It’s almost Halloween so it’s time to share our scariest accounting and tax stories...better have a blanket ready to pull over your eyes, because we have some terrifying tales to tell.
What is scarier than paying more tax than is required? We often find that business owners who DIY the accounting in QuickBooks Online, don’t understand how the bank feed really works. So, they end up recording revenue transactions TWICE!
Coupled with the fact that they don’t reconcile nor do they know how reconciling is different from recording the bank feed, these duplicate transactions go unnoticed until (1) they have cash flow problems or (2) they are being served up a blood-curdling tax bill.
Nothing is more frightening than seeing a set of accounting records prepared in Excel.
Maybe it’s the formula errors, inability to reconcile, or ugly financial reports...any way you slice it, Excel just isn’t an accounting system. It’s ok to conform and jump on the QuickBooks bandwagon.
If you are saying to yourself, “yeah, but I have tried that before and I don’t know how to use the program” then maybe you shouldn’t be doing the accounting to begin with. Hire someone to help so you can avoid getting ghosted by your accountant (and trust me, if that happens, you are the problem client).
Ask any CPA about clients with payroll tax issues and the response will be the same…"Oh, no! Those are the worst problems!"
Payroll tax issues are notoriously difficult and time consuming to help a client to resolve. Not to mention, clients usually don’t have the money to pay the taxes or the steep penalties associated with untimely remittance or late filings. The IRS is super aggressive when it comes to collections on unpaid payroll tax issues because part of the money belongs to the employee.
Yeah, that’s right. When an employer runs payroll, the income tax and employee portion of social security and Medicare withholdings from their paychecks are essentially held in trust by the employer and are supposed to be sent to the IRS. When a company doesn’t do this, it’s basically stealing the employees’ money…and the IRS can prosecute officers of the company both civilly and criminally if they don’t follow the rules. We’ve seen it all — liens, IRS agents showing up at people’s houses, businesses that go under — all because the owner didn’t understand their responsibilities when it came to payroll.
*If you get an IRS notice, don’t ignore it. It’s not going to go away on its own.
It’s risky to operate a business. It’s even riskier when you are operating as a sole proprietor. Without an entity, you are potentially opening up your personal assets to risk as you don’t have the legal liability protection that an entity provides. This doesn’t mean run to LegalZoom and sign-up. These discount online services cannot replace the advice and counsel provided by a qualified attorney combined with the tax advice provided by a CPA. Hire competent professionals so you know you and your family are protected.
Bonus fright – most sole proprietors fail to leverage all aspects of the tax code, including the possibility to minimize self-employment taxes.
The F WordNothing will send chills up a business owner’s spine like suspected FRAUD especially if it’s been going on for a while. If you have solid accounting policies, procedures, controls and regimented monitoring, you’ll rest easy knowing the F word isn’t something that will bring you down, it’s going to be detected and stopped. We regularly identify and report suspicious transactions to business owners — things like using the company card for personal purchases, forged checks or even payroll bonuses.
For our attorney friends, we feel your pain when it comes to IOLTA accounts. These special trust accounts are specific to attorneys who are considered to be fiduciaries of a client’s money, until it is earned by way of fees or disbursed to the client or for case-related costs. The accounting is difficult and most bookkeepers screw it up — royally.
The thing is, if it’s done wrong and the State Bar is alerted, your license is on the line. All attorneys should run immediately to their QuickBooks file and pull a balance sheet — if the IOLTA cash balances don’t agree to the Client Trust Liability, chances are pretty good that you are looking at a grueling clean-up project.
Our horrifying tales could go on and on….
…seems like a never-ending list of avoidable and costly errors that usually cause unnecessary fear and panic.
Give us a call or contact us here if you are scared about your accounting or taxes and we’ll make sure your Halloween isn’t too spooky.
Tags: Taxes Accounting
© 2022 All Rights Reserved The MB Group , LLC