaction.

Then click Replace in the Replace Memorized Transaction window.

Assuming you are simply editing the memorized transaction and do not wish to actually enter it at this time, close the transaction window without saving.

529 Plans Explained

Thu, 09 Oct 2008 00:00:00 -0700

529 Plans are educations savings plans which are designed to help families put away money for future college expenses. An explanation of the key benefits of 529 plans follows, along with answers to some common questions about 529 plans.

Benefits of 529 Plans

While deposits into 529 Plans do not count for federal tax deductions, investments in 529 Plans do grow tax-deferred and distributions which come out to pay for the beneficiary’s college costs (tuition, room & board, books) do come out federally tax free.
Some states offer tax breaks on money invested in 529 Plans, such as deductions on money invested in the plans up to a certain limit. To learn about the plan in your state, click here.
The named beneficiary can be changed without penalty, so if one of your children doesn’t go to college, you can transfer the money set aside for them to another child.
The plans are generally easy to enroll in and contribute to, and they do not require ongoing management.
There are not generally any income or age restrictions guiding who can put money into 529 Plans and who can benefit from them. If you are thinking about going back to school, set a plan up for yourself. If you don’t go, make your child or grandchild the beneficiary.

What can the money in 529 Plans be used for?

529 Plan money can be used for tuition, books, and/or room & board.
All accredited colleges and universities qualify.

What if I need the cash or none of my children go to college?

The donor can withdraw the money from their 529 Plans at any time, though withdrawals are subject to income tax (just the earnings, not the original investment on which you have already paid income taxes) and there is a 10% penalty.

What are contribution limits on 529 Plans?

Contribution limits on 529 Plans are generally quite high – over $300k per beneficiary in many plans.

Who controls the money I put into a 529 Plan for my child?

The donor, not the beneficiary, controls the funds. The named beneficiary does not generally have any rights. Therefore, you can make sure the beneficiary uses the funds in a way you approve of (such as using some money each year rather than all the money the first year, for a four-year college only, for tuition only rather than for books and room & board, etc.).

Using Memorized Transactions

Tue, 07 Oct 2008 00:00:00 -0700

There is no need to repeatedly re-enter the same information in QuickBooks for transactions you frequently make. Instead, simply create a memorized transaction which you can then use repeatedly.

If the transaction is a recurring transaction, such as a monthly rent payment, you can set it up as a recurring transaction (See "Handling Recurring Transactions in QuickBooks"). If not, then use it when you need it by entering it from the Memorized Transaction list (See "Creating Memorized Transactions in QuickBooks" to add memorized transactions to the list).

From the Lists menu, select Memorized Transactions List.

In the Memorized Transaction List window, select the memorized transaction you want by double clicking it. In this example, I will click on American Express to enter my monthly credit card bill.

Now simply enter the relevant info (Date, Amount Due, amount applicable to each account, memo, customer job, class, etc.) and Save, just as if you were entering the bill from scratch.

Creating Memorized Transactions in QuickBooks

Thu, 02 Oct 2008 00:00:00 -0700

For transactions that you frequently enter into QuickBooks, you can save time by memorizing the transaction. This way you just open the memorized transaction when you need it, and much of the information is already there. The information that changes each time you can simply leave blank.

The following example uses a memorized transaction to simplify entering your credit card bill.

First, enter the information that stays the same every time you enter your credit card bill. As you can see, I entered the accounts which credit card transactions normally fall into. However, if you assign your expenses to Classes, then you might have additional rows representing each class for each account. Then click Memorize Bill (or Memorize Invoice, Memorize Sales Receipt, etc.).

In the Memorize Transaction window, select "Don't Remind Me" as you will simply access this memorized transaction when you receive the bill. Alternatively, you could select "Remind Me" to add this transaction to your Reminders list. Click OK to memorize the transaction.

Assuming you are entering the transaction information simply to create a memorized transaction for future use, you can close the transaction window without saving.

This transaction is now available in the Memorized Transactions List, which can be accessed from the Lists menu.

IRS Sets Fourth Quarter 2008 Interest Rates

Wed, 01 Oct 2008 00:00:00 -0700

After lowering interest rates by 1% each the last two quarters, the IRS announced today that they are raising interest rates by 1% effective October 1, 2008. Therefore, beginning today the interest rates will be:

6% for overpayments (5% for corporations)
6% for underpayments
8% for large corporate underpayments
3.5% for the portion of corporate overpayments that is above $10,000.

The IRS determines the rate of interest on a quarterly basis based on the federal short-term rate.

Small Business Tax Calendar for October 2008

Fri, 26 Sep 2008 00:00:00 -0700

Following is a list of October dates that small business owners, bookkeepers and accountants should be aware of:

10/1/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between September 24th and September 26th.
10/3/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between September 27th and September 30th.
10/8/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between October 1st and October 3rd.
10/10/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between October 4th and October 7th.
10/15/2008 - If you are subject to the monthly deposit rule, then deposit payroll taxes for September by October 15th.
10/16/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between October 8th and October 10th.
10/17/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between October 11th and October 14th.
10/22/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between October 15th and October 17th.
10/24/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between October 18th and October 21st.
10/29/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between October 22nd and October 24th.
10/31/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between October 25th and October 28th.

At the end of October we will publish a list of November dates that small business owners, bookkeepers and accountants should be aware of.

S-corp or LLC?

Tue, 23 Sep 2008 00:00:00 -0700

S corporations and LLCs have a lot in common and therefore often appeal to the same people. Two major things S-corps and LLCs have in common are:

both provide protection against liabilities
both enable the owners to avoid double taxation as business losses and profits pass through to the owners.

The decision between an S-corp and an LLC usually comes down to two significant differences:

Employment Taxes
Owners (members) of an LLC must pay employment taxes on all profits passed through to their individual tax return. Owners of an S-corp, however, only pay taxes on the salary and wages they receive from the S corporation. If you expect to generate significant profit or your LLC is already generating a lot of profit, this difference alone can make it worth starting up as or switching to an S-corp. It is important to note, however, that owners of an S-corp are required to take a reasonable salary for the services they perform and the IRS may recategorize distributions made as salary if they don't feel the owners have done so.
It is Easier to Start and Operate an LLC than an S Corporation
It is simpler to start an LLC than it is to start an S-corp and, once operating, LLCs do not require regular corporate meetings and maintaining company minutes, both of which are required by S-corps.

If you are debating between an S-corp and an LLC, then it probably comes down to how much profit you expect to make and whether or not you can reasonably argue that some of that profit should not count as your salary. If this is the case, then consider an S-corp. If not, then it probably makes sense to go with the simpler LLC. It's not difficult to switch from an LLC to an S-corp, so it often is best to keep things simple at the beginning and then switch to an S-corp later if it makes sense to do so.

Finally, choosing the best business structure for you business is not easy. While I hope this blog entry helps you understand and consider the differences between LLCs and S-corps, I recommend seeking guidance from your accountant or attorney before making a final decision.

Handling Recurring Transactions in QuickBooks

Mon, 22 Sep 2008 00:00:00 -0700

For transactions that you regularly make, such as paying rent, you can avoid the hassle of entering the same information time and again by setting up a memorized transaction. You can then set this memorized transaction to occur on a specific schedule (daily, monthly, annually, etc.).

First, open the transaction (I will use a monthly rent payment as an example in this tutorial) you want to memorize. From the Edit menu, click Memorize Bill (or Memorize Invoice, Memorize Sales Receipt, etc.).

In the Memorize Transaction window:

Select Automatically Enter
How Often (daily, weekly, monthly) you want the bill to be entered
Next Date, which is the first date on which the transaction will be automatically entered
Number Remaining if you know. Leave this blank if you don't want to set an end date
Days in Advance to Enter, if you want the transaction entered ahead of time. I set the rent bill to be entered 10 days ahead of time because it is due on the 1st of the month, and I want to make sure I send it in in time.

Click Ok and you are all done. QuickBooks will automatically enter the transaction at the appropriate time.

Accountants Expected to See Above Average Salary Increases in 2009

Thu, 18 Sep 2008 00:00:00 -0700

According to a recent study by Hewitt Associates of 1,073 large organizations, most US workers can expect flat base pay raises in 2009 of 3.8%. However, the good news for most of the readers of this blog is that the Hewitt study found that accountants and consultants can expect higher salary increases (4.6%) than any other industry in 2009. Read the article.

QuickBooks Tutorials: Invoices and Sales Receipts

Wed, 17 Sep 2008 00:00:00 -0700

We have added quite a few QuickBooks tutorials related to working with invoices and sales receipts in QuickBooks over the last month. Each QuickBooks tutorial includes instructions, screen shots, and detailed explanations and information about those things you should think about.

The QuickBooks tutorials we recently added are:

Check out our QuickBooks Tutorials page for tutorials on other things related to QuickBooks.

When to Use Sales Receipts in QuickBooks

Mon, 15 Sep 2008 00:00:00 -0700

When you start using QuickBooks you will probably have to decide whether to use invoices or sales receipts to record your sales in QuickBooks. See our blogs titled Deciding Whether Or Not To Use Invoices in QuickBooks and About QuickBooks Sales Receipts for information on invoices and sales receipts and when it is appropriate to use each. For more information on Sales Receipts, see the following QuickBooks Tutorials:

IRS Creates Web Page for Small Businesses

Mon, 15 Sep 2008 00:00:00 -0700

The IRS recently posted a new web page with links to information on issues that small business owners (specifically those that file Schedule C) commonly face. There is information on starting a business, operating a business, business and employment taxes, IRS forms and publications, and much more. Check it out and share it with your small business clients.

When Will I Receive My Economic Stimulus Payment?

Thu, 11 Sep 2008 00:00:00 -0700

The question the IRS hears the most about the economic stimulus payments is "When will I receive it?". The answer to this question can be found on the IRS's website. Simply click on "Where's My Stimulus Payment?", enter your social security number, filing status and the number of exemptions you claimed, and click "Submit".

Adding Your Logo to Sales Receipts in QuickBooks

Tue, 09 Sep 2008 00:00:00 -0700

Adding logos to QuickBooks Sales Receipts is simple. In the Enter Sales Receipts window, click on the Customize icon to open the Basic Customization window.

Check Use Logo in the Basic Customization window.

Surf to your logo and select it. Click Ok to the messagebox that appears telling you QuickBooks will copy your image to a new location. Back in the QuickBooks Basic Customization window, you can see your logo on the invoice. Use the Layout Designer to resize or reposition your logo.

Finally, note that while the logo does not show up in the onscreen sales receipt form, it will show up when printed. You can also see it in the preview window.

IRS Simplifies Application Process for Tax-Exempt Organizations

Tue, 09 Sep 2008 00:00:00 -0700

Organizations seeking tax-exempt status used to have to go through a two step process in which they first received an advance ruling allowing them to operate as a public charity for 5 years, and then had to demonstrate that they received a substantial portion of their support from public sources in order to receive a final determination letter. However, the revised From 990, the tax return which organizations exempt from federal income tax must file, has eliminated the need for this two step process.

Those organizations which received an advance ruling but have not yet received a final determination letter will no longer need to do so. Instead, they will be allowed to use their advance ruling letter as their final determination letter.

For more information, see the IRS's website.

Hourly Rates for Bookkeepers

Mon, 08 Sep 2008 00:00:00 -0700

Hourly bookkeeper rates vary greatly. I have seen US companies advertising bookkeeping rates of $10/hour and others charging over $100/hour for bookkeeping services. However, the majority of bookkeepers charge from $40/hour to $75/hour for their services, which from my experience is what competent bookkeepers should charge. I would caution companies to question the competence of a bookkeeper charging less than $40/hour and to think twice before paying more than $75/hour for bookkeeping services.

Some bookkeepers charge by the week or month, by the number of transactions, or for specific jobs. Given that it is very difficult to assess how long a job will take for an unknown client, I strongly recommend that bookkeepers not do this unless they have worked with a client for a long time and therefore can be sure they are setting an appropriate price. Likewise, I caution companies to question the quality of work they will receive when they engage a bookkeeper for a very low rate for an unspecified amount of work.

For more information and thoughts, check out Intuit's 2007 Rates Survey and the The American Institute of Professional Bookkeeper's 5 Ways to Succeed as a Freelance Bookkeeper.

Intuit Announces QuickBooks Online for the iPhone and BlackBerry

Thu, 04 Sep 2008 00:00:00 -0700

Intuit announced last week both iPhone and BlackBerry integration with QuickBooks Online. While the majority of the more than 130,000 small businesses that use QuickBooks Online will probably not access their QuickBooks Online account from their iPhones or BlackBerries, some users are likely to do so often to view information such as:

Financial statements including Profit & Loss and Balance Sheet
Bank account balances and credit card balances
Vendor lists, customer lists, and employee lists
Accounts receivable and accounts payable reports
QuickBooks Online contact info, which works with your iPhone to send emails, make calls, and look up addresses using Google Maps

To get started using QuickBooks Online on your iPhone, go to http://www.intuitlabs.com/apps/qboe-on-iphone.

To get started using QuickBooks Online on your BlackBerry, go to http://www.intuitlabs.com/apps/qboe-on-blackberry.

Entering QuickBooks Sales Receipts (Assuming you don't want to track sales by customer)

Tue, 02 Sep 2008 00:00:00 -0700

The following instructions detail how to create sales receipts in QuickBooks ASSUMING YOU DO NOT WANT TO TRACK SALES BY CUSTOMER OR JOB. If you want to track sales by customer or job, see our QuickBooks tutorial titled Entering QuickBooks Sales Receipts (Assuming you want to track sales by customer).

If you don't want or need to track sales by individual customer, then you can create summary sales receipts which include all sales for a specific period of time (normally daily or weekly). To do so, you first create a sales summary template and then you use this template to create sales summaries.

Creating a sales summary template in QuickBooks

From the Customers menu, click Enter Sales Receipts.
Fill in the form as follows:
- Leave the Customer:Job field blank.
- If you want to track sales by the method of payment, then enter the method (cash, check, etc.). Note that if you accept multiple payment methods, then you will want to create a separate template for each method.
- Enter all the items you normally sell in the detail area
  - Leave the Quantity blank as you will fill this in when you create the idividual sales receipts
  - Fill in the Price for each item. Note that if the price changes, you will need to replace this memorized transaction with a new one.
In the Edit menu, click Memorize Sales Receipt.
In the Memorize Transaction window, enter a meaningful name for the template (ex: Weekly Sales Summary) and click OK.
Close the Enter Sales Receipts window without saving the transaction.

Using the sales summary template

From the Lists menu select Memorized Transaction List
Select the appropriate memorized transaction and click Enter Transaction.
Fill out the Sales Receipt by entering the quantity of each item sold. In the Memo field you should enter the dates the sales receipt covers. Then Save.

Creating sales summary templates in QuickBooks only takes a few minutes and it makes entering summary transactions very easy. Taking the time to set these up will save you a lot of time in the future.

Entering QuickBooks Sales Receipts (Assuming you want to track sales by customer)

Tue, 02 Sep 2008 00:00:00 -0700

The following instructions detail how to create sales receipts in QuickBooks ASSUMING YOU WANT TO TRACK SALES BY CUSTOMER OR JOB. If you don't want to track sales by customer or job, see our QuickBooks tutorial titled Entering QuickBooks Sales Receipts (Assuming you don't want to track sales by customer).

Entering sales receipts instead of invoices is the logical choice for companies that receive payment in full at the time they deliver their product or service. Sales receipts are easy to use and allow companies to track individual sales, calculate sales tax and print receipts.

To enter a sales receipt, click Enter Sales Receipts from the Customer menu.

Fill out the Sales Receipt by entering the Customer:Job, the Class (if you use QuickBooks Classes), the Date, the Payment Method, and then the items purchased and details (description, quantity, rate). Then enter a memo to your customer if you want to. Finally, check whether the sales receipt is to be printed, emailed, neither or both (depends on whether or not you want to give your customer a copy of the sales receipt and, if so, how) and then Save.

After entering the sales receipt, remember to deposit the money you received. Until you do, the money will show up in QuickBooks as Undeposited Funds. Deposit it by going to the Banking menu, selecting Make Deposits, selecting the amount in the Make Deposits window, and then saving.

Small Business Tax Calendar for September 2008

Sat, 30 Aug 2008 00:00:00 -0700

Following is a list of important September tax dates for small business owners, bookkeepers and accountants to be aware of:

9/2/2008 - Pay taxes on vehicles first used during the month of July and file Form 2290.
9/4/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between August 27th and August 29th.
9/5/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between August 30th and September 2nd.
9/10/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between September 3rd and September 5th.
9/12/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between September 6th and September 9th.
9/15/2008 - If you are subject to the monthly deposit rule, then deposit payroll taxes for August by September 15th.
9/17/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between September 10th and September 12th.
9/19/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between September 13th and September 16th.
9/24/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between September 17th and September 19th.
9/26/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between September 20th and September 23rd.
9/30/2008 - Pay taxes on vehicles first used during the month of August and file Form 2290.

Come late September we will publish an updated list showing October dates for accountants and bookkeepers to be aware of.

Calculating the Value of Your Business

Tue, 26 Aug 2008 00:00:00 -0700

There are a number of ways to calculate the value of your business. One way is to simply tally up the value of your company's assets. A second way is to compare your business to similar businesses that have sold recently. A third way is to simply assume your company is worth some multiple of your revenue. However, the only method I recommend using to calculate the value of your business is to calculate the value of future cash flows. A brief discussion of the different methods follows:

Calculating the value of your business by adding up the value of your assets
Adding up the value of your assets is a very simple way to calculate the value of your business. Simply add up the value of your hard assets (equipment, machinery, real estate, cash) and subtract any liabilities. The advantage of this method is that it is simple and presumably sets the minimum value of your business. You should be able to liquidate the company and get this value. The disadvantage of this method is that it doesn't assign any value to the company's future earnings potential.

Calculating the value of your business by comparing it to similar businesses
Another simple valuation technique is to compare your business to other similar businesses which have sold. If you can find similar businesses, this can be a great method. However, finding a business that is truly similar can be very difficult. Even two businesses in the same geographic region and industry with the same revenues and profit margin could be worth different amounts to different acquiring companies based on things like the management team, the company culture, and what is actually driving profits. Therefore, if you can find a business you really think is similar, then I recommend using this method as a way to calculate the value of your business. However, I think it is important to think hard about how your company is different than the one you are comparing it to before placing much stock in the value you come up with.

Calculating the value of your business by taking a multiple of revenue
I have often heard people claim that their company is worth a certain amount based on taking a multiple of their revenues. For some industries this might provide a ballpark number, but it is at best a ballpark number. A company's real value comes from its ability to generate profits, not revenues.

Calculating the value of your business by calculating the value of future cash flows
The best way to calculate how much your business is worth is to calcualte the discounted value of future cash flows. This is the most complicated method because it means making detailed projections of revenue and expenses for future years, which inevitably means multiple assumptions. However, this method is definitely the best method of determining what your business is worth to you. You can't know what someone who acquires your business will do with it and therefore can't very well project what it is worth to them. However, you do have a good idea as to what you will do with your own business and therefore can figure out what it is worth to you. In addition, because you will be making all the assumptions, you should end up with a good gut feel as to how accurate they are, so you end up with a value and a good idea if the value is conservative, realistic or optimistic.

Finally, if possible it is great to use multiple methods to calculate the value of your business, and then to compare the different results. There is no correct answer as to what the value of your business is. Two separate entities considering purchasing your business might come up with very different offers based on different methods of valuing your business, different assumptions about what will happen in coming years and/or different plans as to what they will do with your business. In addition, companies make acquisition mistakes all the time, which underscores just how difficult it is to calculate the value of a business. For this reason, I recommend focusing first on what your business is worth to you. Once you understand this, you are in a good position to negotiate with a potential acquirer.

About QuickBooks Sales Receipts

Sun, 24 Aug 2008 00:00:00 -0700

As a general rule, it makes sense to use sales receipts in QuickBooks instead of invoices if your customers pay you at the time they receive your product or service. The reason is that because you receive payment right away, there is no need to track how much your customers owe you. In this situation, using sales receipts is an easy way to track individual sales, calculate sales tax and print receipts.

If your customers pay in advance or pay after delivery of your service or product, then use invoices in QuickBooks rather than sales receipts.

Here's a quick checklist to help you determine if sales receipts are right for your business:

if you collect payment in full when you deliver your service or product, consider using sales receipts
if you want to track your sales, consider using sales receipts
if you want/need to track sales tax collected and owed, consider using sales receipts
if you would prefer to create a weekly or daily summary of your sales instead of entering each individual sale, consider using sales receipts
if you don't accept payment in advance or allow customers to pay you after the sale, consider using sales receipts

Some examples of businesses that should consider using sales receipts are restaurants, beauty salons, dry cleaners, pet groomers and newspaper stands.

Intuit rises on 4Q results, solid 2009 guidance

Fri, 22 Aug 2008 00:00:00 -0700

Intuit Inc. shares rose Friday after the tax preparation and money management software company posted fiscal fourth-quarter results that met Wall Street expectations, and offered a full-year forecast that ...

Samarak Launches New CFO Services Website

Fri, 22 Aug 2008 00:00:00 -0700

Samarak is splitting into two companies, one of which is an internet company which helps accountants, bookkeepers and QuickBooks consultants obtain business over the web and the other of which provides CFO Services to small and medium-sized companies throughout the US. As such, we have launched a new website for the CFO Services side of Samarak and have removed the CFO Services content from www.samarak.com.

Samarak was originally founded to provide CFO services to small companies and medium-sized companies. However, our success with search engine optimization led us to pursue a business helping other accountants, bookkeepers and QuickBooks consultants obtain business over the web, and our site has changed to reflect this new business.

My passion for working with other small businesses, however, has not changed and it is for this reason that we have launched a new site dedicated to my work as a part-time CFO. Please visit our new CFO Services website.

Dave Dunn,
President, Samarak

Adding Your Logo to Your QuickBooks Invoices

Wed, 20 Aug 2008 00:00:00 -0700

Adding logos to QuickBooks invoices is quite simple. In the Create Invoices window, click on the Customize icon to open the Basic Customization window.

Check Use Logo in the Basic Customization window.

Surf to your logo and select it. Click Ok to the messagebox that appears telling you QuickBooks will copy your image to a new location. Back in the QuickBooks Basic Customization window, you can see your logo on the invoice. Use the Layout Designer to resize or reposition your logo.

IRS Releases Revised Instructions for 2008 Form 990

Wed, 20 Aug 2008 00:00:00 -0700

The newly revised instructions for the 2008 Form 990 have been posted on the IRS's website, along with three background documents which explain the new forms and instructions. The revised instructions and background documents are intended to help organizations prepare to file the revised 2008 Form 990, which was released by the IRS in December 2007 and is effective for 2008 tax years (returns filed in 2009). Links to all four documents follow:

Form 990 instructions
Background papers:

Customizing Invoices in QuickBooks

Sun, 17 Aug 2008 00:00:00 -0700

Because QuickBooks offers a great selection of template invoices, most small companies will not need to do much customizing of their chosen template invoice beyond adding their logo to it. However, those QuickBooks users that have special needs or are just very picky will find that it's not that difficult to customize QuickBooks invoices to look exactly the way they want them to.

The first thing to do is to choose which invoice template to use. From the Lists menu, select Templates.

In the Templates window, click on Templates and Edit Template.

In the Basic Customization window, click on Manage Templates.

In the Manage Templates window, click on the different templates until you find the one you want. Then click OK.

Now, back in the Basic Customization window, you are ready to edit your chosen invoice. Here you can add your logo, choose the color scheme for your invoice, change the font for specific items and choose which information shows up on your invoice.

You can also make additional customizations, such as moving fields around, though you will have to make a copy of the template first. Click on Additional Customization... and then click Make A Copy. The image below shows you some of the things you can easily add. Select Screen to add fields for your own records and Print to add fields that will show up on the copy of the invoice you will deliver to your customer.

To change the layout of the invoice, simply click on Layout Designer... from the QuickBooks Basic Customization window or the QuickBooks Additional Customization window. Then click on any of the items and drag and drop them to where you want them.

As you can see, QuickBooks invoices can easily be customized to look exactly the way you want them to.

QuickBooks Tutorials: Creating, Editing and Emailing Invoices in QuickBooks

Fri, 08 Aug 2008 00:00:00 -0700

We recently added a number of QuickBooks tutorials having to do with using invoices in QuickBooks. Each of these QuickBooks tutorials includes detailed instructions, screen shots, and explanations and discussoins of things you should think about.

The QuickBooks tutorials we recently added are:

Take a look at our QuickBooks Tutorials page for tutorials on other things related to QuickBooks.

Who Pays the Most Taxes?

Thu, 07 Aug 2008 00:00:00 -0700

Everyone knows that the more one earns, the more they pay in taxes - both in dollars and on a percentage basis. However, most people will probably be surprised to find out just how much of the total taxes collected the top earners contribute. Here's a breakdown:

top 1% of earners: account for 39.9% of all federal income taxes
top 5% of earners: account for 60.1% of all federal income taxes
top 10% of all earners: account for 70.8% of all federal income taxes
top 50% of all earners: account for 97% of all federal income taxes.

Obviously, to contribute this high a percent of total taxes collected, top earners must be making a lot more than every one else. Here's what it takes to be a top earner:

top 1% of earners: earned $388,800 or more (this group accounted for 22% of all adjusted gross income reported on returns)
top 5% of earners: earned $153,500 or more (this group accounted for 37% of all AGI)
top 10% of all earners: earned $108,900 or more (this group accounted for 71% of all AGI)

Based on this, it is easy to see that changes to the tax rates paid by top earners have a much greater impact on total taxes collected than changes to the tax rates paid by the lower 50% of earners.

Emailing Invoices to Customers from QuickBooks

Tue, 05 Aug 2008 00:00:00 -0700

You can email invoices to customers directly from QuickBooks. Your customer will receive the invoice as a pdf file attached to the email, which you can customize to say what you want. While many customers still prefer to receive invoices via standard mail, emailing invoices from QuickBooks when possible is a very efficient way to send out invoices.

To send an invoice from QuickBooks, open the invoice you want to send and click on the Send icon.

In the QuickBooks Send Invoice window, select E-mail at the top, fill in the To, From, and Subject lines, edit the E-mail Text (this is what will show up in the body of your email), Check Spelling if you want, and click Send Now.

If this is the first time you have sent an invoice from QuickBooks, you will be given the chance to register your e-mail address with QuickBooks Business Services and to sign up for QuickBooks Billing Solutions (allows you to accept credit card payments online, download online payments directly into QuickBooks, and much more) and QuickBooks Merchant Account Service. If you will send a lot if invoices via QuickBooks and/or receive a lot of payments via credit card, then it is definitely worth looking into these. If you won't do much of either, then just click "No Thanks".

Finally, you can customize the template message and subject line for invoices you email to customers in the Send Forms Company preference (from the Edit menu, select Preferences, then select Send Forms and Company Preferences).

Save Time & Money By Reducing the Frequency of Your Payroll

Mon, 04 Aug 2008 00:00:00 -0700

If you pay your employees more than once or twice a month, then you might consider doing so less often. The benefits of doing so are:

Increase your cash: paying employees less often means you are hanging on to your cash for longer.
Save money: if you use a payroll company, then you are paying them each time you run a payroll. Cutting the frequency in half won't cut the amount you pay the payroll company in half, but it might come close.
Save time: processing payroll takes time, and often about the same amount of time whether you are running payroll for a week or a month.

There are, of course, downsides to paying your employees less often:

Unhappy employees: few employees would pick one job over another based on the frequency of payroll, and most employees probably don't care once they are used to a specific system. Many employees, however, are likely to get upset if you change the system so that they are paid less frequently. A simple solution to this is to offer your employees an advance against payroll in the middle of the pay period. The advance need only equal half their take home pay, as opposed to half their actual salary, meaning that you retain some of the cash flow benefits of running payroll less frequently.
Payroll hits harder when it hits: obviously, if you pay your employees less often, then you will be paying them more money when you pay them. Therefore, it is important to set up systems to make sure you will have the money in the bank when payroll comes around.

Reducing the frequency of payroll is not a good idea for many companies. For some, however, it is an easy way to save some time and money. Therefore, it's worth considering.

Editing Invoices in QuickBooks

Fri, 01 Aug 2008 00:00:00 -0700

Editing invoices in QuickBooks is very easy. Simply find the invoice (from the Customer Center, Accounts Receivable register or a customer report such as the Customer Balance Detail report), double-click it to open it, and change the amount, description, class or whatever else as necessary. Then save the changes.

Be aware, however, that once you edit an invoice the original invoice is gone. Therefore, if you sent the invoice to a customer, they told you the amount was wrong, and now you want to edit it and send it again, make sure you have some system in place to remind you what you did (or, even better, use a credit memo to zero out the amount due and then issue a new invoice). The reason is that the hardcopy of the original invoice is out there, and if for some reason someone calls to ask you about it a year later and it no longer matches what you have in QuickBooks, you will want to know why.

Small Business Tax Calendar for August 2008

Thu, 31 Jul 2008 00:00:00 -0700

Following is a list of August dates that small business owners, bookkeepers and accountants should be aware of:

8/1/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between July 26th and July 29th.
8/6/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between July 30th and August 1st.
8/8/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between August 2nd and August 5th.
8/11/2008 - Employees who earned more than $20 in tips in July must report the total to their employers.
8/13/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between August 6th and August 8th.
8/15/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between August 9th and August 12th.
8/20/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between August 13th and August 15th.
8/22/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between August 16th and August 19th.
8/27/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between August 20th and August 22nd.
8/29/2008 - If you are subject to the semiweekly deposit rule, then deposit payroll taxes for payments made between August 23rd and August 26th.

At the end of August we will publish a list of September dates that small business owners, bookkeepers and accountants should be aware of.

Receiving Payment Against an Invoice in QuickBooks

Tue, 29 Jul 2008 00:00:00 -0700

To record a payment received against an open invoice in QuickBooks, make sure to use the Receive Payments window. New QuickBooks users often make the mistake of recording the payment directly into the check register, which results in erroneous reports (P&L is wrong because income is counted twice - once when the invoice was created and again when the payment was received, AR reports will be incorrect) and messy books (an invoice is left open that you are no longer awaiting payment on). Therefore, if you use invoices in QuickBooks, then remember to use the Receive Payments window.

Open the Receive Payments window from the Customer menu.

In the Receive Payments window, fill out the Received From field, the Amount received, Date received, Pmt. Method and Check #. Then select the appropriate invoice to apply the payment to (QuickBooks will make a guess - change it if QuickBooks guessed wrong). Then Save.

After receiving payment, remember that it won't show up in your bank account register in QuickBooks until you deposit it (from the Banking menu, select Make Deposits).

Set Up an S Corporation to Reduce Self-Employment Taxes

Mon, 28 Jul 2008 00:00:00 -0700

Small business owners should consider whether or not it makes sense to set up an S-Corporation as a way of reducing total taxes paid. If your business currently operates as an LLC, a partnership or a sole proprietorship, then your profits are subject to self-employment taxes. As an S Corporation, only your salary is subject to self-employment taxes. Here are the details:

The first $102,000 (CY 2008 number) of salary that a person earns is subject to self-employment taxes of 15.3%. Half of this is paid by the employer and half by the employee. Of course, if you own your own business, then you are both employer and employee.
Salary in excess of $102,000 is subject to the Medicare tax rate of 2.9%. Again, half is paid by the employer and half by the employee.
If you operate as an LLC, a partnership or a sole proprietorship, then your profits are treated as salary, meaning you pay taxes per the above on all your profits.
If you operate as an S Corporation, then you only pay the above taxes on money you take as salary.

Many small businesses are started as LLCs, partnerships or sole proprietorships because of the ease of setting these businesses up. This often makes sense, but switching to an S Corporation is not that complicated, so beware of the above and make the switch when the time is right.

Finally, it is important to note that you are required to take "reasonable" compensation as salary when you operate as an S Corporation. Talk to your accountant about what constitutes "reasonable" salary for your particular situation.

Applying Credits to Invoices in QuickBooks

Fri, 25 Jul 2008 00:00:00 -0700

When a customer has a credit balance because they overpaid on a prior invoice or because you created a credit memo for some other reason, you can apply this credit balance to new invoices when you create them or when you receive payment against them. Instructions for both follow:

Applying Credit Balances to New Invoices:

Create the invoice in QuickBooks and then click Apply Credits.

In the QuickBooks Apply Credits window, select the credit(s) you wish to apply to the invoice. In the upper right QuickBooks shows you the original amount of the invoice, the credits used and the balance due. Click Done when finished.

Back on the invoice, you can now see the amount of payments applied and the balance due. Click Save & Close or Save & New.

By the way, if you don't notice the credits and therefore don't apply them, QuickBooks will remind you they are available when you save the invoice with a popup window (assuming you have not previously asked QuickBooks not to remind you).

Applying Credit Balances When You Receive Payment

If you don't apply the credits when you create the invoice in QuickBooks, you can do so when you receive payment. In the Receive Payments window, simply click on Discount & Credits.

In the QuickBooks Discount and Credits window, select the credit(s) you wish to apply to the invoice. In the upper right QuickBooks shows you the original amount of the invoice, the credits used and the balance due. Click Done when finished.

Back in the Receive Payments window, you can now see the amount of payments applied and the balance due. Click Save & Close or Save & New.

I generally recommend people apply credits as soon as they are aware of them. Therefore, if you know about them when creating the invoice, apply them when creating the invoice. If you create the credits after creating the invoice, apply them when receiving payment.

Thoughts About the Federal Minimum Wage Rate Increase

Thu, 24 Jul 2008 00:00:00 -0700

The federal minimum wage rate increased from $5.85 to $6.55 per hour today, a 12% increase. This is the second of three scheduled increases. The first increase occurred a year ago today and raised the federal minimum wage from $5.15 to $5.85 per hour. The next increase, which will raise the federal minimum wage to $7.25 per hour, takes effect on July 24, 2009. All totaled, these hikes result in a federal minimum wage rate increase of $2.10 (from $5.15 to $7.25), or 41%, in just two years. Here are a couple of thoughts about this:

The Increased Cost to Employers Will Be Passed on to Consumers
A number of articles I have read have raised the question of whether or not businesses will be forced to pass the increased cost of their labor onto the consumer. I think this question is absurd. Of course businesses will pass the increased cost on to their consumers. People run businesses to generate profits. When their costs go up, they either become more efficient or raise their prices. Businesses probably won't increase their prices today, but ultimately they will have to. That said, raising prices is not a bad thing.

Companies set prices with the goal of maximizing profits and the market determines what a company can charge for its products. The increase in the federal minimum wage rate will affect some products and services more than others, and therefore might impact which products and services generate the most profit. As a result, some businesses will be hurt and some will be helped by the raise of the federal minimum wage rate. So, there will be change. Some consumers might choose to change some of their habits. This is not a bad thing. It's just the market adjusting to a new reality (increased cost of labor).

I Want a 41% Raise Over 2 Years! But Let's keep Things in Perspective...
Most people would be delighted to see their salary increase by 41% in just 2 years. However, most people probably would not like to try to feed their families on $7.25/hour. There are very good arguments for and against the minimum wage, and a discussion of whether it is or is not a good thing is far beyond the scope of this blog. Given that there is one, however, it is interesting to compare the current minimum wage rate with past minimum wage rates. Doing this makes me think that $6.55, and even $7.25, is really not that high. The rate in 1968 was $1.60 per hour which, adjusted for inflation, is equivalent to $10.06 per hour today. The rate in 1997 was $5.15 per hour, the equivalent of $7.02 today. Finally, because the federal minimum wage rate did not change between 1997 and 2007, that 41% pay increase over 2 years was also a 41% pay increase over 12 years. Now it doesn't seem so high.

SSA Adds New Retirement Calculator to its Website

Tue, 22 Jul 2008 00:00:00 -0700

The Social Security Administration just added an easy to use retirement estimator to its website. The retirement estimator makes it easy to obtain an estimate of the monthly benefit you will receive when you retire. You simply input your name, social security number, and date and place of birth, and then input last years earnings (prior years earnings come from the Social Security database).

This retirement calculator replaces a tool the Social Security Administration used to offer which required users to input their own earnings history, which was time consuming and difficult for those people that don't keep extensive records. Those people that want to estimate their retirement benefits based on different retirement ages and earnings scenarios can easily do so with this retirement calculator by clicking on Create Additional Scenarios after getting the initial estimates.

The new retirement estimator is available on the Social Security Administration's website at http://www.ssa.gov/estimator/.

Deciding Whether Or Not To Use Invoices in QuickBooks

Mon, 21 Jul 2008 00:00:00 -0700

As a general rule, if you don't receive payment in full from your customers at the time you deliver your product or service, then you should probably use invoices. The main reason is that using invoices helps you keep track of exactly how much money your customers owe you. However, there are many other reasons to consider using invoices:

if you prepare purchase orders in QuickBooks and want to create bills from them, then you should use invoices
if you prepare estimates in QuickBooks and want to create bills from them, then you should use invoices
invoices make it easy to apply markups and discounts to item prices
invoices are the best way to keep detailed records of each sale in QuickBooks
if you use group items or payment items, then you should use invoices.

If you do receive payment at the time you deliver your product or service and none of the above apply to you, then you should probably consider using sales receipts instead of invoices. Sales receipts take a little less time since you don't have to receive payment against them, as you do with invoices. Instead, after entering sales receipts you are ready to enter your deposits.

For detailed insturctions onc reating invoices in QuickBooks, see Creating Invoices in QuickBooks.

Creating Invoices in QuickBooks

Fri, 18 Jul 2008 00:00:00 -0700

If you don't receive payment at the time you make a sale, then you should probably use invoices in QuickBooks. Doing so will make it easy to keep track of which customers owe you money and how much they owe you. Instructions for creating invoices in QuickBooks follow:

Open the invoice window by clicking on Create Invoices in the Customer menu.

Once the invoice is open in QuickBooks, do the following:

Select or add a new customer.
If you use classes, then select the appropriate class.
Fill in the date.
Fill in any special details - such as PO Number, Terms, Rep, Ship (ship date), Via (ship method), F.O.B.
If you don't see these options or want to get rid of them, you can change the template you are using and/or customize it by clicking on one of two arrows circled in blue below.
Fill in line item details (Item, Description, Qty, Rate, Amount, Class, Tax).
Select or create a customer message.
Mark if the invoice is to be printed or emailed (or both).
If you want, fill in a Memo. This is for internal use and will not show up on the invoice.
Save

We will be adding QuickBooks tutorials related to customizing invoices in QuickBooks, emailing invoices from QuickBooks, adding your logo to your QuickBooks invoices, and more soon.

Federal Minimum Wage Rate to Increase

Fri, 11 Jul 2008 00:00:00 -0700

The federal minimum wage rate will increase on July 24th from $5.85/hour to $6.55/hour. As employers are required to pay the higher of the federal and state minimum wage, only employers in states with a minimum wage lower than $6.55 will be affected by this. The federal tipped minimum wage, currently $2.13/hour, is not changing.

Information on state minimum wages is available on the US Department of Labor's website.

QuickBooks Tutorials: Historical Transactions & Writing and Printing Checks

Wed, 09 Jul 2008 00:00:00 -0700

Recently added QuickBooks tutorials on our site explain how to write and print checks in QuickBooks and how to enter historical transactions. As with the other QuickBooks tutorials on our site, these QuickBooks tutorials include specific instructions, screen shots and some thoughts.

The QuickBooks tutorials added over the last couple of weeks include:

For help with other things related to QuickBooks, check out our QuickBooks Tutorials page.

Printing Checks in QuickBooks

Mon, 07 Jul 2008 00:00:00 -0700

Note that this QuickBooks tutorial covers printing, not writing, checks. For a QuickBooks tutorial on writing checks, see Writing Checks in QuickBooks.

There are a few ways to open the Print Checks window in QuickBooks. I usually open it from the File menu. Select Print Forms and then Checks.

In the Select Checks to Print window, select the checks you want to print and then OK.

In the Print Checks window, select your printer, the type of checks you use, and Print.

QuickBooks then asks you if the checks printed correctly. If not, say they did not and then try again.