News & Tech Tips

FAQs about QuickBooks

Almost 40 years after its launch, QuickBooks® remains the leading accounting software program for small and medium-sized businesses. If you decide to use QuickBooks for your bookkeeping needs, you may have questions about implementation and using it to run your operations. Here are answers to some basic frequently asked questions (FAQs) to help you get started.

What is QuickBooks?

It’s a robust accounting software that businesses can use to manage their accounting. Businesses use QuickBooks for many critical accounting tasks, such as recording expenses, creating invoices, tracking sales, producing reports, administering payroll and maximizing tax deductions.

Is QuickBooks easy to use?

Even for those unfamiliar with accounting software, QuickBooks is easy to use. It includes step-by-step instructions to help users begin using the software and guidance to help get the most out of it.

Setup time varies depending on your organization’s size, complexity and maturity. However, once setup is completed, QuickBooks may offer a scalable solution that can streamline your accounting processes and support your business at every stage of its development.

Are there different versions of QuickBooks?

There are versions for new businesses, established small and medium-sized businesses, and freelancers. QuickBooks also provides dedicated solutions for certain industry niches, including churches, construction, legal, nonprofits, restaurants and retail.

How do I access QuickBooks?

It’s available online or by purchasing off-the-shelf desktop software. The online version requires a minimal monthly fee, whereas the desktop version involves a larger annual fee. There’s also a mobile app that’s available for both iOS and Android devices.

Does QuickBooks provide user support?

QuickBooks’ website offers customer support. Users can find answers to common questions and troubleshoot problems with an advisor on the site. There are also online tutorials and user guides. If you’re unable to find answers on the website, however, we can provide answers — or arrange an in-depth training session for your staff.

Can my accountant help me use QuickBooks?

This software isn’t a substitute for your CPA, rather it can facilitate the working relationship between in-house and external accountants. With QuickBooks, we’ll have direct online access to your organization’s books. Plus, we can send requests for information and documents through the platform. Contact us with any additional questions you have about QuickBooks and other accounting software solutions.

What happened to the international convergence project?

For years, there was talk of converging U.S. Generally Accepted Accounting Principles (GAAP) with the International Financial Reporting Standards (IFRS). While the formal convergence project lost steam about a decade ago, Financial Accounting Standards Board (FASB) Chair Richard Jones assured stakeholders at a recent Financial Accounting Foundation meeting that convergence discussions are still regularly taking place behind the scenes.

Working together

Multinational companies have routinely asked for converged solutions for U.S. and international accounting rules. They often complain that it’s expensive to implement two sets of rules. Plus, it’s difficult to compare companies that follow different accounting standards, and convergence would improve comparability globally. The FASB’s website says, “More comparable standards have the potential to reduce costs for both users and preparers of financial statements and make worldwide capital markets more efficient.”

Most countries around the world, including member states of the European Union, have adopted IFRS. And they’ve been increasingly pressuring U.S. accounting regulators to use global accounting standards.

In 2007, the Securities and Exchange Commission (SEC) allowed foreign companies to report under IFRS without reconciliation to U.S. GAAP. A year later, the SEC floated the idea of adopting IFRS as the primary financial reporting regime for U.S. companies. Then the financial crisis hit, and U.S. interest in IFRS waned.

In 2012, the SEC released a much-awaited report on IFRS in the United States. However, the report described the challenges of adopting IFRS, rather than making recommendations on whether international accounting standards should be used for domestic companies.

Current projects

A decade later, informal meetings continue between U.S. and international accounting rulemaking bodies. FASB Chair Jones and his counterpart on the International Accounting Standards Board (IASB) meet quarterly to discuss ways to improve the quality of accounting standards used around the world and reduce differences among those standards.

Jones provided two specific examples of convergence projects currently in the works: rate regulation and government grants. The IASB proposed Exposure Draft No. 2021-1, Regulatory Assets and Regulatory Liabilities, last year to replace International Financial Reporting Standard (IFRS) 14, Regulatory Deferral Accounts. Meanwhile, the FASB published Invitation-to-Comment (ITC) No. 2022-002, Accounting for Government Grants by Business Entities: Potential Incorporation of IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, into Generally Accepted Accounting Principles, in June 2022. The FASB is currently considering comment letters it received on the ITC.

Minimizing differences, maximizing value

While there might never be a one-size-fits-all global financial reporting solution, many businesses operate in more than one country. So, it’s beneficial for the standard-setting bodies to align the rules as much as possible. Doing so improves comparability and lowers compliance costs. Contact us for help implementing the appropriate standards based on where you do business.

Save for retirement by getting the most out of your 401(k) plan

Socking away money in a tax-advantaged retirement plan can help you reduce taxes and help secure a comfortable retirement. If your employer offers a 401(k) or Roth 401(k), contributing to the plan is a smart way to build a substantial nest egg.

If you’re not already contributing the maximum allowed, consider increasing your contribution. Because of tax-deferred compounding (tax-free in the case of Roth accounts), boosting contributions can have a major impact on the amount of money you’ll have in retirement.

With a 401(k), an employee makes an election to have a certain amount of pay deferred and contributed by an employer on his or her behalf to the plan. The amounts are indexed for inflation each year and not surprisingly, they’re going up quite a bit. The contribution limit in 2023 is $22,500 (up from $20,500 in 2022). Employees age 50 or older by year end are also permitted to make additional “catch-up” contributions of $7,500 in 2023 (up from $6,500 in 2022). This means those 50 and older can save a total of $30,000 in 2023 (up from $27,000 in 2022).

Contributing to a traditional 401(k)

A traditional 401(k) offers many benefits, including:

  • Contributions are pretax, reducing your modified adjusted gross income (MAGI), which can also help you reduce or avoid exposure to the 3.8% net investment income tax.
  • Plan assets can grow tax-deferred — meaning you pay no income tax until you take distributions.
  • Your employer may match some or all of your contributions pretax.

If you already have a 401(k) plan, take a look at your contributions. In 2023, you may want to try and increase your contribution rate to get as close to the $22,500 limit (with an extra $7,500 if you’re age 50 or older) as you can afford. Keep in mind that your paycheck will be reduced by the amount of the contribution only, because the contributions are pretax — so, income tax isn’t withheld.

Contributing to a Roth 401(k)

Employers may also include a Roth option in their 401(k) plans. If your employer offers this, you can designate some or all of your contributions as Roth contributions. While such amounts don’t reduce your current MAGI, qualified distributions will be tax-free.

Roth 401(k) contributions may be especially beneficial for higher-income earners, because they don’t have the option to contribute to a Roth IRA. That’s because your ability to make a Roth IRA contribution is reduced or eliminated if your adjusted gross income exceeds certain amounts.

Looking ahead

Contact us if you have questions about how much to contribute or the best mix between traditional and Roth 401(k) contributions. We can also discuss other tax and retirement-saving strategies in your situation.

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Pick the right accounting method for your business

Timely, accurate financial information is essential to running a successful business. There are a number of accounting methods you can use to record and track your business’s financial performance. Here’s an overview of cash, tax and accrual basis accounting to help you choose a method that’s appropriate for your situation.

Cash basis

Often startups and sole proprietorships default to the cash method of accounting because it’s simple and provides an immediate picture of available funds. This may suffice for small businesses with uncomplicated financial affairs.

Under cash-basis accounting, you record transactions only when money changes hands. While this record keeping is easy, it can be challenging to get an accurate picture of your business’s financial situation. This method also isn’t suitable for tax purposes.

Telltale signs that a company is using cash-basis accounting can be found on the balance sheet: The company won’t report any accrual-basis items, such as accounts receivable, prepaid assets, accounts payable or deferred expenses.

Tax basis

Another financial reporting option is to use the same accounting method for book and tax purposes. Under tax-basis accounting, you only record transactions when they relate to tax.

This method can be helpful for companies that want to minimize their tax liability. It can also be beneficial if your business doesn’t have complex financial affairs and you don’t need up-to-date information about your financial situation.

Accrual basis

As your business grows and has more sophisticated financial reporting needs, you may decide to transition to the accrual method of accounting. Businesses that issue financial statements under U.S. Generally Accepted Accounting Principles (GAAP) must use accrual-basis accounting. GAAP is considered by many to be the “gold standard” in financial reporting. Most lenders and investors prefer statements prepared using this method because it’s the most reliable for long-term financial planning and decision-making purposes.

Under accrual-basis accounting, revenue is recognized when earned (regardless of when it’s received), and expenses are recognized when incurred (not necessarily when they’re paid). This methodology matches revenue to the corresponding expenses in the proper period. Compared to the cash and tax methods, the accrual method helps you more accurately evaluate growth and profit margins over time and against competitors.

Using the accrual method also can help you manage cash flow. For example, with more timely financial data, you can negotiate payment terms with suppliers, plan for significant expenses and forecast future cash needs.

What’s right for your business?

Choosing the right accounting method for your business depends on your financial needs and accounting skills. Some businesses use a hybrid approach incorporating elements from two or more methods. The method you’ve used in the past may not be appropriate for your current situation. Contact us to help you find the optimal approach.

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Do you qualify for the QBI deduction? And can you do anything by year-end to help qualify?

If you own a business, you may wonder if you’re eligible to take the qualified business income (QBI) deduction. Sometimes this is referred to as the pass-through deduction or the Section 199A deduction.

The QBI deduction is:

  • Available to owners of sole proprietorships, single member limited liability companies (LLCs), partnerships, and S corporations, as well as trusts and estates.
  • Intended to reduce the tax rate on QBI to a rate that’s closer to the corporate tax rate.
  • Taken “below the line.” In other words, it reduces your taxable income but not your adjusted gross income.
  • Available regardless of whether you itemize deductions or take the standard deduction.

Taxpayers other than corporations may be entitled to a deduction of up to 20% of their QBI. For 2022, if taxable income exceeds $170,050 for single taxpayers, or $340,100 for a married couple filing jointly, the QBI deduction may be limited based on different scenarios. For 2023, these amounts are $182,100 and $364,200, respectively.

The situations in which the QBI deduction may be limited include whether the taxpayer is engaged in a service-type of trade or business (such as law, accounting, health or consulting), the amount of W-2 wages paid by the trade or business, and/or the unadjusted basis of qualified property (such as machinery and equipment) held by the trade or business. The limitations are phased in.

Year-end planning tip

Some taxpayers may be able to achieve significant savings with respect to this deduction (or be subject to a smaller phaseout of the deduction), by deferring income or accelerating deductions at year-end so that they come under the dollar thresholds for 2022. Depending on your business model, you also may be able to increase the deduction by increasing W-2 wages before year-end. The rules are quite complex, so contact us with questions and consult with us before taking the next steps.

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