Tag Archives: small business owner

QuickBooks Software

QBO Tags Will No Longer Be Supported — And The Change Hits During Tax Season

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Did everyone get the memo? QuickBooks Online will no longer support tags, and they’re making the change one week before the S-Corp and Partnership tax deadline.

While I appreciate the need for this kind of decision, I encourage Intuit to reconsider the timing of big changes so that they come between May and November. It’s not just tax pros that struggle with “busy season”… it’s also bookkeepers and CAS practices that have to tie out the annual financial statements in QBO to effectively hand off the books to tax pros — which y’all know is my passion when teaching and in our ‘Ask a CPA’ subscription.

As for the specifics — they are adding an additional custom field to most plans and are creating a tool to facilitate the migration from tags to this new custom field.


More from the announcement here —

What action do I need to take?
In February 2025, you and your clients will have the option to migrate all tags to a custom field. Watch for an email from the QuickBooks team in the first week of February. You and your clients will get access to a tool to facilitate the migration. However, you can also input the values, e.g. tags, into the custom field by hand or not transfer the tags at all, if you prefer. Additionally, be sure to download any tags reports so you have them for your records.

What deadlines should I be aware of if my clients are currently using Tags?
– Week of February 3, 2025 – Both you and your clients will receive an email notification. It will include a link to a tags → custom field migration tool and a how-to FAQ.
– March 8 – April 30, 2025 – You and your clients will have read-only access to existing tags, whereby you can view and generate reports for tagged transactions for your records.
– All Tags UI will be removed after May 1, 2025. You will no longer be able to run reports for tagged transactions.

A lot of people got really mad on social media when I posted about this, saying that it was a really useful feature and skewering Intuit for taking it away… but in reality, from a corporate standpoint, anyway — not enough folks are using it, partially because it’s underdeveloped and kind of buggy, and the reporting usage isn’t robust. As my friend Margie Remmers-Davis said, “either flesh this feature out or let it go”. So, personally — I’m actually on-board with it. EXCEPT for the lousy timing. Increasing the number of custom fields in the three lowest levels of subscription and creating a way to migrate from tags to the new custom field is a good way to facilitate this transition — but it’s going to take work to implement this, and we just don’t have time in Feb/March to make that happen. Beyond that, it’s been pointed out by other colleagues that changing reporting mid-year is really challenging, and that this should have been timed to coincide with next January 1st.

The always-amazing Alicia Katz-Pollock had this to say about it in the QB Power Users Community:

The rest of the comments on this particular post are truly worth reading, in my opinion, as you can get some good insight as to how the folks who do depend on tags are using them — for example, Dena Martin and Megan Tarnow talked about why they use them for event-tracking for non-profits, so they don’t muck up the financial statements — and what workarounds they’re considering. Custom fields are not likely to handle this well. Projects may, but that’s a lot of work to set up and maintain.

There are also folks who are going to be severely limited by the fact that only one custom field is being added. Comparatively, QBO Essentials allotted unlimited tags and 40 tag groups. The new arrangement takes it down to only four custom fields. Several clients are going to be forced to a Plus subscription to use classes — or in some cases, come up with an external workaround. It was pointed out that QBO Advanced clients who are already using classes for other purposes and were using Tags as well are out of luck if using Projects won’t solve the issue. Each client is different, so if you’re a bookkeeper or accountant with clients in this situation, please hit that Feedback button in QBOA and let them know your concerns. And if you aren’t already following the thread I mentioned above on Facebook… it’s definitely worth your time.

Ah, QuickBooks — you giveth and you taketh away. Merry Christmas and Happy Hanukkah!

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

QuickBooks Software, Software, Tips

Why Am I Getting So Many Emails About QuickBooks PCI Compliance?

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Upset and disappointed businesswoman working in modern office

There’s been a ton of confusion lately among QuickBooks Online users due to a series of emails from Intuit about the importance of PCI compliance (that part’s true, it is important), which they follow up with a plug to encourage you work with their “partner,” SecurityMetrics. Problem is, they are surprisingly quiet about the fact that QB Payments… is already PCI compliant.

From Intuit:
It’s important to note that QuickBooks applications themselves maintain a high level of security. However, the security of your overall environment can be influenced by other applications used in conjunction with QuickBooks. As for the use of QuickBooks Payments services, it’s essential to understand that merely utilizing these services does not automatically make you PCI compliant. It’s also crucial to recognize that as a merchant, you hold the responsibility of safeguarding payment card information and adhering to PCI compliance requirements.

Short answer — chances are that you don’t need to pay their “partner” (aka Intuit is likely receiving referral fees) to confirm that you and your clients are probably already PCI compliant if you’re using QB Payments. But that doesn’t mean you shouldn’t review your workflows and integrations with other software to see if there’s a step in your process that doesn’t comply.

Here’s what my amazing colleague, the QB Rockstar herself, Alicia Katz-Pollock, had to say about it on facebook:

You know those emails Intuit is sending about PCI Compliance? QB Payments is already compliant. At issue is how you’re gathering those credit card numbers and bank account data.

If you’re using a workflow where the client enters the info, you’re fine. If you’re talking to the customer and manually entering it into QBO, you’re fine, though you also need to be on an isolated computer, not on a network, if you’re typing in the info.

But if you’re still using those old forms QBO used to provide, or have the information written down, or are saving it in your computer system, you’re NOT fine.

You do NOT need to hire the service in the email and pay $150/year. All you have to do is self-assess, and change your procedures if you’re out of compliance.

Here is the official document!
https://listings.pcisecuritystandards.org/documents/SAQ-InstrGuidelines-v3_2.pdf

A follow-up question she received:

Q: For old clients who completed an agreement years ago with those old QBO forms, how do you move to compliance for those? Just delete and get rid of their old forms?
A: Yes, delete any forms you have saved (and empty your trash)!

(Side note: Alicia’s company Royalwise is my #1 go-to for technical training in QuickBooks, whether for small business owners or bookkeepers, and I’ll be doing a class for her later this year! Here’s my affiliate link for her catalog — check it out.)

Another good friend in the QuickBooks world, Dan DeLong, of School of Bookkeeping (yes, that’s another affiliate link), wrote up a blog post where you’ll discover:

  • Why you receive PCI compliance emails from QuickBooks and what they mean for your business.
  • Steps to complete the Self-Assessment Questionnaire and ensure full compliance.
  • How to review and improve your credit card handling practices.
  • The costs involved with PCI services from SecurityMetrics.
  • Resources like the Small Business Guide to Safe Payments to further guide you.

Check out Dan’s blog post here — https://www.schoolofbookkeeping.com/blog/pci-compliance-quickbooks-guide.

I’m recommending that you take a look at what these two leaders in our field have to say about PCI Compliance because I trust the heck out of them (not because I have affiliate links; in fact, the reason I requested affiliate links is due to the confidence I have in them both).

As much as I adore QuickBooks Online and can say so much good about it — in fact, we base our entire firm’s work on using QBO as an accounting platform — it’s important to remember that its parent company Intuit is a for-profit, publicly-traded company. They’ve built an incredible product, but their end goal is to increase shareholder wealth… so please take what they say with a grain of salt and do some research before plunking down additional dollars. Small businesses need to be careful to watch their budgets!

And I’ll end with another heads-up, which is that earlier this year there was in fact a phishing scam going around called “PCI DSS Compliance Verification” with the QuickBooks logo on it, that encouraged users to “verify compliance now” by clicking on a button. This was *not* an authorized email from Intuit. As always, you have to be careful whenever you’re encouraged to click on any button or link — whether it turns out to be phishing… or just misleading.

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

Education, Site News

‘Ask A CPA’ Subscription Launch Summer 2024

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Selfie of Nancy presenting "The Tax-Ready Bookkeeper" at Scaling New Heights to a large crowd.

✨ Y’all –> I did a BIG THING!

https://www.thedancingaccountant.com/ask-a-cpa-signup/

✍️ Some of you may know that I’ve been writing this award-winning blog for 10 years now. Not monetized — just a labor of love that started out as a way to store articles for myself in an easy-to-search format. But during the pandemic its popularity exploded… not just for small business owners, but for the bookkeepers and accountants that keep them going. (If you didn’t already know my biggest passion is supporting small businesses & the communities that they help thrive and keep vital and colorful, then you must be new here.)

🔢 And I realized — when I help a small business, I help ONE of the key players in keeping local economies healthy. When I help a bookkeeper, I help a multiple of small business owners. When I help many bookkeepers… you can see where this is going…

🐣 Last year I decided that I wanted to focus my efforts on helping bookkeepers and tax pros learn to collaborate, and that the best way to start would be to offer a judgement-free space for bookkeepers to ask ANY QUESTIONS THEY WANT that for whatever reason they can’t ask their clients’ tax preparers (or, if in a firm, they don’t feel comfortable asking the tax department). And thus was born…

🏫 ASK A CPA! A member community designed to provide education, support, and resources for bookkeepers to better serve their clients — by preparing tax-ready books, improving relationships and building knowledge and systems that ultimately help small business owners and their communities.

❤️ We’re starting small, intentionally, and as such we’ll be capping our founding member group at only 50 people — there are only 9 spots left as of August 10th! Get in here and help us create the community you want to see in our industry. (Or feel free to just sign up for our updates if you want to have FOMO like all the time, that’s cool, too.)

https://www.thedancingaccountant.com/ask-a-cpa-signup/

COVID-19 Financial Relief, Education, IRS

Don’t Believe The Hype: IRS Provides Update on Employee Retention Credit (ERC) Processing

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Thanks yet again, and as always, to Lisa Simpson from the AICPA Town Hall for her regular updates on what’s going on with Employee Retention Credit processing at the IRS. I can trust this team to make sure I’m getting the latest information, free from rumors and gossip, and that I’m able to both quell my clients’ concerns and also manage their expectations.

I had just been hearing some rumblings in one of my professional associations — someone had said, “seems inevitable that anyone who filed an ERC claim after September 2023 will need to file a lawsuit to get the claim paid,” and went on to suggest that it would be a great opportunity for a law firm, and wanted to know if we had referrals in this space.

First off, it made me nervous — our remaining ERC claims, all for deserving small business and non-profit clients of a colleague, worked really hard to make sure we had what we needed to submit their claims by January 31st, 2024, since there was pending legislation that might retroactively end the program after that date. They all were informed that it might be a year or more before they received the money, given the IRS moratorium — but certainly none of us expected to line the pockets of an attorney in order to get the claims paid out. And in fact, the claims were mostly small enough that my guess is most lawyers wouldn’t bother with them.

Secondly… it made me suspicious. On what basis was this guy saying a lawsuit would be “inevitable”? I attend every single AICPA Town Hall and hadn’t heard anyone suggest this. And what a sad thing to suggest it would be a “great opportunity” for a law firm — to specialize in making money off those desperate to finally receive what they and their accountants had already worked so hard to obtain.

As usual, I decided to quell those fears until the next AICPA Town Hall, and I’m so glad I did, as Lisa Simpson made ERC the first topic in her Technical Update. She explained the recent IRS news release that likely triggered the unfounded rumblings I was hearing, as well as referenced a new Journal of Accountancy article that delved deeper.

My takeaway was that: while 10-20% of claims are clearly fraudulent, and the IRS is in the process of denying them; and another 60-70% show an unacceptable level of risk and will be examined carefully — there are also between 10% and 20% of the claims show a low risk. The IRS “will begin judiciously processing” more of these claims, and, according to the release, expects some of these payments to be made later this summer.

To me, that’s all good news. It means they’re working through the piles and expediting the ones that have straightforward claims where the businesses played by the rules, processing the oldest ones first. The rest will be examined more critically, or in the case of blatant fraud, flat-out denied.

The one disappointing piece of information is that no claims submitted during the moratorium will be processed at this time. But at least we know the backlog is being cleared to make way for them. Since the moratorium was put in place, the IRS has received over 17,000 claims per week.

I’ve let my clients know that they shouldn’t budget for these dollars for at least another year, but that there’s no reason to presume they won’t eventually receive the claims that are due to them.

And yet again I learned that if something sounds sensational and suspicious… it might not be grounded in evidence and analysis. Rely only on your trusted advisors for the education and resources that will help you guide your small business clients. (And then provide links to those resources to the sensationalists who spread misinformation.)

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

Education, POS - Point of Sale, QuickBooks Software, Software, Tips

Make Next Year Better: Tips for Managing the Change from QB Desktop to Online

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Tax season is over. Take a deep breath – whether you’re a bookkeeper or tax preparer, you’ve endured plenty of stress these past months, and now you’re in the perfect space between vacation and conference season to look back and figure out how to make it go better next year.

That’s what we do in our firm, anyway; I learned an amazing lesson from one of my favorite instructors, Tom Gorczynski, to plan for next tax season while the pain is still fresh in your mind! We schedule a company-wide zoom meeting, and everyone fills out a survey beforehand that asks about what worked, what didn’t, what they’d like to see go differently, who their favorite and least-favorite clients are, and why. This helps us incrementally improve year-over-year, and makes sure everyone has a voice. Then we send out cocktail kits and snacks to everyone, we celebrate, and we brainstorm. We even vote clients “off the island” together.

One of the themes that comes up every year is the need to move more clients off QuickBooks Desktop and onto QuickBooks Online. I know, groan… yet another talking head telling you to make the shift! At this point you’ve been bombarded with information on all the benefits of moving to QBO, so I won’t bore you with those. I’ll just share my own experience.

It was becoming more and more of a drag to coordinate with Desktop clients to review their books, and the new subscription structure made it confusing and frustrating to know who was on which version and how to make the most of what they were paying for. And of course, there were constant client fears around Intuit’s messaging, worrying they were going to stop supporting their product. But the biggest stressor for us was that it was actually getting hard to find junior bookkeepers who had ever worked with the Desktop program. (No joke. How about that for making a certain dancing accountant feel old?)

I assure you, I absolutely *hated* QBO for years; it was a clunky beast that didn’t have some of the most basic functionality that Desktop did – and I’m not just talking about the early days; this went on far too long and alienated many users. And while I held out for ages in moving to QBO, especially for certain types of clients that really benefited from what QBDT had to offer, I finally realized that it’s gotten to the point where the features I love about the Online version far outweigh its negatives. Between the concerted effort that Ted Callahan, Jessica McCracken and their team have made to actually listen to our community and implement some of the most-loved features; the fact that most third-party apps and tools no longer work with Desktop; and the advent of RightTool, an amazing browser extension by industry superstar Hector Garcia that supercharges what QBO has to offer… it’s time. It’s really time. QBO is now light-years ahead of almost anything that QBDT can do.

The point of outlining all this isn’t to convince you that you should migrate your remaining Desktop clients to QBO. It’s to suggest that when you do – follow my lead, and use exactly these reasons in your messaging. This became our mantra for communicating the value of converting, and it worked; at this point we only have one client left who needs to make the shift.

Think about it: your clients and your team members trust you, more than anyone else, to make smart and thoughtful decisions with everyone’s well-being in mind. If you convey the messaging that QBO is listening to us and responding to our requests, that RightTool will make you more efficient, and third-party apps will serve your clients’ needs better than the previous solutions, they will believe you, you’ll get buy-in, and in our experience, we found that clients were overwhelmingly positive and enthusiastic (though understandably still nervous) about the change.

Once you’ve got buy-in, it’s a simple matter of following some practical tips and advice to make sure the execution is done well.

A diagram of a migration plan Description automatically generated
  1. Understand the Conversion Process
    Intuit came out with a free conversion tool a few years ago that they keep tweaking to make it better; the most recent improvements announced at last year’s QB Connect blew me away – you can now batch migrate clients, meaning “do a ton at once and be done with it”. To be honest, it kind of made me wish I had waited to convert some of ours! However, as straightforward as they make it to migrate data from QBD to QBO, you do have to ensure your QBDT file is ready for the transition. This means backing up, running a verification on the file, ensuring it’s under the maximum target limit, and cleaning up any weirdo issues that have been hiding or buried for years, especially if you don’t regularly do a verification and rebuild. And most importantly, reviewing your “all dates” financial statements beforehand, exporting them, and comparing the same reports afterwards is essential.
  2. Technical Resources for Conversion

I mentioned Intuit’s Conversion Tool, which guides you through the process step-by-step; they also have a QuickBooks Conversion Toolkit with checklists, webinar links, guides, client materials, and even a link to book a call to have Intuit do the conversion for you – just head here and then click on the “How to migrate” button to download the toolkit or set up a call. If you prefer your info from a third-party source, Hector Garcia does a short walkthrough on his YouTube channel, and Alicia Katz-Pollock is offering an Earmark webinar on May 21st. And if you have any concerns whatsoever about the process, consider outsourcing the job. We worked with CMB Hero and had a good experience, and I know DL & Associates does migrations as well; there are probably hundreds of companies or even trusted colleagues who’ve gone through the process before and can help you make sure it goes smoothly.

  1. Research Third-Party Apps Before Converting

There are some super-fabulous apps out there that we love to use for syncing daily Point of Sale data, such as Synder, Bookkeep, and Shogo. But you need to look at the client’s needs and determine how they’ll be met in the new QBO world before making the shift – not all sync programs work with all POS platforms. Do demos, consult with colleagues, and figure out the timeline for implementing – in other words, not only the migration of QBDT data to QBO, but setting up the new system to work with the POS and get it all running. Our experience has been that some up-front planning saves loads of effort on the far end (which is when you’re pressed for time so the client can get back up-and-running).

  1. Prepare Desktop Clients For The Change

And sticking with the theme of up-front planning… a little client hand-holding goes a long way. What they’re looking for is to follow your lead as their trusted advisor. The more you can compare and contrast their existing workflows and procedures with the new system, the more comfortable they’ll be with your proposal to move to QBO. Ideally, you already have Standard Operating Procedures in place for each of your clients. I wince as I type this, because I get that this is the “ideal” and not necessarily your reality – in all honesty, we’re still in the process of making sure each client has clear and detailed SOPs for every scenario. But this is a golden opportunity. Your instructions – in Word, an Excel checklist, Loom videos, or a project management app like Keeper, Financial Cents, or Asana – will build trust, making it much easier for you to illustrate to the client that this is a manageable change and that you’ve anticipated their needs. Side bonus: way less stress when a client (or your firm) loses a trusted team member and a new one needs to be trained ASAP.

To illustrate: in going through all the steps that a client’s office manager would complete each month as part of her billing process, and reproducing/ rewriting them using QBO, I noticed that she would no longer be able to run a particular report – at this point I had to decide whether we would come up with a different way for her to perform the same task, or whether we would track the data with a different feature in QBO so that she could run the report she was used to. Both approaches were fair; but the point is that I wouldn’t have noticed this change without walking through the process of retooling the procedures. This built trust with the client and made them more open-minded about making the change, because they knew we were actively anticipating and removing any stumbling blocks.

  1. Client & Staff Training and Familiarization

As you know, transitioning to QBO doesn’t just involve moving data; it’s also about adapting to a new user environment. You’ll want to invest time in training sessions provided by Intuit or certified trainers like Royalwise (my personal favorite – I’ve been studying from Alicia for as long as I can remember). Intuit also offers an ongoing monthly session called QBO In The Know, which I encourage all my team members to attend as part of their paid training hours – this ensures that you don’t just get up-to-date, but that you stay that way, as the QBO ecosystem is constantly improving and new features are released every month. Hector Garcia’s YouTube channel is an endless wealth of information (I once hired a senior accountant with no degree and no certification based on the fact that she learned QBO by watching every single one of his videos. She’s now our Senior Accountant). Lastly, remember that QBO has a demo company! It’s a sandbox – have at it, and let your team practice without the risk of affecting real data.

Start by getting your client and team members’ buy-in. Take advantage of the available resources, and invest in training. With communication and planning, both your firm’s and your clients’ bookkeeping experience will end up better than it was with Desktop – we don’t have a single client that regrets having migrated, despite the fact that we all miss this-or-that feature (everyone’s got their favorite). But I promise it will be replaced by a new favorite. Remember, the goal is not just to convert data, but to enhance the overall efficiency and effectiveness of your accounting practices and those of your clients.

So… take that deep breath, plan for the future, and enjoy the heck out of that moment next tax season when you hear someone go, “oh wow, this really is so much better than it used to be!”

Note! As my readers know, I am downright fanatical about transparency and full disclosure (often to my detriment, as you may have noticed that I have a wildly popular award-winning blog that is non-monetized). Though this particular post is a paid partnership with Intuit, I want you to know that a) I wanted to write an article on QBDT–>QBO conversions anyway, but couldn’t find the time; getting paid allowed me the break from client work I needed to make it happen; and b) they didn’t delete a single thing when I presented it. In fact, they were totally cool with all my Intuit-bashing… which made me pretty impressed with them, to be honest. That’s twice now — let’s see if they go for a three-fer!

Education, Illinois, IRS, Tips

First-Quarter “Safe-Harbor” Quarterly IRS Estimated Tax Payments: Why and How to Make Them

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For years, we have stressed the importance to our clients of making quarterly estimated tax payments. And unlike many tax preparers, we also do bookkeeping, accounting, and consulting for our small business owners — so we’ve also encouraged them to have us do a quarter-by-quarter calculation of how much to pay.

There were many reasons for this:
· Making sure the client had their books up-to-date and reconciled for the quarter, so they can be used for real-time managerial decisions;
· Matching the cash flow of a given quarter (or the actual sales and vendor invoices, for accrual-basis clients) to the related tax liability;
· Preventing the common situation of getting to tax-time and having a huge refund or balance due.

However, times have changed. We still want folks to make quarterly payments (see my related IRS & Illinois posts for how to do it online), but for the first quarter, at least, we’re asking everyone to use “safe-harbor” calculations.

Why Use 1Q Safe-Harbor Calculations Instead of Annualizing?

For one, the immense number of changes to our tax code since the Tax Cuts & Jobs Act (TCJA) took effect in 2018 has made tax planning substantially more complex than it used to be. The amount of time it takes to do a “back of the envelope” or “paper napkin” calculation has tripled. (And in case you’re curious — we use tax software and Excel, not used envelopes and paper napkins in our firm. That’s how you know you’re working with a real professional.) Both the effort involved and the cost to the client have increased accordingly.

Relatedly, first-quarter estimated tax payments are due on the same day as personal 1040 and C-Corp 1120 taxes are due. And since our tax-time work is a deeper dive than it used to be, and the estimated tax calculations are more complex as well, there simply isn’t enough time to do a full-on calculation for each and every client that requests it — at least, not if we also want to be well-rested and in good health, so we can do our very best on the remaining annual tax returns.

There’s good news, too, however — the state of Illinois — and many other states, used legislation to create a loophole for getting around a pesky TCJA limitation on the State And Local Tax (SALT) deduction. I won’t explain it all here, but the result is that all of our S-Corp and Partnership (aka “Pass-Through Entity”, or PTE) clients are paying their personal state taxes through the company. This is a very easy and predictable calculation, as Illinois charges a flat tax (not socially progressive, but it certainly is simple) and requires the annual liability to be divided by four and paid evenly across the quarterly deadlines.

(Side note: the deadlines are not actually quarterly. Due to the timing of the federal government’s fiscal year-end and individuals’ calendar year-end, they are skewed such that they’re not even the same number of months per quarter. You would think that of all the government departments that could count properly, it’d be the IRS, but apparently not. The due dates are 4/15, 6/15, 9/15 and 1/15 — though many are better off making the final state tax payment by 12/31.)

As a result, quarterly calculations for the state simply aren’t necessary for the first quarter (possibly even the first three quarters, depending). Given that the states seem to live for assessing penalties and interest for underpayment of estimated taxes (they are wildly aggressive about it), this is the best approach to take.

But it’s not just the states that issue penalties and interest for underpayment of taxes — the IRS does, as well. Much less aggressively, however, and they do still have the notion (that the new Illinois PTE tax law does not) of “annualizing” your quarterly taxes. This means that you presume the amount you made year-to-date is representative of the whole year, and paying quarterly tax based on that projection. It works great for small business owners who have lower income in the first three-quarters of the year and then make most of their profit in the final quarter.

Just to be clear: we still do this for our clients… but we wait until the second or third quarter, and in some unusual cases, we wait until November and then do a thorough analysis of the year thus far. It’s just that there’s little point in running these calculations for the first quarter anymore — it’s almost never representative of the rest of the year, and it places them into a precarious situation where they may end up underpaying by too much and then owing penalties and interest. Or, at the very least, having to pay us at tax-time to fill out the complicated annualization schedule on the tax return. If you want to be more accurate with your calculation, because you expect your income to be substantially higher or lower than last year, then ask to book a May tax-planning session to get squared-up for the 2Q payment, due June 15.

Last, but not least — we’ve decided to have all our clients commit to a monthly bookkeeping and accounting contract with us. Doing annual clean-ups during tax season simply is no longer sustainable (to be honest I’m not sure it ever was, which is one of many reasons so many CPAs are burned out), and isn’t cost-effective. It’s also not fair to our other clients — who are on a monthly schedule — to have to wait in line while we work on those who swing through just once-a-year. And most importantly, we truly believe that all small business owners should be looking at their financial statements regularly to help them make impactful decisions throughout the year — ones that can sometimes be the difference between turning a profit or enduring a loss. And since everyone will be on a monthly schedule, the motivation no longer exists to do quarterly reviews for estimated tax purposes, purely as a way to get clients motivated to catch up on their books.

Where To Find Your Safe-Harbor Amounts and How To Pay Them

If you’re a client of ours, or of pretty much any tax professional out there, calculating safe-harbor quarterly estimates can and should be a part of preparing your annual tax return.

After reviewing and signing your return, your CPA (or EA, JD or non-credentialed preparer) will e-file it, and once it’s accepted by the IRS and state agencies, they will either send over vouchers (which I wouldn’t bother using, because we want to pay taxes online almost every time that’s an option), or a list of required payments — whether that’s in a letter or a little chart form where you can check ’em off. However you get them — put them in your calendar now. Do not rely on your tax preparer to remind you. This is not their job. You are a grown person running your own business, surrounded by technology that is designed for precisely this kind of thing.

While you’re at it, save these links for instructions on how to pay online:
– IRS: How To Pay IRS Quarterly Estimated Taxes Online — Don’t Let Your Checks Get Buried Or Lost In The Mail (msn.com)
– Illinois: How To Make Quarterly Estimated Taxes Online — Illinois IDOR | The Dancing Accountant

And if you’re in a panic and can’t find the amounts, the general rule is that you want to pay 1/4th-ish of your total tax liability for the prior year (a bit higher for some states, such as Illinois). Again, if we do your taxes, you should have already received these totals for 2024, or will be receiving them as soon as your return is finalized.

Frequently Asked Questions

1) What if I have an extension?
Two options here: a) provide your tax preparer all the docs you already have and ask them to do their best to give you an estimate; they can even add that to the amount you’ll need to pay with an extension — which means if your extension payment estimate is short, the 1Q estimate will make up the difference, and either way, you’ll just apply the balance to the current tax year; or, b) go ahead and keep paying the same amount you paid for last year’s quarterly taxes; some payment is better than none.

2) What if I don’t have a tax preparer?
All the DIY tax programs out there can do this, too — they’re not very helpful for the tax planning that we do with our clients for 2Q & 3Q, and certainly not for 4Q — but they do a perfectly fine job with safe-harbor estimates. Alternatively, check out my colleague Hannah Smolinski‘s great YouTube primer on how to calculate estimated taxes.

And since you asked, here’s a fabulous photo of Hannah and me at QuickBooks ConnectFest.


3) What if I can’t afford to pay my quarterly estimates?
Pro tip: Did you know you can break your quarterly payment into smaller chunks? Let’s say you owe $2400 per quarter and you’re worried that you won’t have enough set aside by the time the due date arrives, because it’s so hard not to raid your own savings account when opportunities call. Just go online and pay $800 per month instead. Or $200 per week. It gets tricky with the weird quarterly tax due dates, but you are a smart cookie and can figure out the math. The point is that you don’t have to save it all up and then make the payment. If you have cash on hand, you can go in there now and do it while it’s on your mind, even if it’s a partial payment. Something is better than nothing.

4) What if I forgot to pay for a quarter?
Go in there and make a payment now. The penalties are per day, so the sooner you make up the difference the better.

5) What if I have additional questions about the process?
Throw whatever you can at the quarterly estimates and contact a CPA to help you… after Tax Day. Please be respectful of the plight of tax preparers right now. It will not serve you long-term to try to wedge yourself onto someone’s calendar last-minute: almost all the good ones had a deadline for submitting tax materials weeks ago; we’re all exhausted and likely to make mistakes this time of year if we’re taking on too much and not taking care of ourselves; and you want to start off on a good foot when building a relationship with a trusted advisor. The amount of penalties and interest that will be due if you underpay slightly is not that significant if you’re going to be making up the difference in a month, so just pay what you can and get on-track later.

Now, get yourself online and go make those first-quarter safe-harbor quarterly tax payments, already!

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

IRS, Software, Tips

Tax Preparers Rejoice! Here’s How To Prepare SECURE 2.0 Form 8881 Retirement Tax Credit If You Use Gusto & Guideline

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Photo by coco tafoya on Unsplash

As my readers and colleagues know, I’m a huge proponent of leveraging technology to remove the drudgery from our jobs and those of our small business clients. We all have enough on our plates already!

As a CPA whose company works with loads of small businesses that need to process payroll, I’ve used quite a few payroll systems through the years… and Gusto has become our favorite. It’s not without its quirks and issues, but overall it does a great job for a great price, and — key for the work we do — it syncs nicely with QuickBooks Online, as well as with Guideline Retirement, saving us oodles of time that we used to spend on benefit reconciliations. (In my recent MSN article about choosing the best state-mandated small business employee retirement plan solution, I cite this as one of the main reasons to go with Guideline.)

This week, I discovered a gift that Gusto created for tax preparers with clients that use the Gusto+Guideline combo — a reporting tool that will literally prepare the Form 8881 “Credit for Small Employer Pension Plan Startup Costs” for you. No joke. And it works!

I want to shout it from the rooftops, because it’s a massive timesaver. The previous SECURE Act credit was super-easy to claim, but this year, the Form 8881 was updated for SECURE 2.0 to include loads of information that most CPA firms are simply not going to have access to — not only current tax-year payroll information, but prior-year data on a per-employee basis; as well as information on how many employees qualified to participate (whether or not they actually participated), again both in 2022 and in 2023.

It was such a balm on my tired tax-preparing soul to know that they were looking out for us and trying to make our lives better through technology. The only thing I can’t figure out is why no one told me about it sooner. (Honestly, I randomly stumbled on it when I went into my own Gusto account to run weekly payroll.)

Not only did we end up using these reports for our own tax clients, but we also sent them over to our colleagues who prepare the tax returns for certain bookkeeping clients of ours, to help them out. And now we’re superstars to them. In fact, here’s a great idea for all the bookkeepers reading: run this report for all your clients, prepare a zip file for each of the tax preparation firms you work with, and send them this beautiful present all tied up with a pretty virtual bow. I’m always talking about collaboration and co-firming between bookkeepers and CPAs (come see me this June at Scaling New Heights for “The Tax-Ready Bookkeeper”) and this is a great example of it! Who do you think they’re going to recommend when a tax client needs accounting and bookkeeping assistance? You!

Keep in mind that these reports are only accurate if a) the client was on Gusto and Guideline, and b) were on them both for all of 2023.

These are the steps I walked through and the screens I clicked on to make this magic happen.

  1. Sign into Gusto and go into a client that used Gusto+Guideline for all of 2023. (No other payroll, no other retirement company.)
  2. On the left side bar, click on “Tax credits”.

3. Under “Available credits”, find the one that says “401(k) tax credit” and click the “Learn more” button.

4. Check out the overview and the FAQ, and then click the “Get started” button.

5. Fill out the short questionnaire. The information below was correct for my own company, but may not be the same answers for yours or for your clients, so make sure to answer accurately. Then click the “Continue” button.

6. At this point, Gusto will provide you with the amount of the credit, as well as all the information you need to prepare the Form 8881. Review it carefully. This is particularly important if you have employees who are not represented in Gusto because you are using another payroll provider simultaneously. And as I mentioned above, if the client switched retirement companies from another provider to Guideline part-way through the year, this information will not be accurate. Once you’ve reviewed the data, then click the “Generate credit form” button at the bottom of the page.

7. On the next screen, you will have two options:

If you click the “Download” button it gives you an incredible PDF with not only all the information you need to know to prepare the 8881, but a copy of the IRS form itself, filled-out exactly as it should be, according to their records + Guideline’s records.

If you click “Review Details” (to the right of the amount of your credit) you’ll get a screen pop-up from the right that you can scroll through to review the same information they noted above. From here, you can click “Reset credit form” if some of the information looks incorrect and you need to edit the questionnaire, or simply click “Close” if you’re done.

That’s it. It was simply that easy. The process of figuring out all this information prior to discovering Gusto’s beautiful gift took about two hours — which doesn’t count the digging through reports in Gusto and Guideline to figure out which ones told us what we needed to know, reaching out to Guideline support and asking for a custom report to be generated for each client that would show which employees qualified (turns out they are completely unaware that Gusto has this great resource, too — someone should definitely let them know)… and it definitely doesn’t count the ridiculous amount of time we spent figuring it out for our last remaining ADP client hold-outs — their reports can’t even be exported into Excel! PDF-only, you heard me. I’ve been warning those two clients for years that one day I’m going to issue an ultimatum. That day might be coming soon.

One small glitch: for some clients, it shows an extra month of Guideline service fee payments compared to what is in QuickBooks Online, which I think is simply a timing issue. It’s also a small-enough amount that if it gets claimed in 2023 instead of 2024, that’s not a huge deal. However, we manually edited ours accordingly, and hope that this gets cleaned up for next tax year.

And while we’re here — did you know that our Gusto referral link will get you a $100 prepaid Visa card when you sign up and run your first paid payroll? Or — $200 if you have over 10 employees! And for accountant partners, signing up through this link will earn you $500 once you’ve added and run payroll for three clients. Next year, you too can be reveling in the glory of pre-prepared small business retirement credits!

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

Cooperatives, Education, Tips

Is Open Book Management Right for Your Restaurant?

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I first came across the concept of “Open Book” management (OBM) for restaurants back in 2009, when I purchased Zingerman’s Guide to Good Eating from a local food & wine retail client of mine and we were discussing their recent adoption of this business philosophy — first popularized by Jack Stack in his excellent 1992 book, The Great Game of Business. Having lived in Ann Arbor for 10 years and attended the University of Michigan, I was of course a fan of their world market and pricey-but-delicious deli salads and sandwiches. But it wasn’t until 2012, when I took a deep dive into restaurant accounting and attended a series of seminars by the former Restaurant Seminar Institute, that I made the deeper connection between healthy financial communication and healthy small businesses. The class instructor had referenced various approaches to management, and included OBM among others on the list. A year later, I began working with local restaurant Honey Butter Fried Chicken — whose owners, as it turns out, had taken Zingerman’s OBM course and were in the process of implementing it in their fledgling project.

I spent the next few years working with them as they fine-tuned their metrics, delivery, and compensation structures, as well as trained their managers and the rest of the staff on why any of it mattered. First-hand, the benefits of this transformative approach were made apparent, and I became an eager proponent of OBM. Later, as I began to specialize in co-ops, I saw the same lessons filtered through a lens of cooperative management and policy governance that in some cases fit nicely with the OBM framework (though not always — check out this excellent Columinate article on lessons learned the hard way; an illuminating quote: “Getting the responsibility into the hands of the staff each week is an important transition in making it successful.  Yet, many times, we see managers hanging on to the reporting lines for too long, which leads to disengagement and disinterest on the part of the staff. They won’t learn it or care about it until they are responsible for it”).

So imagine my delight when I read this month’s Plate online magazine and saw that my former clients are participating in a free webinar on Open Book Management — and how to determine whether it’s a fit for your restaurant! From PlateTalks: “These owners will talk about what it takes to get your books in order, how they share key data points with their teams, and what their staff has gained from the model.”

According to Zingerman’s — and this lines up with my personal experience — OBM can lead to better results: but more importantly, it lines up with the values of many small business owners. Side benefits include building commitment, better business decision-making, and teaching everyone to think like an owner.

Open Book Management isn’t something that can be implemented in a silo, however — a concept summarized well in a case study by the non-profit International Council on Hotel, Restaurant, and Institutional Education (CHRIE), “…small to medium enterprises can greatly benefit from open book management, the creation of a strong and qualitative mission statement, and a cohesive organizational culture that blends well with the external macro culture. Any one of these elements appears to be dependent upon another. For example, Zingerman’s, or any other company could have an open book management style of operation – but without a clear mission, the company would not do as well in the marketplace. Zingerman’s could have a great organizational culture, but without open book management, employees would not take ownership of their jobs, and therefore the bottom line would suffer.”

There are loads of articles and courses out there on Open Book Management — and plenty of restauranteurs who are glad to network and share their experiences. For a short introduction, I encourage you to check out Josh and Christine and their colleagues, as well as the folks at Plate, on March 5, 2024 from 1-2 pm Central. This is not a referral link — I’m just excited to get the word out, to help as many small business restaurants as I can in my time. I’ve always maintained — and as our mission goes — we believe the vibrancy and character of our neighborhood depends on thriving small businesses lending their unique vision to our communities.

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

Illinois, IRS

Tax Season 2023 Is Officially Open! Maybe. Okay, Not So Fast.

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(Many thanks to the AICPA Town Hall for allowing members to leverage their resources, such as the slides included in this article. The opinions shared here are the author’s and not those of AICPA or CPA.com.)

Tax preparers everywhere spent the past two months gearing up for yesterday’s “opening day” of tax season, January 29th. It was an exciting time for us, as it was finally going to be a return to normal. What does that even mean anymore, you might ask? Well, most of the pandemic financial relief programs have wrapped up (save a straggler ERC claim here or there); amendments resulting from that era have almost all been filed; the odd rebates and credits that no one remembered the amounts for were a thing of the past; there were no last-minute tax extenders; and the season end-date actually lands on April 15th for the first time in ages. It felt like we finally had a handle on things and were back to the “normal” amount of seasonal overwork — rather than a Herculean lift, as was the case for the past four years.

Enter Congress. Despite the fact that The American Institute of Certified Public Accountants (AICPA), National Association of Tax Professionals (NATP) and small business advocacy groups have been lobbying for over a year to get an extension of certain popular tax benefits that expired in 2023, our leaders somehow managed to wait until after year-end to introduce legislation to that effect — Tax Relief for American Families and Workers Act — in a spectacular show of bipartisan ignorance. Never mind that the IRS e-file has been offline since November 18th, because it takes over two months to reprogram the systems for new tax laws, updates, and edits to tax forms.

As for January 30th, the legislation has yet to come up for a vote. And yet the IRS is telling taxpayers to go ahead and file when ready, and makes no reference to the pending legislation in today’s Outreach Connection email.

Some of the anticipated changes if the legislation passes as-written include popular business expensing programs that are designed to be leveraged throughout the year. Making them retroactive does nothing to spur the economy, as the decisions to buy equipment, invest in R&D, or take out loans were already made, last year.

To be clear: I’m not saying these aren’t potentially good changes for tax law, business, and the economy. Just that doing it at this late date is misguided in far too many ways.

And the part I really don’t understand is this: IRS Commissioner Werfel told reporters last Friday, “If there’s a change that impacts your return, we will make the change, and we will send you the update — whether it’s an additional refund or otherwise — without you having to take additional steps.” This is simply impossible for most of the business expensing features of the law, which are voluntary elections on the part of the taxpayer. Presumably this is a reference to the child tax credit provisions in the legislation — which have gotten the most press, but have little effect on small business owners, and are a small portion of the actual bill.

The House Ways and Means Committee released a statement recently indicating that the IRS “confirmed its intention to make necessary systems updates by around six weeks after the date of enactment”. Six weeks. Most refunds are issued within three. Six weeks takes us past the S-Corp and Partnership filing deadline. Six weeks?

Speaking of that deadline, many states announced e-filing would begin on the same date as the IRS opened federal tax season, but it turns out that our state (and I’m guessing others) did not release their S-Corp or Partnership forms with enough advance notice for our third-party tax software to program them into their system, so we are unable to e-file any Illinois business tax returns until February 7th. And we were freaking out about that delay. I can’t imagine what six weeks will look like.

To say nothing of the fact that the next government shutdown deadline is scheduled for one week before business tax returns are due. This should make for an even more laid-back season.

And to add to all of this, that the bill is being funded by an early end to the Employee Retention Credit program, as of January 31, 2024. We spent all of last week scrambling to get the remaining claims in, and won’t know whether that sprint was worth the anxiety or not until this bill passes (or doesn’t) — I feel terrible for those who find out in February that their claim’s due date is suddenly in the past.

Again, some of the provisions in this bill are great ideas — well thought-through, balanced, as well as good for business, families, and potentially the economy. Bad players in the world of ERC mills will finally have to deal with some consequences, and the 1099 burden for small vendors and freelancers will be eased as the threshold is finally indexed for inflation. Some good stuff.

So let’s pass this as 2024 legislation, just in time for the new year, as it should be… and get out of the way of tax season, already!

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

Education, Software, Tips

How to Issue 1099s and W-2s from Gusto Payroll (for 2023)

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As a CPA whose company works with loads of small businesses that need to process payroll, I’ve used quite a few payroll systems through the years… and Gusto has become our favorite. It’s not without its quirks and issues, but overall it does a great job for a great price, and — key for the work we do — it syncs nicely with QuickBooks Online, as well as their own Benefits company and with Guideline retirement.

(By the way, our referral link will get you a $100 prepaid Visa card if you sign up and run your first paid payroll before Jan 31st, 2024! Bonus! Happy New Year!)

It seems that for 2023, Gusto has slightly changed the details for how they handle distribution of 1099 and W-2 forms — and so that no one ends up without a copy of their important documents, I am sharing the step-by-step process that we went through for our own firm, in hopes that it helps you manage it in your own small business.

Spoiler alert: the process of DIY-ing (aka creating the packet of 1099 or W-2 PDFs, going to the Tax documents section and finding/ downloading these PDFs, printing them, and mailing them) was enough of a pain that for sure next year I will just click the option to pay $3 per form to have them mailed for me for anyone who hasn’t selected “electronic-only delivery”. But before then, I will contact all my employees and contractors and ask them to please change their preferences to be electronic-only delivery next year, since the thing I would be mailing them is literally a printout of the same PDF that they can download themselves from their Gusto account.

And now — here’s the process I went through, in real time, as I walked through the steps myself.

First off, as the company/ employer, I received an email from Gusto (though it incorrectly stated that these are client tasks, rather than firm tasks) stating that I need to distribute important payroll forms to recipients before the IRS deadline of January 31, 2024.

When I click on the “Let’s do it” button for 1099s, it takes me (after logging in) to the screen below, which notes “If you have us mail forms for you, you can choose to exclude anyone who’s consented to have them delivered electronically.” This is pretty important, as I encourage everyone to accept this delivery method, even if they also request a paper copy. I am curious to see if they make this option clear even if I select “I’d like to download and distribute them on my own,” and will give that approach a try.

After selecting the second option — “I’d like to download and distribute them on my own” (DIY), I get this screen:

And then this screen:

And good news! Even in the DIY version, you can select “Only contractors who haven’t requested electronic-only copies,” which is a real win for everyone. It would be nice if they made that clearer on the first page, and simply said, “you can choose to exclude anyone who’s consented to have them delivered electronically.”

I take that back! NOTE: After going through the whole process (you’ll see this below), I never did get a packet that was just for the electronic-only folks. I was only able to download a packet for ALL employees. I will have to pick out which ones selected paper delivery and only print and mail those. Or I can go into each employee and download the form individually. What a pain! I don’t want to reward Gusto for handling this poorly, but if I could go back again, I’d have chosen to have them mail the ones who set their preferences for paper forms, for $3 each.

I clicked on “Create packet”, and nothing happened. However, this box shows on the right-side, so I’m guessing that’s why:

(I think this could have been handled a bit better by the Gusto programmers.)

Now, if you had any contractors who did not select electronic delivery, you would in theory eventually get a copy of that packet, and use the PDFs of the 1099s that were made available to you by Gusto — you would print and mail them yourself. But in my experience with the W-2s (below), I was only ever able to download a copy of ALL the forms, not just the ones that set their preference to receive a paper copy. Or I could go to each employee and download them individually. Therefore, as I keep saying… if I had this to do over, I’d pay Gusto the $3 per form for just the ones that requested paper forms. And in future onboarding, I’d ask them to set it to “electronic-only”.

Next, we’re going to give the W-2 form distribution a try. I clicked “Home” to get to the main page of my Gusto account but got an error message, probably because as an accountant user, it got confused about whether to take me to my own firm homepage or my client dashboard. So I went back to the original email and started from there. As expected, it brought me here:

And after selecting DIY, it took me here:

After clicking “Continue” it took me to a page that nicely spelled everything out for me:

It turns out that four of my employees have requested paper copies. They may have also requested electronic copies, but since that doesn’t matter one way or the other here, it’s not indicated. (Note to self: ask your team members to select electronic-delivery-only!)

So this time when I clicked the “Create packet” button, I got a pop-up.

I clicked on the “Go to Tax documents” button and it took me to a very familiar screen (since I have to download this information on behalf of clients from time-to-time), with a tab for each type of tax document.

I clicked on W-2s and followed the prompt to download my 2023 W-2 packet — but this turned out to be the entire employer-copy of the W-2 packet. So, I clicked below that on the option to “Distribute 2023 W-2s” — but that just took me back to “Choose how to distribute W-2s” starting page.

To be fair, it did say in the pop-up that they’re creating my packet and would email me when it’s ready… I’ll go check email next.

But first I want to point out that this page also makes it clear in the employee list at the bottom what the delivery preference for each employee is, making it easy for me to make good on my “note to self” above and reach out to those who requested “paper and electronic”. (By the way, my own name is on that list. Sigh.)

It’s many minutes later and I still don’t have an email saying my packet is ready.

At this point, I’m wishing I’d just paid Gusto $3 each for them to mail these for me.

I’m going to sign off on this blog post for now and return to it once I get an email from Gusto. And if I don’t, I will shake my fist at them and ask my team members if I really have to spend $3 each to send them a paper W-2 when they already have a PDF.

Update: I never did get an email from Gusto saying my packet of just the ones that need paper copies was ready. And when I went back in to just pay Gusto the dang $3 each, I got this screen:

So apparently that’s not even an option anymore. Heads-up! (This is the part where I scroll back to the top of my post and give everyone a spoiler alert before starting this process.)

The key takeaway I’d like to share with clients and readers is that you should absolutely, unquestionably go into “Tax Documents” and look at the list of people under the W-2s and 1099s tab to see if anyone chose paper-only (I am presuming that’s an option but do not truly know… because it’s 2024 and who would choose that, anyway). If anyone did *not* consent to electronic delivery, then go spend that $3 per employee. For everyone else, reach out and ask if this is really necessary, and suggest they (myself included, whoops) change their settings — not because the $3 per form is a prohibitive cost, but because the amount of time and energy spent in making that happen (any at all) is simply not worth it in this day and age of electronic communication.

I will leave you with a hilarious poem that a dear colleague of mine shared with me recently.

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.