Tag Archives: tax

Education, IRS, Tips

How I Stay Sane During Busy Season (Mostly… Arguably… Okay, Just Don’t Ask My Husband About It)

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Tax season—that special time of year when caffeine consumption triples, restful sleep becomes a scavenger hunt, and your spouse and friends begin to question your sanity. If you’re deep in the trenches of tax filings, bookkeeping clean-ups, and client questions that could’ve-been-Google-searches, you know the struggle is real. But after 23 years, I feel like I’m finally finding my groove… and because I don’t want it to take you as long to figure out as it did me, I’m sharing tips and tricks that have been successful, and maybe this vision for the future will make today’s load a little lighter.

Tap Technology to Do More with Less

I’ll start with the lifesaver of modern accounting: technology. Yes, I recognize that it’s also the bane of our existence when “Mercury’s retrograde” (or whatever we want to blame for it), but as my software-developer-husband likes to remind me, that’s because I’ve built my life around my tech stack—and vice versa, have built it around my life. It’s what facilitates the lifestyle I’ve chosen for myself: a fully-remote CPA firm that allows me to live in Mexico during tax season and travel during conference season, while making an important difference in the lives of small business owners back home in Chicago.

For me, that means making sure my tech is portable, accessible by my whole team, easy for my clients to use, secure, and reliable.

QuickBooks Online has been my trusty sidekick on this journey for years. And I was such a hater when it was first released! I still laugh when I think about how negative I was about it; because at the time, it was a real frustration that it didn’t behave like or do what the Desktop version could. Thankfully those days are far behind us now. For the type of work we do, QBO has far surpassed its older cousin – it helps automate the tedious, repetitive tasks that used to eat up my team’s capacity (especially when combined with RightTool, my favorite QBO-loving Chrome extension). We lean hard into creating bank rules, automating recurring transactions and payments, and using third-party syncs with Point of Sale and Project Management systems. And because there’s functionality for ProAdvisors that allows us to easily review and recategorize (check out my MSN article on our favorites), it means I can feel confident about the quality of the end result… before it goes onto my clients’ tax returns.

A few QBO life-savers I wish I’d had in the Desktop Days: the audit log makes short work of the tedious task of figuring out why last year’s retained earnings might have changed (and who was responsible); the reconciliation review allows a junior accountant to make sure all accounts are reconciled before we start our review; and the “transactions without payees” report helps us make sure we don’t miss any 1099 vendors. As a firm runner, I also love that I can assign different team members to individual clients, and that I can control their level of access – this came in very handy recently when I had to have a contractor jump in mid-season due to multiple team members having personal setbacks. As I recently noted on LinkedIn, managing team capacity is hard enough without having technology get in the way.

I also rely on apps that help me make the most of our time outside of tax season. In my webinars on 1099 best practices, I illustrate that an hour during tax season is about 4 or 5 times as precious as one during the rest of the year. So the more I can do in the off-season, the less my team and I have to cram into the space right before deadlines. A great example is Keeper – we use them to create a year-round 1099 workflow, where we review for vendors and request W-9s as part of the month-end close. It also helps with practice management and client communication, as we’ve standardized our annual process and language for collecting information from clients, and I have transparency into where my team is getting stuck in closing out the books and handing them off to the tax team.

And lastly, I couldn’t do tax season without Ace Cloud Hosting. Talk about a sanity-saver. They simplify the setup and maintenance of cloud-hosted tax software while still giving us enough administrative control to implement changes when we need them. We used to live in fear of our server going down just before a deadline; in the case of a significant software problem, now we have a whole team to assist in rolling back and restoring any data. I can honestly say that I sleep better at night than I did before working with them.

These tools don’t just save time—they support my mental health. Automating the little things and not worrying about the big ones means I can focus on higher-value work (or take a five-minute dance break between Zoom meetings… see my next point).

Remember That Work-Life Balance Is a Thing (Really!)

Busy season has a way of making you forget that life exists outside of work—but here’s a secret: it’s okay to take a break. Seriously. In fact, it’s not only okay, it’s essential. And my clients will survive if I step away for a meal that doesn’t involve eating over the keyboard. My brain functions better when it’s not running on fumes, and my work is actually better and more efficient when I prioritize rest.

My husband and I have a tradition: every night we have what we call “sunset wine”. We climb a ladder to the roof and watch the sunset over an adult beverage. The birds are busy going back to their roosts, the sky changes colors, and my old friends the winter constellations start to draw their pictures up above. I picked this tradition during the pandemic, when I realized that I could not be relied upon to take a break. There was always another email that needed to be sent, another article to write, another emergency to address. But the sun doesn’t wait for “just one last thing”… it’s gonna set when it sets, and I have a date to keep. By creating an external trigger for my breaks, I was able to truly disconnect and decompress. And discovered in doing so that when I went back to work later that evening, I felt renewed focus.

It’s a similar phenomenon to when I started dancing, 12 years ago. I felt like I didn’t have enough time for physical exercise, because I was always so busy. But going to rehearsal three times a week only took about five hours—and it turns out the exercise led to higher-quality sleep, so that I went from needing nine hours per night to only seven-and-a-half. Net weekly gain: over five hours.

I use an accountability app to remind me to exercise, where my best friend can see that I’ve checked in each day, even if it’s just a quick stretch, breathing exercise, or a kitchen dance party while I’m making dinner. And once-a-week, a friend sets up a zoom session for one of our dance troupes, the Fabulous Ladies of Fitness. (In case you’d like to follow along at home, here I am at Chicago SummerDance leading 400 enthusiastic participants in a rousing routine to Laura Branigan’s Gloria.)

Lean on Your Professional Community

Accounting might be a numbers game, but I believe that it’s primarily about personal relationships. And especially during busy season, your community can be a lifeline. Whether it’s a QuickBooks ProAdvisor Facebook group, a local networking event, or a paid community like Bookkeeping Buds (I’ve been a participant for almost a decade) or my ‘Ask a CPA’ membership – having a place to vent, ask questions, and share wins is invaluable.

I can’t count the number of times a fellow ProAdvisor has shared a shortcut or app that’s saved me hours. And when things get overwhelming, just knowing that others are in the same boat is deeply comforting. It’s one of the main themes of my favorite conference, Bridging the Gap; last year I presented a panel there on “Vulnerability as a Strength,” about the importance of taking off our masks and sharing our challenges with each other; it absolutely builds trust and diffuses the isolation we often feel when times are hard. (Bonus tip: Last year’s BTG also reminded me how effective expressing gratitude and helping others can be in building resilience and improving mental health. Having a rough day? Lift someone else up who’s feeling low. Now two people feel better. This is one reason BTG’s Randy Crabtree and I both volunteer during tax season to assist AICPA as scholarship judges.)

I’m also a dedicated attendee of the bi-weekly AICPA Town Hall. Not only can I count on Lisa Simpson to offer the latest technical guidance, but I also get some “me time” that clients and team members simply aren’t allowed to interrupt. (Meeting hosts Lisa and Erik in-person and getting my moment on-stage with them at DPCA was a dream come true.)

Whether it’s the Town Hall, Unofficial QuickBooks Podcast, or The Accounting Podcast (honestly, whatever your favorite flavor of continuing education is), you can stack keeping up on industry guidance with community… and maybe even exercise (I love listening while I’m in the pool and I know many folks consume podcasts while on a walk). An easy three-fer.

So, don’t go it alone—tap into your community. It’s like group therapy… but with more bank feeds and spreadsheets.

Keep Perspective (And a Sense of Humor)

When a client “forgets” to mention a major business merger or a team member has to suddenly take a leave of absence, I sometimes let exasperation take over and decide I’m going to burn the whole thing to the ground. But laughter truly is the best stress relief—I’ve enjoyed quite a few accounting memes among WhatsApp groups and on LinkedIn that sometimes are just the ticket.

And of course:

Busy season is tough, but it’s temporary. And with the right tools, support, and mindset, we can get through it—and make a plan for each season to be better than the last.

Now, if you’ll excuse me, I have a well-earned dance break to take.

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 managing tax season stress 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 have been totally cool with all my Intuit-bashing since the first article I wrote for them… which impressed me quite a bit, to be honest. That’s four times now — I might just keep this win-win-win up.

Education, IRS

NATP Offers Tax Planning for Military Personnel and Spouses Webinar

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My cousin, Lt. Col. David Oclander, Battalion Commander, on the left.

As regular readers know, I’m a big fan of the National Association of Tax Professionals. They generally provide top-notch education, and I appreciate the fact that they do not discriminate against non-credentialed tax pros. Before I became a CPA, that was where I got most of my continuing education, because organizations like AICPA or NAEA are restricted to those with licenses. The IRS Tax Forums and web programming are more accessible, but often the quality of IRS presentation skills is pretty poor — they’re trained on compliance, not on public speaking. So when I see that NATP is hosting a class on an important topic that might not be getting enough promotion, I try to amplify it.

Today I’d love to highlight their upcoming session on August 29th: “Tax Planning for Military Personnel and Spouses“. NATP Instructor Mari Fries, EA, CFP explains that at the core of all military returns is the Servicemember’s Civil Relief Act (SCRA) and in more recent years the Military Spouse Residency Relief Act (MSRRA). Understanding the impact of these acts on a military return can result in thousands of dollars of tax savings for the service member and family.

I wanted to share it because I feel like this is a topic that doesn’t get much CPE time — it’s always a page in an update where the presenter says, “and I’m sure this doesn’t apply to anyone in here,” or “if this applies to your clients you already know the details, so I won’t go into it.” The most we can usually hope for is a link to the IRS webpage on Tax Information for Members of the Military or IRS Publication 3, Armed Forces Tax Guide. (To be fair, both of these are chock-full of great info, but it’s hard to suss out on your own, even as a professional preparer.)

If you have tax clients in the military, or you’re considering a niche in this under-served area, I strongly recommend this 100-minute, 2-CPE credit class. It will also be available on-demand.

From NATP:

At the core of all military returns is the Servicemember’s Civil Relief Act (SCRA) and in more recent years the Military Spouse Residency Relief Act (MSRRA). Understanding the impact of these acts on a military return can result in thousands of dollars of tax savings for the service member and family. This webinar, through case studies, will demonstrate the impact of these two federal laws on state returns and offer the preparer the knowledge necessary to identify when the SCRA and MSRRA are not being applied accurately at the state level. Additionally, we will cover other tax benefits afforded to our military personnel such as nontaxable pay and benefits, nontaxable combat pay and its impact on IRA contributions and EITC, and automatic extensions to name a few.

In this course, the instructor will teach you to distinguish between “home of record” and “domicile”, understand the impacts of the SCRA and the MSRRA on domicile, accurately identify when the laws are not being applied appropriately at the state level, and summarize special tax provisions available to military personnel.

Mari Fries, EA, CFP provides a preview of the course and her passion for the topic in this short YouTube spot:

According to the University of Florida IFAS Extension, there are a wide range of unique issues that affect tax filing for military families, including:

  1. Moving expenses for permanent change of station (PCS) relocations
  2. Sale of a primary residence or “accidental landlording” following a PCS move
  3. Travel required for Reserve duty
  4. Tax-exempt and taxable allowances (i.e., need-specific payments in military pay)
  5. Tax-free “combat pay” for service in designated combat zones
  6. Certain tax-filing extensions
  7. Legal residency rules for state income tax filing (service members and spouses)
  8. State tax rules for taxation of military retirement benefits
  9. The opportunity to make tax-deductible pre-tax dollar (i.e., money that has not yet been taxed) contributions to the traditional Thrift Savings Plan (TSP)

A complete description of military-specific tax rules can be found in IRS Publication 3, Armed Forces Tax Guide. The IRS website also contains military tax tips and links to resources such as MilTax, a Department of Defense and Military OneSource program that provides free tax return preparation and e-filing for service members and some veterans, with no income limit.

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/

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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A person and person giving each other a high five Description automatically generated

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

UPDATE: As of 2025, the report is now located under Gusto’s “Tax Incentives” section on the left-hand side of the screen, rather than “Taxes & Compliance”. It didn’t disappear (I nearly freaked out when I saw it might have and wanted to reassure y’all).

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 a prior blog post 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), in both the current and previous tax year.

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 the entire tax year.

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 the entire tax year. (No other payroll, no other retirement company.)
  2. On the left side bar, click on “Tax Incentives”.

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 — or 2024 instead of 2025, 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.

Education, QuickBooks Software, Software, Tips

QuickBooks Ledger: Welcome to the Family! We’re Glad You’re Here.

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QB Ledger was announced at QB Connect a few months ago.

If you’re like me, March is that special month from hell where clients that have ignored your pleas for four quarters in a row suddenly show up again… and lucky you. Because now they’ve got a new AirBnb rental property in tow! Or yet another side gig! Or even better: an estate that they have to manage until it settles, and it’s caught up in probate!

To be honest, I’ve been slowly weeding these folks out of our client list – and I feel like a jerk about it – but it just doesn’t make sense for us to spend time during our busiest season getting them caught up on a year’s worth of transactions. Especially because these are the same characters that tend to be super price-conscious, and are somehow convinced that because they have a low volume of transactions, they shouldn’t have to pay for the monthly QuickBooks Online subscription – “can’t you just use our bank statements or a spreadsheet?”

For anyone reading this who isn’t intimately familiar with these classic dance moves already – no, we can’t just use bank statements or a spreadsheet. There’s no double-entry bookkeeping, no debits and credits, no Balance Sheet, and far too many potential lurking mysteries to be uncovered only after all the manual data entry is already complete. At some point we put a stop to these shenanigans… only to find ourselves sitting in QB Desktop, doing all the write-up work on behalf of our clients – a total reconstruction job. More reliable, but not less effort. (And moot at this point, since QB Desktop has gone subscription and is slowly asphyxiating.) And yet – I was a tiny startup at one point, too! I get not wanting to spend big bucks on a full-featured bookkeeping package for an activity that’s not earning much money.

By this point we’ve filtered out most of these types of clients, raising our minimum to price out some of the potential clients we really did (in theory) want to help – itty bitty start-ups or serial entrepreneurs, those that can’t resist a good deal on real estate, or people who sadly lost a loved one and are adrift as to how to handle the demands of bookkeeping for the estate. (I did this for both of my grandmothers back in the day, using my accountant’s copy of QuickBooks Desktop. It was not fun, but boy was my family relieved that they had a knowledgeable QB ProAdvisor handy.) But some remained. Clients who we really like who have been with us for ages, or who have another full-on business that we support, or whose side-gig really serves our community and they deserve a break.

(You read the title, right? I mean… you can see where this is going?)

Enter QuickBooks Ledger.

Those who know me know that I don’t mince words about Intuit as a company. They’ve created a core product that I love, which I’ve been using in some form or another since 1993 (oof, that dates me) – but when they cross me (and they do, more than I’d like), I call ‘em out on it. I don’t like the constant price increases (though I do see the constant improvements), nor the aggressive marketing of corollary products to us and to our clients. I don’t understand why they haven’t fixed some basic functionalities we’ve been asking about for literally years. But the only reason I bother complaining is that I truly believe in QuickBooks products, and the ecosystem they’ve built, and that other software companies have built around them. Which is why it was delightful to be there when QB Ledger was announced at QB Connect in November (see photo above), and all the more delightful that since then, I’ve been able to honestly say I’m in love with this new product.

Why? What’s the hype?

Nothing. There’s no hype. That’s what’s so great about it. It’s just plain old reliable QB Online that we know and love, but without all the bells and whistles, and therefore totally affordable for uncomplicated files. It basically strips down the system to the core functionalities but retains the tools that are the most timesaving. And therefore, they only charge you for the basics. It’s $10/month per client.

At this price, and with the connected bank feeds, rules and reconciliation features, we can blow through an entire year of transactions on a cash-basis filer in literally a couple hours, and still make it affordable for the client, while maintaining plump margin for our firm. Since the bank and credit cards are connected, we don’t have to rely on the client for statements before we get started, so we can take care of most of the work well before tax-season begins. In most cases, the client won’t ever need access to the system, because it’s not about managerial insights and analytics – it’s just a compliance engagement that gets us to the point where we can file an accurate return. But unlike QB Self-Employed, this is real accounting software that gives us double-entry accounting, adjusting journal entries, and spits out proper financial statements. And also unlike QBSE, it allows for a full-on easy upgrade should the side-hustle turn into a more full-fledged business, or the real estate toe-dipper turns full-on house-flipper. (And yes, two accountants can be connected, just like the other QBO products, so if you’re not doing CAS and tax in-house like us, you can have a bookkeeper firm and tax prep firm both connected.)

Things to know before you dive in:
– It seems like QB Support staff haven’t all been trained yet on what it can and can’t do, how many and which types of users can be attached, and which use-cases make the most sense, so be aware of that. It’s also sometimes tricky to get the client added (to set up the bank feeds) because the accountant user gets assigned both as accountant and admin; as with other versions, when this happens it can be a pain to switch that over to the client. So, make sure not to check the box to make yourself primary admin when setting it up.
– And… they’ve got a weirdo situation where you can’t use a Customer name anywhere in the file (presumably they deactivated this because there’s no invoicing, which is fine… but we still need that field). I’ve got it on good authority that this isn’t a bug. I suspect this was done with the expectation that those who have customer reporting needs will just upgrade, but I don’t personally think that it will serve the purpose of moving them to Simple Start. They’ll just use an external invoicing or scheduling program to track income by customer instead of upgrading – especially because those third-party apps do in fact create these customers in the app – and then they’ll be hooked on that invoicing feature… instead of tracking things by customer in QB Ledger and eventually upgrading to Simple Start. I have clients in all walks of QBO and there are startups that can’t initially afford Simple Start who will eventually get there… but they’re going to need customers to make that happen. Another workaround: some folks are using the Vendor field with a “-Cust” after the name to get around this.
– And lastly, bummer – you can’t downgrade, you can only start a new QB Ledger file or upgrade that file. (Yeah, they were thinking about all the reluctant clients who we had to talk into paying for Simple Start that don’t actually need A/R and A/P and would be fine on Ledger… really wishing they’d released this version years ago.)

Hector Garcia just released a half-hour complete tutorial on QB Ledger for accountants and bookkeepers, so if you want a deep dive on the specifics, then you’ve found your instructor.

Start-ups, trusts, estates, once-a-year write-up or tax prep clients, small side-hustles, AirBnB and other rentals, your glam diva marching band (ok, maybe my glam diva marching band)… the list goes on. Intuit has finally taken the core functionalities that are the reason we celebrate QuickBooks Online, and packaged them into an affordable option. It’s earning them goodwill, providing a pipeline for future upgrading customers, and will surely make the switch from Desktop to Online more attractive for the masses. For us, it fits seamlessly into our strategy to shift away from once-a-year rush work. For bookkeepers just getting their start, it allows them to take on small freelance and hustle clients. Welcome to the QB family, Ledger! We’re glad you’re here.

(What’s that, you want to learn more about QB Ledger? I knew you were gonna want to know how – so I’ve conveniently set it up for you to check out this page here.)

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 QB Ledger 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 edit 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. I might just do this again sometime. We’ll see.

IRS, Tips

Struggling With Taxes? Here’s Where To Get Help in 2024.

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The past four years have been challenging in so many ways, to so many people — but as a tax preparer, I can confidently say that the inability for the IRS to provide its usual level of customer service has been among the most impactful. Luckily, recent Congressional funding to make up for years of inadequate budgets, combined with Treasury Secretary Yellen’s direction that IRS priorities should include clearing the backlog of unprocessed tax returns and improving customer service, seem to be making a difference.

Pre-pandemic, the IRS offered all sorts of taxpayer assistance options, but the inability to offer in-person services, as well as the intense strain that government financial relief programs placed on the already-stretched agency, made it impossible to offer even the most basic of support programs. The good news is that now Taxpayer Assistance Centers are open to the public one Saturday each month for walk-in help without an appointment.

On February 24, March 16, April 13, and May 18, from 9 am to 4 pm, certain IRS Taxpayer Assistance Centers will offer in-person service and assistance to meet taxpayers’ needs. The IRS recommends that you come prepared and bring documents such as photo ID, Social Security cards, IRS notices received, proof of bank account information, and so on. Professional foreign language interpretation will be available through an over-the-phone translation service. For a list of addresses, visit the IRS’s website announcement and then click the plus-sign to the left of your date of choice. Scroll down to your state, and all the addresses of the participating offices will be listed.

The IRS also notes various options for obtaining free tax preparation services locally:

The IRS has also published a series of “Tax Time Guide” news releases designed as a resource to help taxpayers file an accurate tax return. And NerdWallet recently published a list of free and tax preparation resources. It’s not a magic wand, but after some rough years, you’re no longer alone when it comes to navigating tax season.

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.