Client Handbook - Tiretfinalize the accounting—mainly related to meals and entertainment expenses...

CLIENTHANDBOOK

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TABLEOFCONTENTS

1) TiretTeamconcept2) AccountingProcedures

a. EnteringchecksintoQBOb. Reconcilingpaymentsreceivedatthecloseofeachday

i. RecordingReceiptsinGoogleDrivespreadsheetii. Makingdailydeposits

c. Sendingmonthlyreportsatthecloseofthemonth3) DeductionGuidelines

a. Meals&Entertainmentb. InsurancePremiumsc. EquipmentPurchasesd. Autoexpenses

4) PayrollProcedures5) InsuranceGuidelines6) InternalControlGuidelines7) IndependentContractorvsemployee8) EmployeeHandbook9) RecordRetentionGuidelines

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THETIRETTEAMCONCEPT

WelcometoTiret&CompanyCPAs.Tiret&Co.isstructuredtoprovideyouwithanentireteamofpeopletoserviceyouraccounting,tax,payroll,andfinancialneeds.Theteammembersarecomprisedofthefollowingroles:

Partner:Thefirmpartnerwillbeyourprimaryconsultativerelationshipattheoffice.Yourmeetingswilltakeplacewiththepartner,andalltaxandfinancialplanningmatterswillworkthroughthepartner.

StaffAccountant:Youwillhaveadedicatedstaffaccountantthatwillprepareyourmonthlyaccounting.Theaccountantwilloccasionallyhavequestionsforyourelativetocompletingtheaccounting.Anyquestionsthatyouhaverelatedtothelogisticsoftheaccountingcanberunthroughyourstaffaccountant.

PayrollDepartment:Yourpayrollinfo(employees,rates,hours,vacation,etc)willbecommunicatedtoourpayrolldepartment,whowillthantakecareofpreparingyourpayrollandyourpayrolltaxes.

TaxPreparer:Whileyourtaxreturnwillalwaysbereviewedbythepartnerinchargeofyouraccount,thereturnitselfmaybepreparedbyoneofourhighlyqualifiedtaxpreparers.Tofacilitatetheproperandtimelycompletionofyourreturn,thepreparerwillcommunicatewithyoutorequestneededdocumentsortoresolvequestions.

AdminDepartment:Wehaveatop-notchadmindepartmentatTiret&Co.CPAsthatwillassistyouinnumerousways,includingschedulingmeetingsandarrangingforthetransferofdocumentsandinformationbetweenyouandthefirm,orthefirmandathirdpartyasnecessary.

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ACCOUNTINGPROCEDURES

Generally,Tiret&Co.willtakecareofallactionsnecessarytocompleteyouraccounting.Therearesomeactionitemsrequiredfromtheclientsidetoenableustodothis.

DAILY:Writingchecks:Asyourwritemanualchecks,theyneedtobeenteredintoyourcheckregister

inQBO(QuickBooksOnline).Thiscanbedonefromacomputer,orfromasmartphonewiththeQBOmobileapp.PleasenotethatyoucanalsouseQBOandyourprintertoactuallyprintchecksdirectlyfromthecomputer.

MakingandRecordingDeposits:Atthecloseofeachdayyoushouldreviewyourposted

collectionsforthedayandtheactualchecks,cash,andcreditcardreceiptsrelativetothosepostedcollections.YoushouldenterthedepositinformationintotheGoogleDrivedepositspreadsheetthatwascreatedforyoubyTiret&Co.Ideallyyoushouldmakeadepositoftheday’schecksandcashatthecloseofeachday.Ifyouareunabletomakeadepositonedayandneedtomaketwoday’sdepositsinthesameday,theyshouldbedepositedastwoseparatedeposits.Ifyoumakeyourdepositsviaascanneranddon’thaveabranchatwhichyoucandepositcash,youshouldwriteapersonalchecktotheofficefortheamountofcashreceived,andkeepthecashforyourself.Thisensuresapapertrailofallcollections.Theseareimportantcashcontrolstepstohelpdefendagainstpotentialembezzlement.

MONTHLY:

SendinginPracticeReports:Atthecloseofthemonthyouwillsendtoyourassignedstaffaccountantapacketofyourinternalsoftwarereportsthatwewillneedinordertocompletetheaccounting.Thiswillincludeproduction,collections,andadjustmentsforthemonth,alongwiththeaccountsreceivableagingasofthecloseofthelastbusinessdayoftheparticularmonth.Youwillbeprovidedwithachecklistthatwilllistindetailtheparticularreportsneededeachmonthfromyourparticularinternalsoftwareprogram.Thereportscanbeemailed,postedtotheportal,orifeitherofthosetwomethodsdoesnotworkforsomereason,snailmailedtous.

Answeringquestions:Asyouwillseeonthedeductionguidelinepage,therearesome

expendituresforwhichwewillneedsomeclarificationfromyou.Thiswillleadtoyourstaffaccountantemailingyoueachmonthquestionsthatwillneedtobeansweredtofinalizetheaccounting—mainlyrelatedtomealsandentertainmentexpenses(splitbetweenstaffandnon-staff).

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DEDUCTIONGUIDELINES

TheIRSdefinesadeductiblebusinessexpensesassomethingthatis“ordinaryandnecessary”forthesakeofthebusinessoperations.Therearehowevermorestringentguidelinesonsomeparticulartypesofexpenses.

1) InsuranceExpense:Thereareparticularrulesdeterminingthedeductibilityofinsuranceexpenditures.Assuch,wewillneedtoknowfromyouwhattypeofinsuranceaparticularpremiumisfor:

a. Disabilityincome(non-deductible)b. Disabilityoverhead(deductible)c. Lifeinsurance(non-deductible)d. Worker’scomp(deductible)e. Malpractice(deductible)f. OfficerHealthinsurance(generallydeductible,butwithsomeparticularreporting

guidelines)g. StaffHealthinsurance(deductible)h. OfficeUmbrellaInsurance(deductible)i. Etc.

2) Mealsandentertainmentexpenses:Anymealsandentertainmentthatarerelatedtofeedingand/orentertainingyourstaffare100%deductible.Anymealsandentertainmentthatarenotstaffrelated(i.e.dinnerwithareferralsourceorsomeotherbusinesscontact)areonly50%deductible.Assuch,wewillneedfromyou,andwewillaskyouforguidanceeachmonthastothesplitofmealsandentertainmentcostsbetween:

a. Staffmealsandentertainmentb. Non-staffmealsandentertainment

Pleasenotethatinordertosupportthedeductibilityofmealsandentertainmentexpenses,itisagoodideatobothkeepreceiptsrelatedtomealsandentertainment,andtojotdownthebusinessreasonandbusinessassociatewithwhomthemealtookplace.

3) Equipment:Pleasetakecaretonoteifapurchaseisforequipment,andwhenequipmentispurchasedpleaseincludetheinvoicewiththeaccountingworkpacket.Alternatively,youcouldalsoemailacopyoftheinvoicetoyourassignedstaffaccountantwhenthepurchaseismade.Equipmentforthesepurposesisanythingwithacostover$500.00thatrepresentsanassetthatwillremainintheofficeforanextendedperiodoftime.Notethatwetreathand-piecesassupplies,notequipment.Examplesofequipmentwouldbesomethinglikeanx-raymachine,aninter-oral

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camera,anofficedesk,awaitingroomTV,etc.Thecostofequipmentisdeductedthroughdepreciationdeductions,notdirectlythroughtheexpenseofpayingfortheitem.Dependingonthetaxlawsinplaceforaparticularyear,theequipmentwillbedeductedallintheyearofpurchase,oroveraperiodofyears(rangingfromaslittleas3toasmanyas39,dependingonthetypeofequipment).

4) AutomobileExpenses:Commutingmilesrepresentnon-deductibleautomobileexpenses.Allothermilesrelatedtobusinessrepresentdeductiblemileage.Thisincludestripstothebank,tothepostoffice,tothestoreforbusinesspurchases,tripstocontinuingeducationmeetings,etc.YourcommuteforIRSpurposesisdefinedasthetripfromhomeinthemorningtoyourfirstplaceofbusinessforthedayandyourtripfromyourlastplaceofbusinessforthedaytoyourhomeatthecloseoftheday.Soifyoufirstdrivefromhometothepost-officeforworkrelatedactivities,andthenfromthepostofficetoyouroffice,thetriptothepost-officewouldbeconsideredyourcommute.Thetripfromthepost-officetoyourofficewouldbeconsidereddeductiblebusinessmiles.Likewise,ifyouleaveyourofficeattheendofthedayanddrivetothebanktodepositthatday’scollections,andthenheadhomefromthebank.Thetriptothebankwouldbebusinessmiles,andthetripfromthebanktoyourhomewouldbecommute.Businessautoexpensescanbetakenintheformofapercentageofactualautoexpenses.So,ifyoudrive10,000milesintheyearand6,000arebusinessmiles,then60%ofallexpensesrelatedtothebusinessautomobilewouldbedeductible.Alternatively,thedeductioncanbebasedonacalculationoftheIRSapplicableautoexpenserateforaparticularyearmultipliedbythetotalbusinessmilesdrivenfortheyear.Whenpreparingthetaxreturn,wecangenerallychoosewhichevermethodwillgivethebetterdeduction.Whicheverdeductionmethodisultimatelychosen,youshouldpayforallexpensesrelatedtoyourbusinessusecarthroughthebusiness.Thisincludes,gas,repairs,carwash,registration,etc.

5) TravelExpenses:Travelexpensesthatareordinaryandnecessarybusinessexpensesaredeductible.Themostcommonreasonforbusinesstravelisforcontinuingeducationandconventions.Whileyoumaybringyourfamilyalongonyourtravels,notethatonlytheexpensesthatwouldhavebeenincurredwithoutthepresenceofyourfamilyaredeductible.Thisincludesyourairfare,butnotyourfamily’s.Itcouldincludealllodgingexpenses,ifthepresenceofyourfamilydoesnotcauseyoutobookalargerroomthanyouwouldhavebookedforyourself.Itincludesbusinessrelatedmealsandentertainmentforyou,butnomealsandentertainmentexpensesforyourfamily.Alsonotethatifyouextendyourtripbeyondthetimeframeofthebusinesspurpose,theexpensesrelatedtotheadditionaldaysarenotdeductible.

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Someexamplesofdeductiblebusinesstravelexpensesareasfollows:

1. Travelbyairplane,train,busorcarbetweenyourhomeandyourbusinessdestination.(Ifyouareprovidedwithaticketoryouareridingfreeasaresultofafrequenttravelerorsimilarprogram,yourcostiszero.)

2. Usingyourcarwhileatyourbusinessdestination.Youcandeductactualexpensesorthestandardmileagerate,aswellasbusiness-relatedtollsandparkingfees.Ifyourentacar,youcandeductonlythebusiness-useportionfortheexpenses.

3. Faresfortaxisorothertypesoftransportationbetweentheairportortrainstationandyourhotel,thehotelandtheworklocation,andfromonecustomertoanother,orfromoneplaceofbusinesstoanother.

4. Mealsandlodging(stillsubjecttothepotential50%limitation).5. Tipsyoupayforservicesrelatedtoanyoftheseexpenses.6. Drycleaningandlaundry.7. Businesscallswhileonyourbusinesstrip(Thisincludesbusinesscommunicationsbyfax

machineorothercommunicationdevices).8. Othersimilarordinaryandnecessaryexpensesrelatedtoyourbusinesstravel(Theseexpenses

mightincludetransportationtoandfromabusinessmeal,publicstenographer'sfees,computerrentalfees,andoperatingandmaintainingahousetrailer).

9. Shippingofbaggage,andsampleordisplaymaterialbetweenyourregularandtemporaryworklocations.

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PAYROLLPROCESSINGPROCEDURES

Itemsneededforpayrollsetup:

• FederalTaxID#(EIN)(Wecanacquirethisnumberforyouifneedbe)• StateTaxID#(EDD)(Wecanacquirethisnumberforyouifneedbe)• Voidedcheckforbusinessaccount• 4digitpinnumberforEFTPS(thisnumberismailedtoyoushortlyafteryoureceiveyourFederal

EIN)• W4forallemployees(linkbelow)

http://www.irs.gov/pub/irs-pdf/fw4.pdf

• I9forallemployees(linkbelow)http://www.uscis.gov/sites/default/files/files/form/i-9.pdf

• Payrates• Anyotherpay/deductioninformation(vacation,sick,medical,401k,etc)• Voidedchecksfordirectdeposit• PayrollFrequency–Everyotherweek(bi-weekly)ortwicepermonth(semi-monthly)?• Payrollperiods• Paydates

Submittingpayroll:

Payrollhoursareduenolaterthan1pmtwobusinessdaysbeforeyourpaydateifyouremployeesareondirectdeposit(onebusinessdayforregularchecks).WeekendsandbankholidaysdoNOTcountasbusinessdays.

Onthedaythatyouareduetosubmitpayroll,youshouldrunreportsforthepayperiodandcalculateovertimeifyourtimekeepingsoftwaredoesnotalreadydoitforyou.Hoursshouldbetotaledandreportedasseparatecategoriesifyouwishforthemtobebrokendownonthecheckstub(regularhours,OThours,vacation,sick,holiday).

Receivingpayroll:

Thepayrollpackagewillbedeliveredtoyouroffice(orotherlocationifspecified)viacourier.Uponreceipt,youshouldreviewthecheckstubsorreportstomakesureeverythingisaccurate.Thecheckstubsshouldthenbegiventotheemployeesonpaydayfortheirrecords.Itisalsorecommendedthatyoumakecopiesandretainthemforyourrecords.

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Alternatively,youcanelecttoreceiveyourpayrollrecordselectronicallythroughourclientportal.Inthiscase,eachemployeewillhavetheirowndedicatedportallog-inwheretheywillaccesstheirpaystubs.

PayrollTaxLiabilites:

Thepayrolltaxesthatyouareresponsibleforpayingwillbecalculatedandsubmittedelectronicallybyourofficeonyourbehalf.Eachpayrollyouwillreceiveacoverletterthatdetailsthetotalnetpayroll,totalFederaltaxesdueandtotalStatetaxesdue.

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INSURANCECOVERAGEGUIDELINES

Therearecertainrisksthatcomealongwiththeroleofbusinessowner.Itisimportantthatyouhavetheproperinsurancepoliciesinplacetodealwiththoserisks.RequiredPoliciesinCAMalpractice:Malpracticeinsuranceprotectsyouagainstliabilityrelatedtoyourprofessionalworkonpatients.Malpracticeinsurancepremiumsaredeductible.Worker’sCompensation:Ifyouhaveemployees,thenyouarerequiredtocarryworker’scompensationinsurance.Worker’scompinsurancecoverspotentiallostwagesofyouremployeesduetoinjuriesincurredwhileonthejob.Asanowner,worker’scompinsurancehelpsmitigateyourrisksassociatedwithemployeesthatarehurtonthejob.Worker’scompinsurancepremiumsaretaxdeductible.RecommendedPoliciesGeneralBusinessLiabilityInsurance:Protectsagainstawidevarietyofbusinessrisks–includingbutnotlimitedtorisksassociatedwithsomeonegettinghurtonyourbusinessproperty,anddamagescausedtoyourbusinesspropertybyyouand/oranemployee.GeneralBusinessLiabilityInsurancepremiumsaredeductible.EmploymentPracticesLiabilityInsurance:Employmentpracticesliabilityinsuranceprotectspotentialsuitsbroughtforthbystaffmembers,suchaswrongfultermination,discrimination,andsexualharassment.Employmentpracticesliabilitypremiumsaredeductible.DisabilityIncomeInsurance:Disabilityincomeinsurancecoversabusinessowner’slostincomeshouldheorshebecomedisabled.Thenatureofdentistryissuchthatinjuriesthatmayberelativelyminorinthegrandschemeoflifecanbedebilitatingtotheabilitytopracticedentistry.Mostdentistscarryhighbalancesofstudentloandebt,anddonothavethesameearningpoweroutsidetheprofessionofdentistry.Therefore,itisimportanttocarryinsurancetopreventapotentialdisabilityfromleadingtoseverefinancialhardship.Disabilityincomeinsurancepremiumsarenotdeductible.Ontheflipside,ifclaimsareeverpaidonthepolicy,theclaimsarenottaxable.OtherPotentialPoliciesBusinessUmbrellapolicy:Anumbrellapolicycoversliabilitiesthatareinexcessofthecoverageprovidedbyyourotherprofessionalpolicies.Dependingonyourpoliciesandyourrisks,itmaymakesensetohaveanumbrellapolicy.Umbrellapolicypremiumsaredeductible.Ownerhealthinsurance:Ifyouarenotcoveredforhealthinsurancethroughaspouse,thenyouwilldefinitelywanttoacquireyourownhealthinsurance.Whileitisnotdeductibleasabusinessexpensesperse,asabusinessowneryouareallowedtodeductyourhealthinsurancepremiumsonyourtaxreturn.StaffHealthinsurance:Differentofficesprovidevaryinglevelsofstaffhealthinsurance,rangingfromzerocoverage,tofullcoverageforallstaff.Payingemployeehealthinsuranceisanaddedcost,butit

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canhelpimprovestaffmoralandloyalty,andservetoattractbettertalentwhenlookingfornewhires.Whilethereisnorequirementtocoverstaffhealthinsurance,ifyouaregoingtocoveranystafftherearecertainnon-discriminationrulesyoumustabideby.AnystaffcoverageshouldbediscussedwithbothyourTiret&Co.advisorandwithyourhealthinsurancebroker.Coveringstaffinsurancecanalsopotentiallydecreaseyourownhealthpremiumsthroughgroupplanrates.Premiumsforstaffhealthinsurancearedeductible.DisabilityOverheadInsurance:Disabilityoverheadinsurancecoverstheoverheadofyourofficeinthecaseofashorttermdisability.Dependingonyoursituation,thispolicymayormaynotmakesenseforyou.ItshouldbediscussedwithbothyourTiret&Co.advisorandwithyourinsurancebroker.Disabilityoverheadinsurancepremiumsaredeductible.LifeInsurance:Coverstherisksassociatedwithanearlydeath.Anybankwillrequirealifeinsurancepolicyaspartofapracticepurchaseloan.Dependingonyourfinancialandfamilysituation,itmaymakesensetohaveadditionallifeinsurancecoverage.Therearetwotypesoflifeinsurancepolicies.Terminsuranceisapolicythatlastforacertainnumberofyearsandthenexpires.Itcarriesnovestinginvestmentfeature.Wholelifeinsurancelastsuntildeath,wheneveritmaybe.Premiumsarefarmoreexpensivethanterminsurancepremiums,thoughthereisavestinginvestmentthatispartofthepolicy.DiscusswhichtypeofpolicyandhowmuchcoverageisrecommendedwithyourTiret&Co.advisor.Lifeinsurancepremiumsarenotdeductible.Tiret&Co.CPAsdoesnotsellanyinsuranceproducts.Wehavepositionedourselvesthiswaysothatwecanprovideindependentadvicewhenitcomestowhichinsuranceproductsyoushouldhaveinplace.Wedohaveastrongnetworkoftrustedbrokersthatwehavemetoverthecourseofourmanyyearsinbusinesstowhomwecanreferyouforyourvariousinsuranceneeds.

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INTERNALCONTROLPROCEDURES

1) PrintandreviewDaysheetReportandDepositReportattheendofeveryworkday.

2) Makebankdepositsdaily(includingcashreceipts),makingsurethatdeposittiestodaysheetreceipts.Ifyourbankarrangementdoesnotallowforcashdeposits,youshouldkeepthecashyourselfandissueapersonalchecktothecompanyfortheamountofcashsothatadepositintothebusinessaccountcanbemadeforthatcash.

3) Completedailydepositspreadsheet,makingsuredailydepositamounttiestothepostedcollectionsforthatday.

4) Stampchecksreceivedas“ForDepositOnly.”

5) Donotallowanyfeeadjustmentswithoutownerauthorization.

6) Reviewfeeadjustmentsoccasionally(asoftenasdaily,ifyoulike)toconfirmthatnounauthorizedadjustmentshavebeenentered.

7) Reviewbankstatement,checkregisterandclearedcheckstoconfirmthatnounauthorizedchecksorbankdebitsareclearingthebank.

8) ReviewMonthlymerchantcreditcarddepositsummarytoconfirmthattherearenounauthorizedchargebacks.

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INDEPENDENTCONTRACTOROREMPLOYEE?

Asabusinessowneryouwillemploytheuseofbothemployeesandindependentcontractors.TherearestiffIRSpenaltiesforerroneouslyclassifyingsomeonewhoisyouremployeeasanindependentcontractor,soitisimportanttomakethecorrectclassification.Therearenohardandfastrulestodefineonefromtheother,buttherearesomeguidelinestobeappliedtothefactsandcircumstancesofeachcase.FromtheIRSwebsite,herearesomeoftheguidingfactorsthatarelookedat:

CommonLawRulesFactsthatprovideevidenceofthedegreeofcontrolandindependencefallintothreecategories:1. Behavioral:Doesthecompanycontrolorhavetherighttocontrolwhattheworkerdoesandhow

theworkerdoeshisorherjob?2. Financial:Arethebusinessaspectsoftheworker’sjobcontrolledbythepayer?(theseincludethings

likehowworkerispaid,whetherexpensesarereimbursed,whoprovidestools/supplies,etc.)3. TypeofRelationship:Aretherewrittencontractsoremployeetypebenefits(i.e.pensionplan,

insurance,vacationpay,etc.)?Willtherelationshipcontinueandistheworkperformedakeyaspectofthebusiness?

Businessesmustweighallthesefactorswhendeterminingwhetheraworkerisanemployeeorindependentcontractor.Somefactorsmayindicatethattheworkerisanemployee,whileotherfactorsindicatethattheworkerisanindependentcontractor.Thereisno“magic”orsetnumberoffactorsthat“makes”theworkeranemployeeoranindependentcontractor,andnoonefactorstandsaloneinmakingthisdetermination.Also,factorswhicharerelevantinonesituationmaynotberelevantinanother.

Thekeysaretolookattheentirerelationship,considerthedegreeorextentoftherighttodirectandcontrol,andfinally,todocumenteachofthefactorsusedincomingupwiththedetermination.

Thereareacoupleofthingstonoteaboutthefieldofdentistryinparticular.Hygienists,inaccordancewithcaselaw,mustalwaysbeclassifiedasemployees.Asforassociatedentists,itismoreofafactsandcircumstancesanalysisofeachsituation.Iftheassociatedoeshisorherownbillingandorscheduling,thatissupportiveoftheirclassificationasanindependentcontractor.Also,ifheorsheworksatmultipleofficesitissupportiveofanindependentcontractorrelationship.Conversely,ifyouhavestrongcontrolovertheassociate’shours,scheduling,andbilling,andthatassociateonlyworksatyouroffice,theIRSwouldclassifythatpersonasanemployee.Withassociates,onewaytoworkaroundthevagariesoftheindependentcontractorvsemployeeissueistorequireyourassociatestoincorporate.Onceincorporated,thereisnoriskfactortoyouclassifyingtherelationshipastheircorporationcontractingforyou.

Asnotedabove,thisisgenerallyafactsandcircumstancessituation.Ifyouareunsureoftheproperclassificationofaworkrelationshipinyourofficedon’thesitatetoseekguidancefromthepartnerthatyouareworkingwithatTiret&Co.CPAs.

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EMPLOYEEHANDBOOK

BeinganemployerinthestateofCaliforniacanbeaminefieldofHRlaws,andpotentialemploymentdisputesandlawsuits.Withinthisenvironment,itisveryimportanttohaveanuptodateemployeehandbook.Thishandbookisusefulfortwomainreasons.One,itprovidesyouremployeeswithclearguidanceontherulesandregulationsoftheirworkenvironment.Andtwo,itcanserveasalayerofliabilityprotectioninthecaseofanydisputesthatshouldarisewithyourstaff.TiretandCo.willnotcreateyouremployeehandbookforyou,butwedohaveseveralreferralsourcesthatcanhelpyoucreateyouremployeehandbook.

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RECORDRETENTION

TaxRecords:TheIRScanauditareturnupto3yearsfromthelaterofthedateitisfiled,ortheduedateofthereturn(includingextensions).TheCAauditperiodis4years.Werecommendkeepingtaxrecordsforfiveyearstobesuretocoveryourbasesonpotentialaudits.

Additionalnotesonrecordretention:-Ifincomeisunderstatedonyourreturnby25%ormore,thentheIRSstatuteoflimitationsisexpandedfrom3yearsto6years.-Ifnoreturnisfiled,orafraudulentorfalsereturnisfiled,thenthereisnostatuteoflimitationsonthatyear.

-Aslongasyouhavecapitallosscarryforwards,thestatuteoflimitationsrelativetothatcapitallosscarriesforwarduntil3yearsfromthetimethecapitallossisusedonthereturn.Forthisreason,werecommendkeepingcapitaltransactionrecordsindefinitely,aslongasyouhaveacapitallosscarryover.

-Whilewerecommendthatyousavetaxreturnsandtaxdocumentsforatleast5years,alsonotethatyourreturnsandworkpaperswillbesavedinourpaperlessstoragesystemindefinitely.

AccountingDocuments&Receipts:Ifaudited,itiswithintheIRSrightstoaskforabill,invoice,and/orreceipttosupportadeductedtransaction.Werecommendkeepingallinvoicesandbillsrelatedtoaccountingandtaxrecordsfor5years.Thesedocumentsneednotbeheldinpaperformthough.Ifyouwanttoscanthedocumentsortakepicturesofthem,thosedigitalrecordswillbesufficientforIRSauditpurposes.Someadditionalnotesonreceipts:Formanytransactions,simplyseeingthelineitemdescriptionoftheexpenseonthecheck,bankstatement,orcreditcardstatementissufficienttosupportthetransaction.Forexpensesatmerchantswhichcouldeitherbebusinessand/orpersonalinnature,suchasgrocerystores,drug-stores,andgeneralstores(suchasTargetorCostco),anauditormaywanttoseeanactualreceiptofthetransactiontoseetheindividualitemsofthepurchaseandjudgeeachofthemastotheirbusinesspurpose.Unfortunately,thesereceiptsgeneralfadetoillegibilitywithinamatterofmonths.Assuch,asavedreceiptlosessomevalueforauditpurposes.Tocombatthis,werecommendeitherhavingreceiptsemailedtoyouifpossibleortakingpicturesofreceipts.Ifyoulike,youcantakeanextrastepandattachthosepicturestotheirrelatedtransactioninQuickBooksOnline.Withoutthesereceipts,uponaudittheIRScouldattempttodisallowalloraportionoftheexpenses.

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AdditionalNotesonMealsandEntertainmentExpenses:TheIRSwouldverymuchliketoseecontemporaneousnotesonbusinessmealsandentertainmentexpensesindicatingwhothebusinessassociatewasandhowtheexpensewasbusinessrelated.Inourexperience,thiscanbedifficulttorecreateyearsafterthefact.Assuch,werecommendkeepingnotesonbusinessrelatedmealsandentertainmentexpenses.Therearetwomainwayswerecommenddoingso.Thefirstway,wouldbetogointoyourQuickBooksOnlineaccountandwritethosenotesintothememosectionoftherelativetransaction.Thesecondwaywouldbetoaddnotestothelistofmealsandentertainmentthataresenttoyoueachmonthfromyourdedicatedstaffaccountantwhenyouindicatewhichofthemealsarestaffrelatedandwhicharenon-staffrelated.