Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. If desired, we would be pleased to perform the requisite research and provide you with a detailed written analysis. Such an engagement may be the subject of a separate engagement letter that would define the scope and limits of the desired consultation services.
Key tax provisions in the American Rescue Plan Act (ARPA) could affect your tax situation. Here’s what you need to know:
The new tax law affected taxpayers in several ways. First, it increased the dollar amount of the credit and the amount of eligible expenses for child and dependent care. It also modified the phase-out amount for the credit to allow higher earners to take advantage of the credit. Finally, the new law made the child and dependent care credit fully refundable.
For 2021, the top credit percentage of qualifying expenses increased from 35% to 50%. In addition, eligible families can claim qualifying child and dependent care expenses of up to $8,000 for one qualifying individual (up from $3,000 in prior years) or $16,000 for two or more qualifying individuals (up from $6,000 before 2021). This means that the maximum credit in 2021 of 50% for one dependent’s qualifying expenses is $4,000, or $8,000 for two or more dependents.
When figuring the credit, employer-provided dependent care benefits, such as those provided through a flexible spending account (FSA), must be subtracted from total eligible expenses.
As before, the more a taxpayer earns, the lower the credit percentage. Under the new law, however, more people will qualify for the new maximum 50% credit rate because the adjusted gross income (AGI) level at which the credit percentage is reduced is raised substantially from $15,000 to $125,000.
For adjusted gross incomes above $125,000, the 50% credit percentage is reduced as income rises and plateaus at a 20 percent rate for taxpayers with an AGI above $183,000. The credit percentage level remains at 20 percent until reaching $400,000 and is then phased out above that level. It is completely unavailable for any taxpayer with AGI exceeding $438,000.
Also of significance is that in 2021, for the first time, the credit is fully refundable. As such, an eligible family can get it, even if they owe no federal income tax.
For 2021, the maximum amount of tax-free employer-provided dependent care benefits increased from $5,000 to $10,500. An employee can set aside $10,500 in a dependent care FSA if their employer has one instead of the normal $5,000.
Workers can only do that if their employer adopts this change. Interested employees should contact their employer for details.
For 2021 only, more childless workers and couples can qualify for the Earned Income Tax Credit (EITC), a fully refundable tax benefit that helps many low- and moderate-income workers and working families. That’s because the maximum credit is nearly tripled for these taxpayers and is, for the first time, made available to both younger workers and senior citizens.
In 2021, the maximum EITC for those with no dependents is $1,502, up from $538 in 2020. Available to filers with an AGI below $27,380 in 2021, it can be claimed by eligible workers who are at least 19 years of age. Full-time students under age 24 don’t qualify. In the past, the EITC for those with no dependents was only available to people ages 25 to 64.
Another change is available to both childless workers and families with dependents. For 2021, it allows them to choose to figure the EITC using their 2019 income, as long as it was higher than their 2021 income. In some instances, this option will give them a larger credit.
Changes expanding the EITC for 2021 and future years include:
- Singles and Couples – who have Social Security numbers can claim the credit, even if their children don’t have SSNs. In this instance, they would get the smaller credit available to childless workers. In the past, these filers didn’t qualify for the credit.
- Workers and Working Families – who also have investment income can get the credit. The limit on investment income is increased to $10,000 starting in 2021. After 2021, the $10,000 limit is indexed for inflation. The current limit is $3,650.
- Married but Separated Spouses – can choose to be treated as not married for EITC purposes. To qualify, the spouse claiming the credit cannot file jointly with the other spouse, cannot have the same principal residence as the other spouse for at least six months out of the year, and must have a qualifying child living with them for more than half the year.
The new law increases the amount of the Child Tax Credit, makes it available for 17-year-old dependents, makes it fully refundable, and makes it possible for families to receive up to half of it, in advance, during the last half of 2021. Moreover, families can get the credit, even if they have little or no income from a job, business, or another source.
Prior to the taxable year 2021, the credit is worth up to $2,000 per eligible child. The new law increases it to as much as $3,000 per child for dependents ages 6 through 17 and $3,600 for dependents ages five and under.
The maximum credit is available to taxpayers with a modified AGI of:
Above these income thresholds, the extra amount above the original $2,000 credit — either $1,000 or $1,600 per child — is reduced by $50 for every $1,000 in modified AGI. Furthermore, the credit is fully refundable for 2021. Before this year, the refundable portion was limited to $1,400 per child.
From July through December 2021, up to half the credit will be advanced to eligible families by the Department of Treasury and the IRS. These advance payments will be estimated from their 2020 return, or if not available, their 2019 return.
For that reason, the IRS urges families to file their 2020 returns as soon as possible – including many low-and moderate-income families who don’t normally file returns. Often, those families will qualify for an Economic Impact Payment or tax benefits, such as the EITC. This year, taxpayers have until May 17, 2021, to file a return.
To speed delivery of any refund, be sure to file electronically and choose direct deposit. Doing so will also ensure quick delivery of the Advance Child Tax Credit payments to eligible taxpayers later this year.
In the next few weeks, eligible families can choose to decline to receive the advance payments (more information about this, below). Likewise, families will also be able to notify Treasury and IRS of changes in their income, filing status, or the number of qualifying children using the IRS Child Tax Credit Update Portal.
For the most up-to-date information on these and other changes affecting your tax situation in 2021, don’t hesitate to contact the office. With taxes becoming more complicated every year, it’s never too early to consult a tax and accounting professional for assistance.
Thanks to the advance payments of the Child Tax Credit, approximately 60 million children received $15 billion in July, according to the Department of Treasury and the IRS. While many of these families will benefit from the extra money deposited into their bank accounts, some families may want to opt-out and instead take the credit when they file their tax return next spring.
There are several reasons a taxpayer may want to opt-out or unenroll. For example, if the amount of tax owed when filing a 2021 tax return will be greater than the expected refund.
Because the payments you receive are an advance of the Child Tax Credit that a taxpayer would normally qualify for when filing their taxes, every dollar received in advance will reduce the amount of Child Tax Credit a taxpayer is able to claim on their 2021 tax return. By accepting advance child tax credit payments, the refund amount may be reduced, or the amount of tax owed may increase. By unenrolling and claiming the entire credit when filing a 2021 tax return, a taxpayer may avoid owing tax to the IRS – thereby avoiding a “tax surprise.”
If your tax situation has changed and you receive more money than you are entitled to, you will generally need to pay any excess back to the IRS. However, if your income is below certain threshold amounts, then IRS repayment protection applies. These amounts are:
- $60,000 if you are married and filing a joint return or if filing as a qualifying widow or widower;
- $50,000 if you are filing as head of household; and
- $40,000 if you are a single filer or are married and filing a separate return.
Some families may prefer to receive a lump sum payment (i.e., tax refund) instead of smaller payments. This is especially true if families use the refund to make a large purchase such as a car or home appliance.
Complex family situations such as divorced or separated parents who share custody and claim dependents on their tax returns in alternate years, for instance, also make unenrolling an attractive option – simply to avoid an even more complicated tax filing situation.
Self-employed individuals, whose income fluctuates, may also want to opt-out. Typically, estimated taxes are paid based on a prior year’s income and may differ from the current year’s income. Because the advance payment of the Child Tax Credit offsets the amount of tax owed, it may inadvertently result in an estimated tax penalty.
Higher net worth families with complicated tax returns that include not only wages but income from capital gains or rental properties are another group that might consider unenrolling. Quite often, they have tax planning strategies to reduce their tax liability, and any extra income could complicate their tax situation.
The Child Tax Credit Update Portal (CTC UP) allows taxpayers to unenroll from receiving Advance Child Tax Credit payments. To stop advance payments, a taxpayer must unenroll three days before the first Thursday of next month by 11:59 p.m. Eastern Time. There is no need to unenroll each month. If that month’s deadline is missed, the next scheduled advance payment will be sent out. The unenrollment process may take several days, and taxpayers should check back after unenrolling to make sure the request was processed successfully.
Taxes are complicated, and pandemic-related tax legislation has made it even more so. If you need help figuring out whether your tax situation merits opting out of the monthly Advanced Child Tax Credit payments, don’t hesitate to call.
If you’re looking to sell your home this year, then it may be time to take a closer look at the exclusion rules and cost basis of your home to reduce your taxable gain on the sale of a home.
The IRS home sale exclusion rule allows an exclusion of gain up to $250,000 for a single taxpayer or $500,000 for a married couple filing jointly. This exclusion can be used over and over during your lifetime (but not more frequently than every 24 months), as long as you meet certain ownership and use tests.
During the 5-year period ending on the date of the sale, you must have:
The Ownership and Use periods need not be concurrent. Two years may consist of a full 24 months or 730 days within a 5-year period. Short absences, such as for a summer vacation, count in the period of use. Longer breaks, such as a 1-year sabbatical, do not.
If you own more than one home, you can exclude the gain only on your primary home. The IRS uses several factors to determine which home is a principal residence: the place of employment, location of family members’ main home, mailing address on bills, correspondence, tax returns, driver’s license, car registration, voter registration, location of banks you use, and location of recreational clubs and religious organizations you belong to.
As mentioned earlier, the exclusion can be used repeatedly every time you reestablish your primary residence. When you change homes, please call the office with your new address to ensure the IRS has your current address on file.
Only taxable gain on the sale of your home needs to be reported on your taxes. Further, you cannot deduct the loss on the sale of your main home. Please call for additional details.
Additionally, consider all improvements made to the home over the years when selling your home. Improvements will increase the cost basis of the home, thereby reducing the capital gain.
Additions and other improvements that have a useful life of more than one year can also be added to the cost basis of your home.
Examples of improvements include the following: building an addition; finishing a basement; putting in a new fence or swimming pool; paving the driveway; landscaping; or installing new wiring, new plumbing, central air, flooring, insulation, or security system.
Jack and Mary Kelly purchased their primary residence in 2012 for $200,000. They paved the unpaved driveway, added a swimming pool, and made several other home improvements adding up to a total of $75,000. The adjusted cost basis of the house is now $275,000. The house is then sold in 2021 for $550,000. It costs them $40,000 in commissions, advertising, and legal fees to sell the house.
These selling expenses are subtracted from the sales price to determine the amount realized. The amount realized in this example is $510,000. That amount is then reduced by the adjusted basis (cost plus improvements) to determine the gain. The gain, in this case, is $235,000. After considering the exclusion, there is no taxable gain on the sale of this primary residence and, therefore, no reporting of the sale on their 2021 personal tax return.
This tax credit helps individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, solar electricity equipment, wind turbines, and solar roofing tiles, and solar roofing shingles that serve as solar electric collectors, while also performing the function of traditional roofing. In the case of property placed in service after December 31, 2019, and before January 1, 2023, the credit is 26 percent. For property placed in service after December 31, 2022, and before January 1, 2024, the credit is 22 percent. There is no cap on the amount of credit available, except for fuel cell property.
Generally, you may include labor costs when figuring the credit, and you can carry forward any unused portions of this credit. Qualifying equipment must have been installed on or in connection with your home located in the United States; fuel cell property qualifies only when installed on or in connection with your main home located in the United States.
Not all energy-efficient improvements qualify, so be sure you have the manufacturer’s tax credit certification statement, which can usually be found on the manufacturer’s website or with the product packaging. Please contact the office for more information about residential energy tax credits.
Even if you do not meet the ownership and use tests, you may be allowed to exclude a portion of the gain realized on the sale of your home if you sold your home because of health reasons, a change in place of employment, or certain unforeseen circumstances. Unforeseen circumstances include, for example, divorce or legal separation, natural or man-made disasters resulting in a casualty to your home, or an involuntary conversion of your home. If one of these situations applies to you, please call us for additional details.
Good recordkeeping is essential for determining the adjusted cost basis of your home. Ordinarily, you must keep records for three years after the filing due date. However, you should keep documents proving your home’s cost basis for as long as you own your house.
The records you should keep include:
Tax considerations surrounding the sale of a home can be confusing. If you have any questions on taxes related to the sale of your home, give us a call.
Teachers and other educators should remember that they can deduct certain unreimbursed expenses such as classroom supplies, training, and travel – even when schools switched to hybrid or remote learning models during the pandemic last spring. Deducting these expenses helps reduce the amount of tax owed when filing a tax return.
To qualify for the deduction, the taxpayer must be a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide. They must also work at least 900 hours a school year in a school that provides elementary or secondary education as determined under state law.
Teachers and other educators can also take advantage of various education tax benefits for ongoing educational pursuits such as the Lifetime Learning Credit or, in some instances, depending on their circumstances, the American Opportunity Tax Credit.
Educators can deduct up to $250 of unreimbursed business expenses. If both spouses are eligible educators and file a joint return, they may deduct up to $500, but not more than $250 each. The educator expense deduction is available even if an educator doesn’t itemize their deductions. To take advantage of this deduction, the taxpayer must be a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide for at least 900 hours during a school year in a school that provides elementary or secondary education as determined under state law.
Here are some of the expenses an educator can deduct:
Educators should keep detailed records of qualifying expenses noting the date, amount, and purpose of each purchase. This helps prevent a missed deduction at tax time. Taxpayers should also keep a copy of their tax return for at least three years. Copies of tax returns may be needed for many reasons. A tax transcript summarizes return information and includes adjusted gross income and available free of charge from the IRS.
Don’t hesitate to call if you have any questions about tax deduction available to educators, including teachers, administrators, and aides.
According to the US Small Business Administration, small businesses employ half of all private-sector employees in the United States. However, a majority of small businesses do not offer their workers retirement savings benefits.
If you’re like many other small business owners in the United States, you may be considering the various retirement plan options available for your company. Employer-sponsored retirement plans have become a key component of retirement savings. They are also an increasingly important tool for attracting and retaining the high-quality employees you need to compete in today’s competitive environment.
Besides helping employees save for the future, however, instituting a retirement plan can provide you, as the employer, with benefits that enable you to make the most of your business’s assets. Such benefits include:
Most private-sector retirement plans are either defined benefit plans or defined contribution plans. Defined benefit plans are designed to provide a desired retirement benefit for each participant. This type of plan can allow for a rapid accumulation of assets over a short period. The required contribution is actuarially determined each year, based on age, years of employment, the desired retirement benefit, and the value of plan assets. Contributions are generally required each year and can vary widely.
On the other hand, a defined contribution plan does not promise a specific amount of benefit at retirement. In these plans, employees or their employer (or both) contribute to employees’ individual accounts under the plan, sometimes at a set rate (such as 5 percent of salary annually). A 401(k) plan is one type of defined contribution plan. Other defined contribution plans include profit-sharing plans, money purchase plans, and employee stock ownership plans.
Small businesses may choose to offer a defined benefit plan or any of these defined contribution plans. Many financial institutions and pension practitioners make available both defined benefit and defined contribution “prototype” plans that have been pre-approved by the IRS. When such a plan meets the requirements of the tax code, it is said to be qualified and will receive four significant tax benefits.
It is necessary to note that all retirement plans have important tax, business, and other implications for employers and employees. Therefore, you should discuss any retirement savings plan you consider implementing with your accountant or financial advisor.
Here’s a brief look at some plans that can help you and your employees save.
A SIMPLE IRA plan allows employees to contribute a percentage of their salary each paycheck and to have their employer match their contribution. Under SIMPLE IRA plans, employees can set aside up to $13,500 in 2021 (same as 2020) by payroll deduction. If the employee is 50 or older, they may contribute an additional $3,000 (same as 2020). Employers can either match employee contributions dollar for dollar – up to 3 percent of an employee’s wage – or make a fixed contribution of two percent of pay for all eligible employees instead of a matching contribution.
SIMPLE IRA plans are easy to set up by filling out a short form. Administrative costs are low, and much of the paperwork is done by the financial institution that handles the SIMPLE IRA plan accounts. Employers may choose to allow employees to select the IRA to which their contributions will be sent or send all employees’ contributions to one financial institution. Employees are 100 percent vested in contributions, get to decide how and where the money will be invested, and keep their IRA accounts even when they change jobs.
A SEP plan allows employers to set up a type of individual retirement account – known as a SEP IRA – for themselves and their employees. Employers must contribute a uniform percentage of pay for each employee. Employer contributions are limited to less than 25 percent of an employee’s annual salary or $58,000 in 2021 (up from $57,000 in 2020). Most employers can start SEP plans, including those that are self-employed.
SEP plans have low start-up and operating costs and can be established using a single quarter-page form. Businesses are not locked into making contributions every year. You can decide how much to put into a SEP IRA each year – offering you some flexibility when business conditions vary.
401(k) plans have become a widely accepted savings vehicle for small businesses and allow employees to contribute a portion of their incomes toward their retirement. The employee contributions, not to exceed $19,500 in 2021 (same as 2020), reduce a participant’s pay before income taxes so that pre-tax dollars are invested. If the employee is 50 or older, they may contribute another $6,500 in 2021 (same as 2020). Employers may offer to match a certain percentage of the employee’s contribution, increasing participation in the plan.
While more complex, 401(k)plans offer higher contribution limits than SIMPLE IRA plans and IRAs, allowing employees to accumulate greater savings.
Employers also may make profit-sharing contributions to plans that are unrelated to any amounts an employee chooses to contribute. Profit-sharing Plans are well suited for businesses with uncertain or fluctuating profits. In addition to the flexibility in deciding the amounts of the contributions, a Profit-Sharing Plan can include service requirements, vesting schedules, and plan loans that are not available under SEP plans.
Contributions may range from 0 to 25 percent of eligible employees’ compensation, to a maximum of $58,000 in 2021 (up from $57,000 in 2020) per employee. The contribution in any one year cannot exceed 25 percent of the total compensation of the employees participating in the plan. Contributions need not be the same percentage for all employees. Key employees may get as much as 25 percent, while others may get as little as three percent. A plan may combine these profit-sharing contributions with 401(k) contributions (and matching contributions).
The rules for setting up retirement plans are complex, and the tax aspects of retirement plans can also be confusing, so it is important to consult with a tax and accounting professional before deciding which plan is right for you and your employees.
This year’s tax deadline may have come and gone, but it’s never too early to start planning for next year. With that in mind, here are five things you can do now to make next April 15 easier for everyone.
1. Review your paycheck. Make sure your employer is properly withholding and reporting retirement account contributions, health insurance payments, charitable payroll deductions, and other items. These payroll adjustments can make a big difference to your bottom line. Fixing an error in your paycheck now gets you back on track before it becomes a huge hassle.
2. Adjust your withholding. Why wait another year for a big refund? Now is a good time to review your withholding and make adjustments for next year, especially if you’d prefer more money in each paycheck this year. If you owed money at tax time, perhaps you’d like next year’s tax payment to be smaller. Please call if you need assistance in adjusting your withholding.
3. Organize your recordkeeping. Establish a central location where everyone in your household can put tax-related records all year long. Anything from a shoebox to a file cabinet works. Just be consistent to avoid a scramble for misplaced mileage logs, or charity receipts come tax time.
4. Store your 2020 tax return in a safe place. Put a copy of your 2020 tax return and supporting documents somewhere secure so you’ll know exactly where to find them if you receive an IRS notice and need to refer to your return. If it is easy to find, you can also use it as a guide for next year’s return. See the article, Keeping Good Tax Records is Essential, below.
5. Consult a tax professional early. Due to the ever-increasing complexity of tax laws, it pays to use a tax and accounting professional to help you strategize, plan and make financial decisions throughout the year. Doing so ensures that you will have more time when you’re not up against a deadline or anxious for your refund.
Each household’s financial circumstances are different, so it’s important to fully consider your specific situation and goals before making any major financial decisions. Don’t hesitate to contact the office at any time with questions or concerns. A competent tax professional knowledgeable about current tax law changes can help you throughout the year – not just at tax time.
Summer is wedding season – even during a pandemic – and newlyweds should understand how tying the knot can affect their tax situation. Marriage changes many things, and taxes is one of them. Here’s a tax checklist for newly married couples:
1. Name and address changes
3. Filing status
For more information about how life changes, such as marriage, the birth of a child, or the death of a loved one, affect your tax situation, don’t hesitate to get in touch with the office.
When choosing a payroll service provider to handle payroll and payroll tax, employers need to make sure they choose a trusted payroll service that can help them avoid missed deposits for employment taxes and other unpaid bills. Typically, these clients remain legally responsible for paying the taxes due, even if the employer sent funds to the payroll service provider for required deposits or payments.
Employers are encouraged to enroll in the Electronic Federal Tax Payment System (EFTPS) and make sure the payroll service provider uses EFTPS to make tax deposits. EFTPS is free and gives employers safe and easy online access to their payment history, provided they make deposits under their Employer Identification Number (EIN). Using the EFTPS enables them to monitor whether their payroll service provider meets its tax deposit responsibilities.
Employers have a couple of options when finding a trusted payroll service provider:
Employers should contact a tax professional about any bills or notices received, especially payments managed by a third party. They can also call the phone number on the bill, write to the IRS office that sent the bill, or contact the IRS business tax hotline at 800-829-4933.
Most payroll service providers provide quality service, but some don’t have their clients’ best interests in mind. Each year, a few payroll service providers don’t submit their client’s payroll taxes, close down abruptly, and leave employers on the hook.
Don’t get caught short. Choose a payroll service provider you can count on – and don’t hesitate to call the office with any questions about payroll and other business-related taxes.
The Coronavirus Aid, Relief, and Economic Security Act allowed self-employed individuals and household employers to defer the payment of certain Social Security taxes on their Form 1040 for tax year 2020 over the next two years. Half of the deferred Social Security tax is due by December 31, 2021, and the remainder is due by December 31, 2022.
How individuals can repay the deferred taxes
Individuals can pay the deferred tax amount any time on or before the due date. Here is how it works:
- Household employers and self-employed individuals should make payments through the Electronic Federal Tax Payment System or by credit or debit card, money order, or with a check. These payments should be separated from other tax payments to ensure they are applied to the deferred tax balance on the tax year 2020 Form 1040 since IRS systems won’t recognize the payment for deferred tax if it is with other tax payments or paid with the current Form 1040.
- Designate the payment as “deferred Social Security tax.”
- Select 1040 US Individual Income Tax Returns and deferred Social Security tax for payment type if using EFTPS. The payment must be applied to the 2020 tax year, where they deferred the payment.
What to do if you are unable to pay in full by the installment due date
Individuals who cannot pay the full deferred tax amount should pay whatever they can pay by the installment due dates to limit penalty and interest charges.
If the installment amount is not paid in full, IRS will send the taxpayer a balance due notice. Taxpayers should follow instructions on the notice to make a payment or apply for a payment plan. They can also visit the Paying Your Taxes page on IRS.gov for additional information about the various options of how they can pay, what to do when they can’t pay, and viewing their tax account.
Please call if you need assistance making deferred tax payments or have any questions about using the EFTPS.
An important part of tax planning is keeping good records. Having an organized recordkeeping system makes it easier to file a tax return or understand a letter from the IRS. Here are some tips:
Good recordkeeping helps taxpayers is a number of ways including:
In general, taxpayers should keep records for three years from the date they filed the tax return. It is important to develop a system that keeps all their important information together – whether it is a software program for electronic recordkeeping or labeled folders to store paper documents.
What Records to Keep:
1. Tax-related records. This includes wage and earning statements from all employers or payers, interest and dividend statements from banks, certain government payments like unemployment compensation, other income documents, and records of virtual currency transactions. Taxpayers should also keep receipts, canceled checks, and other documents – electronic or paper – that support income, a deduction, or a credit reported on their tax return.
2. IRS letters, notices, and prior-year tax returns. Taxpayers should keep copies of prior year tax returns and notices or letters they receive from the IRS. These include adjustment notices (where an action is taken on the taxpayer’s account), Economic Impact Payment notices, and letters about advance payments of the 2021 child tax credit. Taxpayers who receive 2021 advance child tax credit payments will receive a letter early next year that provides any payments they received in 2021. Taxpayers should refer to this letter when filing their 2021 tax returns in 2022.
3. Property records.>Taxpayers should also keep records relating to property they dispose of or sell. They must keep these records to figure their basis for computing gain or loss.
4. Business income and expenses. For business taxpayers, there’s no particular method of bookkeeping they must use. However, taxpayers should find a method that clearly and accurately reflects their gross income and expenses. Taxpayers who have employees must keep all employment tax records for at least four years after the tax is due or paid, whichever is later.
5. Health insurance. Taxpayers should keep records of their own and their family members’ health care insurance coverage. If they’re claiming the premium tax credit, they’ll need information about any advance credit payments received through the Health Insurance Marketplace and the premiums they paid.
Need help setting up a recordkeeping system that works for you? Don’t hesitate to call.
If you’re currently using QuickBooks, you know how it’s transformed your daily bookkeeping practices. You can create sales forms like invoices quickly and find them when you need them. Your customer and vendor records are organized and stored neatly for fast retrieval. You can accept online payments, track your inventory, and record your billable time.
But if you’re not using QuickBooks’ built-in reports, you’re missing out on one of the software’s most powerful components. While you can look at lists of invoices, sales receipts, and payments, you can’t see in a few seconds who owes you money and how late they are paying, for example. You’re not able to get an instant overview of who you owe. You can’t call up a customer’s history instantly, and it will take an enormous amount of time to see which of your items and services are selling and which aren’t.
These are just a few of the insights you get from using QuickBooks reports. Beyond learning about your company’s past and present financial states, you can make better business decisions that will improve your future.
QuickBooks’ reports are exceptionally customizable, as you’ll see. But before you start creating them, you should see what your available report options are. Open the Edit menu and select Preferences, then Company Preferences (which only administrators can modify). You’ll see this window:
Figure 1: Before you start working with reports in QuickBooks, you should make sure their global settings represent your needs.
You can see in the image above that you can control your reports’ general settings. For example, some reports can be created on the basis of either Accrual or Cash. You can designate your preference here. Do you want the aging process to begin on the due date or transaction date? How much information should appear when Items or Accounts are displayed? What additional data should appear on your report pages (Report Title, Date Prepared, Report Basis, etc.)? You can specify your own Format or just accept the Default.
Statement of Cash Flows is an advanced report, one we don’t recommend you try to modify or analyze on your own. We can help with that when the report is needed, which is usually monthly or quarterly.
When you’re done here, click OK.
The best way to familiarize yourself with the reports that QuickBooks offers is to open the Reports menu and click Report Center. The content here is divided by type (Customers & Receivables, Sales, Purchases, etc.). Click around these lists and use the icons in each box to Run the current report, get more Info on it, mark it as one of your Faves, or view a Help file. You can choose the date range before you run it with your company’s own data.
As mentioned previously, QuickBooks’ reports are easy to customize. Customization options vary from report to report, but one example is illustrated as follows:
You’re likely to want to run Sales by Item Detail frequently to see what your most popular items are as well as what’s not doing so well. Find it in the Report Center by clicking the Sales tab, selecting it, and clicking Run. If you don’t have a lot of data in QuickBooks yet, open one of the sample files that came with the software (File | Open Previous Company).
With the report open, click Customize Report in the upper left corner to open this window:
Figure 2: You have tremendous control over the content that appears in your reports.
There are four tabs here. Click on each to see what your options are.
When you’ve finished customizing your report, click OK to create it. Your modified report format will not be saved unless you click Memorize and give it a name.
You can customize and run most of the reports in QuickBooks by yourself. But there are several that you may need help with, beyond the Statement of Cash Flows mentioned earlier – such as standard financial reports, like the Balance Sheet and Profit & Loss. Ideally, these should be generated on a regular basis so you can get more actionable, deeper insight into your company’s finances. You’ll need them if you, for example, apply for a loan or seek investors.
If you want to understand better how QuickBooks’ reports can help you make better business decisions, don’t hesitate to call.
Employers – Federal unemployment tax. Deposit the tax owed through June if more than $500.
Employers – If you maintain an employee benefit plan, such as a pension, profit sharing, or stock bonus plan, file Form 5500 or 5500-EZ for calendar year 2020. If you use a fiscal year as your plan year, file the form by the last day of the seventh month after the plan year ends.
Certain Small Employers – Deposit any undeposited tax if your tax liability is $2,500 or more for 2021 but less than $2,500 for the second quarter.
Employers – Social Security, Medicare, and withheld income tax. File Form 941 for the second quarter of 2021. Deposit any undeposited tax. (If your tax liability is less than $2,500, you can pay it in full with a timely filed return.) If you deposited the tax for the quarter in full and on time, you have until August 10 to file the return.
Employees Who Work for Tips – If you received $20 or more in tips during July, report them to your employer. You can use Form 4070.
Employers – Social Security, Medicare, and withheld income tax. File Form 941 for the second quarter of 2021. This due date applies only if you deposited the tax for the quarter in full and on time.
Employers – Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments in July.
Employers – Social Security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments in July.
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