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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.