Breaking News

Breaking News!

Congress has reached a Budget deal which incorporates and reauthorizes some tax breaks and incentives for individuals and small business.   Below is a list of items that are PERMANENTLY extended!!

The credits being permanently extended include:

  • An expanded Earned Income Tax Credit for low-income earners;
  • The Child Tax Credit for low and moderate income workers;
  • The American Opportunity Tax Credit to help students under age 40 pay college tuition and expenses;
  • Low income housing credits;
  • An expanded research and experimentation credit;
  • Section 179 business expensing, which allows businesses to fully deduct the price of equipment and software investments;
  • State and local sales tax deduction;
  • Tax deductions for food inventory donated to food banks;
  • A deduction for land donated for conservation; and
  • A tax break for individuals to donate to charity from qualified retirement accounts.

Section 179 is the huge one for Businesses!!  Very happy with congress today for seeing the light on this one.  (For further information on Section 179, please see our Blog on 09/09/2015)

Additional items included in this legislation:

  • A compromise over cybersecurity legislation that would encourage businesses to share information with the government about potential cyber threats
  • Permanently reauthorize federal health benefits for emergency personnel who responded to the Sept. 11 terrorist attacks;
  • Put in place new security requirements for a visa waiver program, which the House passed as a standalone bill earlier this month. that has come under scrutiny following the Paris terror attacks. The legislation does not include new restrictions that would prevent Syrian and Iraqi refugees from entering the country, a provision House Republicans had pushed to get in the bill;
  • Freeze funding for the Internal Revenue Service and the Environmental Protection Agency; and
  • Repeal country-of-origin food labeling requirements.
tax-penalty

New Penalties for Failure to File 1099’s

The IRS has strengthened its penalty phase of the reporting requirements.  These penalties are effective beginning January 1st for the 2015 tax year filing period.  The penalties are as follows:

1-30 days late:  $30.00 each penalty per return not filed with a maximum of $500,000.00 per year ($175,000.00 for small business maximum)

30 days – 8/1/2016:  $100.00 each penalty per return not filed timely with a maximum of $1,500,000.00 per year ($500,000.00 for small business maximum)

After 8/1/2016:  $250.00 each penalty per return not filed timely with a maximum of $3,000,000.00 per year ($1,000,000.00 for small business maximum)

Intentionally Disregarded:  $500.00 each penalty per return not filed timely with no maximum limit per year (No maximum limit for small business)

As you can see from the information above, the penalties can be severe.  However, should your supplier not provide you with necessary paperwork, you will not be penalized – SO LONG AS, your attempts to collect the information can be provided and are sufficient to prove that you made attempts to obtain the information.

More than ever, it is important that you are complying with these regulations.

 

 

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Online / Cloud Accounting Software

All the rage now-a-days is to move your accounting/bookkeeping to a Cloud based/Online software provider. But is that really such a good idea? Is it really right for YOUR business?

I’m old school. I was taught and learned on old mainframes that required large cooled rooms with a large IT staff to support the system. The internet was still relatively new and we didn’t have smart phones – we had bag phones! In addition, my first job was for a company that was traded on NASDAQ so we had pretty intense internal controls on everything and I’m not sure we would have ever moved to an online accounting system. Cloud/Online software does have a couple advantages: (1) you have the convenience that you can access your books from virtually anywhere. You can log on to your provider from anywhere you have a computer with internet access or even smart phone and (2) your software is never out of date and never needs to be updated. But are they safe?

In an article by Forbes Magazine (link below), they discuss that Online Software is probably better secured than in-house server based systems. Online software providers use the some of the same security as banks do for online banking. With this you get the benefits of the economies of scale – large number of users sharing the costs of security, updates and IT personnel. But you should keep in mind that NO system will ever be 100% secure. I only need to point to the hundreds of data breaches over the last couple years, over a billion personal records were illegally accessed in 2014 alone. Target, Michaels and the IRS just to name a couple of the better known breaches. Digital First (link below) has a very good article on the comparisons of security for Online/Cloud software vs Desktop/Server based systems.

My issue with these online providers is beyond the security issue. My biggest concern is internet connectivity and cost is my second. Being in Madison, WI you would think that the internet is relatively accessible – but you would be incorrect. I have a client, literally less than 2 miles from my door that just got high speed cable last month – did I say this was almost 2016! Until then, it was traditional phone lines and if you have ever experienced slow internet from traditional phone lines, you know exactly what I’m talking about. My brother-in-law even lives less than 10 miles outside of Madison, his internet is via his cell phone so the convenience of a Cloud based system would not be a good fit for his business. Consider the following before jumping onto the cloud.

  • What happens if your internet is slow or you lose connectivity all together? If this happens, are you dead in the water? Can you provide service to your customers? Can you accept sales from your customer? You should have an alternate system in place to provide these services to your customers in the event this happens. It’s not a question of if it will happen, it’s a matter of when it will happen. In the event of natural disasters or the increasing threat of grid/virtual terrorism, you need a plan in place before you move to online. If the bad guys wanted to hurt the U.S. economy (or world economy for that matter) what better way than to shut down internet commerce…. Just saying.
  • How much is the monthly online subscription cost? If you are paying 10 or even 20 times more than the desktop version of the software would cost you in a year’s time, you should consider whether or not the cost is worth the convenience of being able to access your data online. Determine if there are other, more cost efficient ways to access data without breaking the bank. Or do you even need to access the data while you are on your vacation or home relaxing? There is something to be said about being able to get away from your work, even if only for a few hours each night. Running a small business is stressful and as any small business owner can attest to, you never actually can get away from the business, so do you really need to have 24 hour access to your accounting or sales software? If not, do you need both? Can you have one without the other? If you have a sales staff located out away from your home office, maybe access to sales online is all you need.
  • What happens if you have a bad financial month and cash flow is tough? Do you still have access to your books? Or are you being held hostage by the software company in order to access your data? Or what happens if you close your business – what happens to the data then? You should know you are required to be able to provide this data to the IRS in the event of an audit for 7 years! So if you close your online account, can you get a usable copy so that you can comply with tax needs?  Be sure you know the answer to this before you close your online cloud accounting software.
  • How many users can access your data for the base subscription fee? Do they charge you for users in groups of 5, 10 or a single add-on as needed. And are those new user seats more than the cost of the base fee? You should always have separate user IDs for each user. You want to be able to track who did what in the event you have some sort of breach. Being able to track who will help you determine how that breach happened and the breach can be better addressed and secured.
  • Can the online software meet your specific business need or is it relatively flat? Besides users, are there restrictions on the number of Customers or Vendors you can add? Years ago, QuickBooks started their online software which was lack luster at best. The basic model was free but you could only have 10 customers and you couldn’t run job costing. To get to the next level, the cost was $24.95 per month – the desktop version was only $189 for 3 years! So although your Accountant or Bookkeeper could get access to your data without having to run to your business (which saves both you time and money), the cost of having that convenience may not be enough of a benefit to make it worth while.

As a professional firm working with Startups and Micro Businesses, I tend to lean towards the desktop versions. I find that the overall cost-benefit analysis of having the online/cloud software is just not as beneficial as the reduction of expenses in the first years of being in business. Young businesses should focus on growing the business. Things such as inventory, marketing/advertising and employee costs eat up a lot of the cash flow in the first years. Even if the Cloud software is “free”, it may not really be beneficial if you have to pay someone to extract and recompile the data into useful financial statements.  I know this probably goes against everything the guy down the road could be telling you, but is he trying to make his life simplier or yours?

Come have a chat with us! We can give you options you may not even be aware of before you leap onto the cloud.

Related Articles:
Forbes: http://www.forbes.com/sites/quickerbettertech/2014/05/05/and-the-best-small-business-cloud-accounting-software-is/

Digital First: https://www.digitalfirst.com/online-accounting-guide/secure-online-accounting-software/

1099-form

1099 Requirements – What you need to know

Forms 1099 are “information returns” that businesses are required to file annually with the IRS. The forms are used to report amounts a business paid out that should be reported by the recipients as income.

Form 1099-MISC, Miscellaneous Income, is probably the most familiar to business owners. But Form 1099-MISC is just one of a group of more than fifteen different forms used to report other types of income to the IRS.

To increase compliance of Form 1099 filing, business income tax forms include questions about whether the business made payments that require issuing the form and whether the business actually did issue it. This scrutiny, coupled with steep penalties, make it important for every business to check Form 1099 filing requirements each year.

Here’s what you need to know about Form 1099.

COMMON 1099s – A variety pack

Under current tax law, every person engaged in a trade or business, including nonprofit organizations, must file Forms 1099 for certain payments made during the year in the course of the payer’s trade or business. Here are some of the most common forms and filing requirements.

Form 1099-INT
Used to report interest payments of $10 or more by financial entities; $600 or more by certain trades or businesses.
Form 1099-DIV
Used to report dividend payments of $10 or more; $600 or more for liquidations.
Form 1099-B
Used to report any proceeds from broker and barter transactions.
Form 1099-R
Used to report distributions of $10 or more from retirement or profit-sharing plans, IRAs, SEPs, annuities, or insurance contracts.
Form 1099-S
Used to report the sale or exchange of present or future ownership interests in real estate.
Form 1099-C
Used to report cancellation of debt of $600 or more.
Form 1099-MISC
Used to report miscellaneous payments generally of $600 or more; $10 or more for royalties; any amount for fishing crews.

■ 1099-MISC – The major business form

Form 1099-MISC is used to report payments for services provided to your business by unincorporated vendors when those payments total $600 or more for the year. Typical payments include rents, royalties, and compensation to independent contractors, such as consultants, web designers, accountants, lawyers, and cleaning services.

Here are five conditions for payments that must be reported using Form 1099-MISC.
1. The payment was made to a nonemployee.
2. The payment was made for services (not goods) provided to the trade or business.
3. The payment was made to an unincorporated entity (except for payments to attorneys and medical and health care payments).
4. The payment or payments generally totaled $600 or more for the year.
5. The payment was not made electronically (e.g., with a credit or debit card or with PayPal).

DEADLINES – When to file

January 31 – Give one copy of Form 1099 to the recipient of the payment by this date of the year following payment.

February 28 – Send one copy of Form 1099 (along with Form 1096) to the IRS by this date of the year following payment unless the form is filed electronically.   You will also need to check with your State Department of Revenue to see if they require filing of these forms as well.

March 31 – If Form 1099 is filed electronically, this is the deadline for providing a copy to the IRS.

NOTE: Electronic filing is required for businesses filing 250 or more information returns and optional, though encouraged, for businesses filing fewer than 250 information returns.

PENALTIES – A matter of intent

The penalties for failing to file Forms 1099 range from $50 to $250 per form, depending on how late your filing is and whether or not the failure to file was intentional. Total penalties can go as high as $1 million for businesses with gross receipts under $5 million or $3 million for those with gross receipts over $5 million.

To increase compliance of Form 1099 filing, federal income tax returns for businesses include the following questions:
1. Did your business make any payments during the year that would require it to file Form(s) 1099?
2. If “yes,” did or will the business file required Forms 1099?

MORE HELPFUL FACTS

1. If you receive a Form 1099 with an incorrect dollar amount, request a corrected copy from the payer before tax filing time.
2. Only trades and businesses are required to report payments made in the course of business on Form 1099. No reporting is required for personal payments. For example, a business owner who pays a dentist $1,500 for a child’s dental work does not need to report that payment on Form 1099.
3. Payments of $600 or more to attorneys in the course of business must be reported on Form 1099-MISC, whether the attorney is incorporated or not. Medical and health care payments made to corporations must also be reported.
4. Payments to vendors by credit or debit card, or by services like PayPal, should NOT be reported on Form 1099-MISC. The bank or third-party payment provider is required to report those transactions on Form 1099-K.
5. Nonprofit organizations are subject to Form 1099 filing requirements because they are considered to be “engaged in a trade or business.”
6. The fact that payments may not have to be reported on Form 1099 does not mean that the payments are exempt from income tax. All income must be reported on the income tax return of the recipient.
7. To properly complete Forms 1099 and avoid penalties, a business needs the recipient’s name, taxpayer identification number, and a mailing address. Obtain this information by sending the recipient Form W-9, Request for Taxpayer Identification Number and Certification. If the recipient fails to provide the necessary information, the business may have to withhold taxes from payments and remit these amounts to the IRS.

AN ACTION LIST – Staying compliant

1. Review accounts payable and cash disbursements to capture reportable payments.
2. Verify that the information on Form W-9 is current for each vendor.
3. Initiate a policy that no vendor will be paid unless Form W-9 is completed.

For additional information about the Form 1099 filing requirements that apply to your business, please contact our office at (608) 239-4907.

emailscam

Scam Emails

WARNING!

If you use QuickBooks and have your email ANYWHERE on their site, be warned that there are active scams going out to get your information!
If you get any emails from what appears to be “Intuit” – BEFORE you hit reply, review the name@xxxxx.com address. These phishing emails look just like a legitimate email using all of the Intuit Logos and usual fonts. However, if it doesn’t say “Intuit” in the email address – it’s NOT a legitimate email!

Login to your Intuit account directly – never use any hyperlinks on these emails.

reader

LKM Technology Memo

As you may or may not be aware, as of October 1, 2015 businesses and Credit card companies need to switch to the new Chip Compliant Cards and Card readers in order to protect themselves from losses incurred by credit card fraud. These new cards will essentially talk with the issuing bank to ensure that the card itself is a real card issued by that bank.

The move to Smart Cards is being done to bring the U.S. into sync with the rest of the world. This move also shifts the liability of the risk of loss from the issuing banks to YOU and YOUR processing company. Depending on who is the LEAST compliant will determine who holds the burden of loss. In other words, if you accept a credit cards on your old magnetic strip reader after October 1st and that card was fraudulent, you/your business will keep that lost sale on your books – no longer will the credit card company indemnify you for that loss.

So, if you haven’t already, you will need to purchase a new Credit Card EMV reader that will bring your Credit Card terminal into compliance with the new technology. So where do you get them?? Here’s a list. If I missed a system or service you are using, please let me know and I will be happy to research that EMV reader availability for you.

QuickBooks Desktop – Intuit will have their card reader for their merchant service system available in Sept – date unknown at this point. I will let you know as soon as this becomes available.

QuickBooks Point of Sale – An EMV reader is available for use with POS 2011, 2012 & 2013. This can be purchased online at http://quickbooks.intuit.com/pos-hardware/ You’d want the PIN Pad with Integrated Card Swipe3
Intuit will have new readers available sometime in Sept for use with POS 2015

• If you are using Square to process payments, They have this available now for $29.00 and I’ve provided the link below
https://squareup.com/shop/reader

• If you are using PhoneSwipe, these readers are NOT yet available. As of this morning, no target date is scheduled but they said they will be notifying each customer within the next month to tell them how they can get a new EMV compliant reader. They are aware of the Oct 1st deadline but are still working with a proto-type device. PhoneSwipe was also not sure if they would be providing this free of charge or if there would be a cost associated with this new reader.

If you have any additional questions, don’t hesitate to contact us here at LKM Accounting at (608) 239-4907

Update:  (08/25/2015)
Square has posted a “Reserve your Reader” site.  The cost of the new Device, which is very cool if I must say, is $49 but gets you ready for the next phase of pay methods – the “Tap and Go” method.  This Contactless method uses your phone device with Apple pay and  Chase Freedom (just to name a couple) and eliminates the need for Cash and Card.  Here’s the link to reserve your new updated reader device… Remember, you need to be ready for this by October 1st!

Here’s the Link to the Square site:  https://squareup.com/contactless-chip-reader/

 

Update:  (12/01/2015)

QuickBooks – What you should know:

  • Intuit is working with its partners to offer EMV-ready versions of QuickBooks Payments mobile, desktop and point of sale solutions, which work with QuickBooks GoPayment, QuickBooks for Desktop 2016, QuickBooks Online, and QuickBooks Point of Sale v12.
  • Intuit is extending the EMV liability shift by six months for its QuickBooks Payments customers to allow everyone more time to transition. If you are a QuickBooks Payments customer and unknowingly accept a counterfeit EMV card using your magnetic stripe reader, Intuit will assume your liability for the fraud until March 31, 2016.
  • Information on the new QuickBooks USB EMV Card Reader for use with Desktop 2016, QuickBooks Online, and QuickBooks Point of Sale v12, will be available soon.
    For more information on QuickBooks and EMV readers:   http://qbservices.net/faq-emv-chip-card-payment-technology/

PhoneSwipe:

  • Although PhoneSwipe has the EMV capable readers, the software for these is not yet active.  They expect everything to be functional by 1st Quarter 2016.  The readers will be contactless as well as swipe.

Update (05/12/2016)

Square reader is now available – check out their site for details on purchasing your card reader at:  https://squareup.com/contactless-chip-reader