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7 year anniversary

7 was heaven, but 8 will be great...

Today I found myself reflecting on July 1, 2012. Leaving a place where I loved the work, and the people I worked with; I risked it all. I knew I had done everything I was taught, so with many blessings I went for it. We have grown over the years to something strong, viable, and so enjoy watching our clients grow. There is nothing like an entrepreneur that knows the numbers. They become better almost instantly. Its helps in their confidence and critical thinking to propel their company forward. Its more than bookkeeping. To our clients; Your are the best. You make us better every day. It is our privilege to continue to work with you! Thanks for taking this journey with me. 8 Looks Great!
-- Karen

Audits in an Electronic World

Don't be fooled

Many of us in today's world think that our bank or credit card statements will be sufficient in the event of an audit. There are many case studies where the taxpayer with cancelled checks and receipts was more likely to have their deductions allowed, than those that don't. How do we make that work in today's paperless and technology world. Some helpful tips...

Request that your bank statements include images of your checks. If you are not receiving images with your monthly statement, contact your bank and ask them to fix that. It is important to have your cancelled check images. Most banks will only allow access to old statements on your online banking for up to 12-18 months. For this reason it is important to download and save.

When using your credit card, request that your receipt be emailed or texted to you. If by text, forward to yourself in an email and save. Store all receipt emails in an orderly way for future reference. If you receive a paper receipt, develop a way to scan them to the cloud, your computer, or server at least one time each week. Everyone develops different methods for keeping receipts that works for them. But it is important to have a process in place for this.

If you do not find a way to manage good and complete records, it could be a long day with the IRS or State officials, and the outcome will most likely NOT be in your favor. Need help in this area of bookkeeping? Abacus can help. Email Us

Need help getting disciplined in maintaining your receipts? Abacus can help.

Give me a call

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Happy New Year 2019 Joy

Where does the time go...

Its funny how some days seem to take forever, but when you look back you wonder where did the time go?? There were many hardships in 2018 but there was also much to celebrate. So the decision is ours to make. Do we wallow in the mess life seems to sling at us, or do we rise above and find the JOY. I choose the latter. JOY is the expectation of something great or wonderful. Imagine how different your day would be, when you choose JOY. Our strategic theme this year is "Rise Up" We can never rise, if we allow the weight of the day to hold us down. So go ahead..when life's got you twisted...give it a try. You'll be amazed... Looking forward to 2019. Thanks to everyone who has been a part of our 2018, and welcome to all our new clients for 2019. Its one of those moments when your afraid to exhale, or blink. Almost half-way through year 7 and in awe of all we have accomplished together.

End of Year Gifts

Non Cash Gifts – What’s Taxable, What’s Not

Its that time of year when you are the Big Cheese at the office sharing Christmas cheer by giving out gifts to your staff. Be sure you know the tax implications for the gifts you give.

Nontaxable gifts. Fruit baskets, hams, turkeys, wine, flowers and entertainment tickets to a show, sporting or other event (but not season tickets) generally are de minimis (nontaxable) fringes if given infrequently.

Taxable gifts. Cash or gift certificates for any amount is wages subject to FIT, FICA and FUTA–e.g., a gift certificate for a turkey is taxable; a turkey is not. So...buy your staff a turkey rather than a gift certificate for the turkey.

Parties and picnics. The cost 100% deductible to the business and nontaxable to employees and their families–if infrequent and given to promote employee health and goodwill –e.g., holiday or cocktail parties, company picnics. [IRC §132, Rev. Rul. 2004–109 and Rev. Rul. 2004-110]

Information provided in part by AIPB - American Institute of Professional Bookkeepers

My gift is You! And that too is non-taxable...

No political deductions

Be as Political as you like, but its not deductible

A Company formed a political action committee (PAC) to be funded by its employees. As incentive the Company matched the contribution to a charity of the Employee's choice in the Employee's Name. The Employee got a thank you note and the Company would get the deduction.

The IRS ruled that deduction is not permissible. The tax code does not allow deduction of contribution to or in connection with political campaigns. Because these charitable contributions match the PAC contributions, they are incentives for Companies to contribute to PACs, making them political.

Bookkeeping tip: Use two general ledger expense accounts on your books for contributions. One for political contributions (non deductible), and one for all others (deductible). This allows your CPA to quickly determine which of your contributions throughout the year are deductible, which saves them time, and you money, on your tax preparation each year.

Information source: AIPB - The General Ledger Vol 33 No. 6

Louisville Kentucky Debt Tips

Where Did I Put Those Receipts?

With the tax deadline quickly approaching the mad dash to find all those receipts from trips, lunches, and any other expense you might be able to claim as a deduction are no where to be found. Sometimes we think that itemizing every penny throughout the year is maddening. The time spent to retain and organize receipts can be daunting. But it is important in your income tax filing and measuring your Company's performance. You can't figure out where to go, if you don't know where you've been. Keeping good records can tell the story of your past, which helps you strategically plan where your going in the future.

Many folks believe that if they have their credit card statement or bank statement, that is enough, but it is not. If called in for an audit, if a receipt can not be produced, the deduction could be disallowed.

Don't get caught in this trap. Take the time to keep all receipts.

With technology today, there are many ways to retain a receipt. We at Abacus encourage our clients to take a picture of the receipt right at the table after lunch or dinner. When at the gas pump, before you lay it down on the console or in the seat, snap a picture. When checking out of a Hotel, ask them to email you a receipt or text one to your phone. Then simply build a file to keep your receipts on your computer. Email or text them regularly to your bookkeeper. There is nothing worse than your bookkeeper chasing you down for that missing receipt, and it isn't necessary if you find ways to stay organized.

No paper to save, no bulky file cabinet to maintain. Just neat folders on your computer system to hold your receipts for at least 7 years.

Need help getting disciplined in maintaining your receipts? Abacus can help.

Give me a call

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Budgets are a Way to Measure

Budgets are a Way to Measure

People are afraid of budgets. It could be viewed as failure if the numbers you project are not met so many folks don't bother.

Budgeting is critical in business and in your personal life. Its goal setting...You can't tell where your going if you don't know where you've been. A budget helps you take history and define it for the new year. It allows you to set expectations for yourself and your business. It is a motivator at times as you review the results and take steps to meet or exceed your goals.

If you use QuickBooks as your accounting tool, it can help you to get started on your budget. It can take your history and prepare a budget for you. Using QuickBooks and don't know how to make that happen. Give me a call. We can help!

If you want to grow...you just gotta know.

Not in service? No Depreciation. No Tax Credit.

Not in Service? No Depreciation. No Tax Credit.

You bought a company car or a piece of equipment on December 27th 2015? You wrote the check and you see that it cleared your bank on December 31st. The new car or equipment is delivered to your Company on January 4th 2016. Is there depreciation to book in 2015? Is there a tax credit for 2015?

No...The vehicle or equipment must be available for its intended use in the year the depreciation or tax credit is claimed.

Want to be sure you are strategically adding vehicles and/or equipment each year? Start reviewing year end items such as capital purchases at the end of October or beginning of November. Plan your work and work your plan.

Out with 2015 - Are you ready?

Out with 2015 - Are you ready?

Some things to know as we ring in 2016

Social Security wage base unchanged for 2016. It stays at $118,500 and the tax rate will stay at 6.2% for both employees and employers. Also, the 1.45% Medicare tax on all wages and self-employment income remains the same.

Expect most expired tax breaks to be reinstated including bonus depreciation and the higher Section 179 write-off-by December 31 or in January retroactively.

Emphasis on employment tax violations in 2016. The federal government will increase its focus on employment tax violations. Be careful in filing your W-2's and Form 1099 for your contractors for 2015. The federal government believes many employers fail to understand the importance of employment tax requirements. The focus will be on both civil and criminal cases. The quickest way to sink a small business is to not comply with the withholding tax guidelines.

Happy New Year! It's smooth sailing with accurate reporting. Let's Abacus help you with your bookkeeping needs. We make sense out of cents!

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Business Mileage - Are you prepared?

Business Mileage - Are ou Prepared?

That moment when your CPA asks you...do you have your mileage records for 2015? Start planning now for what you need to turn over for 2015 tax preparation.

A log of business mileage must list for each trip the time, place and specific business purpose of the travel. A general description is likely to be rejected. Equally important, a mileage log should be prepared contemporaneously. The more time that passes between a trip and recording it in the log, the less credible it will be.

Best Practice - Record your activity every day. Keep your log readily available in your vehicle.

Portions of this information collected from AIPB - American Institute of Professional Bookkeepers.

ow Should you Withhold on Employee Bonuses and/or Gifts this Christmas

How Should you Withhold on Employee Bonuses and/or Gifts this Christmas

Are you thinking about giving your employees a bonus this year? Should you give them a cash bonus or a nice juicy ham this year???

Taxable bonuses/gifts:
Gift Certificates. a gift certificate for a turkey is taxable, even though a turkey is not. Cash gifts of any amount are taxable as wages.
Nontaxable Gifts:
Fruit baskets, hams, turkeys, wine, flowers, entertainment tickets, sporting or other event tickets.

A cash bonus or gift certificate is subject to Federal Income Tax, Social Security, Medicare, Federal Unemployment Tax, and any applicable State and Local payroll taxes. If a bonus is paid separate for normal wages you can use the supplemental withholding rate of 25%

Holiday bonuses are usually considered discretionary even if employees expects it each year.

When calculating on bonus pay, be sure to understand the difference between discretionary and nondiscretionary bonuses. The way they are treated for tax and OT calculation pay is different.

Note...Portions of this information was obtained from the AIBP "General Ledger" Issues 42 & 43 - Karen Weller, CB

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Use-it-or-lose-it rule on FSAs

Use-It-Or-Lose-It Rule on FSAs

Now is a good time to remind your employees to use it or lose it with their FSA funds.

In 2015, an employee could exclude up to $2,550 of salary contributed to a flexible spending account (FSA) plan. Employees should know that to claim reimbursement of the entire account balance of a traditional FSA, they must have enough qualified medical expenses by December 31, 2015; any leftover money reverts to the employer. However, there are exceptions:

March 15 grace period exception. If the plan has a provision that expenses incurred between January 1 and March 15 of the following year are allowed than you can use previous year FSA monies for these reimbursements.

The $500 annual carryover exeption. Employers also have the option of allowing employees to carry over up to $500 each year of the FSA balance. But accumulating $500 carryovers in multiple years is not allowed.

A plan can include the March 15 grace period OR the $500 carryover, but not both.

*Portions of article taken from AIPB - The General Ledger

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Contractor vs. Employee?

Contractor vs. Employee?

Is the person you are hiring as an IC (Independent Contractor), really considered an Employee? Know the difference...it can cost you BIG if you don't.

IRS abandons traditional independent contractor v. employee test

The IRS has given up its 20-factor test, replacing it with a 3-factor test it has been pushing in court cases. The previous test included the extent to which workers provided their own tools and supplies, provided services only for that firm v. working for others, how and when their work was performed, and other factors.

The IRS fact sheet states that instead of the 20 factors, businesses and other entities should examine the degree of control and independence in three categories:

1. Behavioral: Does the business control or have the right to control what the worker does and how the worker does the job?

2. Financial: Are the business aspects of the worker’s tasks controlled by the business —how the worker is paid, whether expenses are reimbursed, who provides tools and supplies, etc.?

3. Relational: Is there a contract in writing? Is the work performed a key aspect of the business? Are these workers given employee-type benefits—e.g., vacation pay, a pension plan or medical insurance? Will the work relationship continue?

Some tax advisors say the change is little more than a different way of applying the same tests. Others say the three-category test will result in fewer workers being considered ICs. The fact sheet emphasizes that the Voluntary Classification Settlement Program remains available. The program allows taxpayers who have been treating workers as ICs to reclassify them as employees going forward while incurring a low penalty for classifying them as ICs in the past.

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Louisville Kentucky Debt Tips

Where Did I Put Those Receipts?

With the tax deadline quickly approaching the mad dash to find all those receipts from trips, lunches, and any other expense you might be able to claim as a deduction are no where to be found. Sometimes we think that itemizing every penny throughout the year is maddening. The time spent to retain and organize receipts can be daunting. But it is important in your income tax filing and measuring your Company's performance. You can't figure out where to go, if you don't know where you've been. Keeping good records can tell the story of your past, which helps you strategically plan where your going in the future.

Many folks believe that if they have their credit card statement or bank statement, that is enough, but it is not. If called in for an audit, if a receipt can not be produced, the deduction could be disallowed.

Don't get caught in this trap. Take the time to keep all receipts.

With technology today, there are many ways to retain a receipt. We at Abacus encourage our clients to take a picture of the receipt right at the table after lunch or dinner. When at the gas pump, before you lay it down on the console or in the seat, snap a picture. When checking out of a Hotel, ask them to email you a receipt or text one to your phone. Then simply build a file to keep your receipts on your computer. Email or text them regularly to your bookkeeper. There is nothing worse than your bookkeeper chasing you down for that missing receipt, and it isn't necessary if you find ways to stay organized.

No paper to save, no bulky file cabinet to maintain. Just neat folders on your computer system to hold your receipts for at least 7 years.

Need help getting disciplined in maintaining your receipts? Abacus can help.

Give me a call

Read More

Are Electronic Accounting Records Adequate?

In todays workplace with all things going paperless, it is important to remember that a good paperless filing system is critical to retain support documentation for your entries on the books.

TIP - JEs alone neither document a transaction nor the parties' intent. The IRS and the Tax Court take a similar stance. In one case, relying on electronic entries without retaining the source records was negligent. When electronic records were the only proof offered of certain transactions, the IRS has at least on one occasion pushed for a fraud penalty.

Key Problem: Anyone can create or alter transactions on accounting software long after the fact.

You are allowed to record transactions on your accounting software and use reports from it to prepare tax returns, but to prove or support the transactions, you need source documents. If you use electronic documentation such as images, keep them as long as you would paper records and be prepared to satisfy the IRS that such records are contemporaneous with the transactions and have not been altered since.

HOW CAN WE HELP - If setting out to become a paperless environment you must first outline the structure of this environment to insure it is set up in such a way that will take you through many years of filing documents in this manner. We help many companies every day with their back office needs. This is just another area where our expertise can help get you situated in to many years of keeping your back up in a paperless environment.

Making sense out of cents..... Karen Weller, CB

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Louisville Kentucky Debt Tips

Thinking of Starting a New Business? What's Deductible, What's Not?

The case: C and his wife lived in a home on a large parcel of land that he began plans to develop and subdivide. Over about 5 years, he prepared a business plan, hired land-use professionals, paid fees and submitted plans to the town planning board for approval as a subdivision. Work included mapping and surveying the land, designing the subdivision and testing soil. The plans were revised several times in response to directions from the planning board.

After 5 years of preparation the economy hit a downturn, so C delayed his plans. He deducted on Sched C all the professional, legal, vehicle, meals and entertainment, and other expenses related to his development plans.

The IRS denied all the deductions, claiming that C was not engaged in a trade or business and that the expenses were capital costs, not deductible expenses.

Held: For the IRS. The activities that the taxpayer had engaged in, although substantial, were related to planning and exploring the future development and sale of the property. The taxpayer never actually did any marketing or even had product available, so he was not yet engaged in a trade or business, making the expenditures nondeductible—unless he completely abandoned the project in the year that he wanted to make the deduction. (Note that there are special rules for deducting expenses for a business related to property.) [Chen v. Commissioner, T.C. Summ. Op. 2014-6]

AIPB tip: To write off expenses related to exploring a business opportunity, you must show that any intention to pursue the business has been completely abandoned or that the business idea is no longer useful. Otherwise, the expenses related to planning must be capitalized either as business preparation or as organizational costs.

Source:  American Institue of Professional Bookkeepers, Volume 10: Issue 29

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Vehicle Fleet Bookkeeping Louisville Kentucky

"Business Use"? Prove It…

He owned a carpet cleaning business which he reported on a Schedule C. He owned 9 vehicles, including 4 vans. He admitted to using 4 vehicles for a combination of business and personal purposes. He did not keep mileage logs to document business use of any of the vehicles.

He deducted the vehicle expenses based on a handwritten summary he had given his accountant that showed business use and expenses, but he included no receipts.

He claimed 75% business use for each of the 4 vehicles. The IRS denied all of the expenses for the 4 vehicles but allowed the deductions for the other vehicles.

Held: For the IRS. A contemporaneous log of business use and expenses for a vehicle is not required if there is other evidence created at or near the time of the expenses. But all the taxpayer offered was his testimony and time of the expense to support the taxpayer’s reconstruction of recollections about business use.

Although the court believed that he had, in fact, made some business use of the vehicles, because he did not have evidence to support the portion of business use, the court agreed with the IRS that all business use deductions should be denied. [Daniels v. Comon, T.C. Summ. Op. 2014–16]

Source: The General Ledger – The Complete Newsletter for Professional Bookkeepers

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State TAx Payment Bookkeeping Louisville Kentucky

To Which State Should You Pay SUI?

If the employee lives in one state, works entirely in another, submit quarterly wage 
reports and contributions to the worked-in state.

If the employee is temporarily transferred from one state to another, continue to submit wage reports and contributions to the state where the employee worked regularly.

If the employee is permanently transferred from one state to another and relocation occurs prior to the beginning of a calendar year, transfer to the new state no more than the original state's SUI limit based on the original state's SUI wage ceiling.

From AIPB Advisory Board member, Lorelei M. Krucki, CPP, Department of Corporate Training, St. Petersburg College, St. Petersburg, Florida