Tax Regulations

If you give a small gift or service to your employee that doesn’t cost much and you do it infrequently, you don’t have to include its value in the employee’s wages. The IRS refers to this is as a “de minimis” benefit. It is so small that it would be unreasonable or too difficult to account for it.

However, this doesn’t apply to cash or cash-like gifts (like gift certificates, gift cards, or use of a credit card), no matter how small they are. The IRS never considers these as “de minimis” and you should always include them in the employee’s wages.

If you occasionally provide meal money or local transportation fare to your employees due to overtime work, you may exclude these from their wages.

Examples of “De Minimis” Fringe Benefits

Here are some examples of minimal fringe benefits:

• you give to your employee a cell phone mainly for business purposes, and he or she occasionally uses it for personal reasons,
• when a copying machine that is mostly used for business purposes (at least 85% of the time), is used occasionally by employees for personal reasons,
• you give to your employee non-cash gifts for holidays or birthdays that aren’t worth much,
• you give items like flowers or fruit during special circumstances (like illness, a family crisis, or to recognize outstanding performance),
• you provide your employee with group-term life insurance payable on the death of his or her spouse or dependent, and the payout is not more than $2,000,
• some meals,
• occasionally thrown parties or picnics for your employees and their guests,
• occasional tickets for theater or sporting events,
• certain transportation fare.

Examples of Non-Minimal Fringe Benefits

Here are some examples of benefits that you must include in your employees’ wages:

• season tickets to sporting or theatrical events,
• using an employer-provided car or other vehicle for commuting more than once a month,
• membership in a private country club or athletic facility, no matter how often your employee uses it,
• using employer-owned or leased facilities (like an apartment, hunting lodge, boat, etc.) for a weekend.

If a benefit doesn’t qualify as a small or infrequent benefit (for example, if it’s provided too often), then the entire value of the benefit must be included in the employee’s income.

In the meantime, if you encounter any issues or have any questions, we are here to help you with your accounting, QuickBooks, and tax needs. Click here to schedule an appointment.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.

If you are thinking of buying a new car in 2023 or later and you are considering a clean vehicle that runs on electricity, hydrogen, or natural gas, you should know that you may be eligible for a federal tax credit that could save you money.

The tax credit for new clean vehicles was introduced in 2021 as part of the American Clean Energy and Security Act and can be claimed for a clean vehicle placed in service on or after January 1st, 2023 and that you aquired for original use (meaning that nobody else used the car for any purposes). The credit is designed to encourage consumers to switch to more environmentally friendly modes of transportation and reduce greenhouse gas emissions.

How Do I Know If My Car Qualifies For The Credit?

Before purchasing a vehicle you should ask the dealer if the car you are interested in qualifies for the new clean vehicle credit and for what amount. The maximum credit amount that can be claimed for a clean vehicle is $7,500. Depending on the specifications of the vehicles, there might be some cars that qualify for less. Thus, you might want to look for a vehicle that qualifies for the maximum amount of the credit. Furthermore, when a dealer sells you a new clean vehicle, they need to provide you and the IRS a report; this report should include:

• • the buyer’s name and taxpayer identification number,
  • the dealer’s name and identification number,
  • date of the sale and the sales price,
  • the Vehicle Identification Number (VIN) of the vehicle, unless the vehicle doesn’t have a VIN according to U.S. Department of Transportation rules,
  • the battery capacity of the vehicle,
  • confirmation that the buyer is the first user of the vehicle,
  • the maximum clean vehicle credit that the buyer can claim for this vehicle,
  • a declaration under penalties of perjury from the seller,
  • the credit that the dealer provided to the buyer (this starts in 2024).

It Is Important To Know

• the credit is available for both individuals and businesses,
• you can not buy the vehicle for resale purposes,
• if you order a new clean vehicle in one year, but you receive it next year, you claim the credit when you place the vehicle in service, meaning in the year you receive it,
• the credit is not avilable for vehicles exceeding certain price levels (for example for vans, SUVs, pick-up trucks the MSRP of the vehicle can not exceed $80,000), make sure to check with your dealer if the car qualifies for the credit and for how much,
• the vehicle must be used primarily in the U.S.

What Are the Limits?

Before buying the vehicle it is important to review your tax return information. That is because you can claim the credit only if your modified adjusted gross income (AGI) is not more than:

• • $300,000 if you’re married and filing jointly or if you are filing as qualifying surviving spouse or qualifying widow(er),
  • $225,000 if you are filling as head of a household,
  • $150,000 for everyone else.

You can use your modified AGI from either the year you get the vehicle or the previous year, whichever is lower. If your modified AGI is below the limit in one of these two years, you can claim the credit. However, the credit is nonrefundable. This means you can’t get back more in credit than you owe in taxes. As an individual, you can’t carry over any excess credit to future tax years. If the credit is claimed for a business on Form 3800 General Business Credit, it follows the carry back and carry forward rules of this form.

You should check the IRS’ website for any updates or changes to the rules for the new clean vehicle credit.

Taxes are complicated, especially if you have a business. If you need help with your business books, tax planning and filing your taxes, we are here to help. Click here to schedule an appointment.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.

If you run a business that sells goods or services, you may need to collect and pay sales tax to your local tax authorities. Sales tax is a percentage of the price of the goods or services that you charge to your customers. In this blog post, we will show you how to manage sales tax payments in QuickBooks Online.

Set Up Automated Sales Tax in QuickBooks Online

To use the sales tax feature, you need to turn it on in the settings and enter some basic information about your business, such as your tax agency, filing frequency, and start date.

• QuickBooks calculates the total sales tax for each transaction based on three factors:
• the tax exemption status of your customer,
• the locations where you sell and ship your products or services,
• the sales tax category of your product or service.

In other words, it takes into account who you’re selling to, where you’re selling and shipping to, and what kind of product or service you’re providing. This ensures that the correct amount of sales tax is applied to each sale. In some states sellers are required to charge tax depending on their business location, but QuickBooks should be able to handle this situation as well.

• QuickBooks Online is a tool that helps you manage sales tax in accordance with your state’s tax laws. It can also handle sales tax for transactions outside your state by allowing you to add other tax agencies. There are two methods to configure the locations where you collect sales tax:
  • if you’re new to QuickBooks, you can set up the locations where you charge sales tax for the first time,
  • if you’re currently using manual sales tax, you can check if it’s possible to switch to the new automated sales tax system.
• When you are ready, you have the option to set up sales tax categories for the items you sell. This feature in QuickBooks helps determine the appropriate amount of sales tax to apply based on the nature of the item or the location of the sale.
• If you’re delivering goods or providing services at your customer’s location, the tax rates might vary. Some customers, such as churches, schools, and non-profit organizations, may not need to pay sales tax. It’s important to keep accurate records of your customers’ tax status, billing address, and delivery address. You can verify this information in QuickBooks.

Sales Tax Feature

First, review your taxes in detail to understand what you owe and why. This ensures everything is correct before you submit and pay your sales tax return.

Once you have set up the sales tax feature, you can start recording sales tax on your invoices and receipts. QuickBooks Online will automatically apply the correct sales tax rate to each transaction, based on the information you entered in the settings, in the costumer details and the details of the transaction. You can also adjust the sales tax amount manually if needed.

To pay your sales tax to your tax agency, you need to file a sales tax return in QuickBooks Online. This is a summary of your sales tax activity for a specific period, such as a month or a quarter. You can view your sales tax return in the Sales Tax Center, which shows you how much sales tax you have collected, how much you owe, and when your next payment is due. You can also see a breakdown of your sales tax by jurisdiction, product category, and customer.

To file your sales tax return, you need to review the information in the Sales Tax Center and make sure it matches your records. You can also make any adjustments or corrections if needed.

By using QuickBooks Online to manage your sales tax payments, you can save time and avoid errors. QuickBooks Online will do the math for you and keep track of your sales tax obligations. You can also access your sales tax data anytime, anywhere, from any device.

We hope this blog helped you to understand how this feature works.

In the meantime, we are here to help you with your accounting, QuickBooks, and tax needs. Click here to schedule an appointment.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.

 

If you are an employer in the restaurant industry, you may be eligible for a tax credit for the Social Security and Medicare taxes you pay on your employees’ tips. This credit is called the FICA Tip Credit, and it can reduce your income tax liability dollar for dollar.

What Is The Credit?

The FICA Tip Credit is a nonrefundable tax credit that allows employers to claim a portion of the FICA taxes they pay on their employees’ tips as a credit against their income tax. The FICA taxes consist of Social Security and Medicare taxes. Typically, the employer and the employee share these taxes equally. Employers must collect a written statement from each employee who receives tips of $20 or more in a calendar month, showing the total amount of tips received. This statement is due by the 10th day of the following month. Based on these statements and the employer’s records, the employer has to do the tips reporting.

You can use the FICA Tip Credit to offset some of your burden of paying these taxes. You can claim the credit only for the tips received in regards to providing, serving and/or delivering food.

The credit is equal to the employer’s share of FICA taxes paid on tips in excess of the tips used to meet the federal minimum wage in effect as of January 1st, 2007 of $5.15. For example, considering that the federal minimum wage taken into consideration for the FICA tip credit is $5.15 per hour, and an employee earns $4 per hour in wages plus $5 per hour in tips, the employer can claim a credit for the FICA taxes paid on $3.85 per hour of tips for this particular employee.

How To Claim The Credit?

To claim the FICA Tip Credit you should file Form 8846. To file Form 8846, Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips, you must meet the following requirements:

• you must have employees who receive tips from customers for providing, delivering or serving food or beverages for consumption,
• you must pay or incur employer Social Security and Medicare taxes on these tips during the year.

On Form 8846, you must report the following information:

• the total amount of tips received by your employees on which Social Security and Medicare taxes were paid or incurred,
• the tips not subject to the credit provisions (only if you pay any tipped employee wages (excluding tips) less than $5.15 for 2022),
• the creditable tips by subtracting the tips not subject to the provisions from the total amount of tips received,
• FICA Tip Credit from partnerships and S corporations.

Special Situations

In addition, you should pay attention if you had any employees who received tips, and their salary including tips exceeded the social security tax wage base (for example for 2023 the social security tax wage base is $160,200). If this happens you have to attach to the form separate calculations for the tips credit (for the details of these calculations, please see the instructions for Form 8846).

The amount of credit you can claim is limited by your income tax liability. If your credit exceeds your tax liability, you have to carry the excess back 1 year and if you still have excess, you can carry it forward 20 years.

In conclusion, if you are an employer who pays FICA taxes on your employees’ tips, you should consider claiming the FICA Tips Credit.

In the meantime, we are here to help you with your accounting, QuickBooks, and tax needs. Click here to schedule an appointment.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.

If you own or manage a restaurant, you know that payroll can be a complex and a time-consuming task. Comply with federal, state, and local laws and regulations, and ensure fair and accurate payment for your employees. In this blog post, we will provide some practices on how to navigate payroll in the restaurant industry.

Practices That You Can Follow

To make payroll and tip reporting easier and more efficient for your restaurant business, here are some best practices you can follow:

• use a payroll service or software that can handle the complexities of restaurant payroll, such as tip allocation, tip pooling, tip splitting, minimum wage adjustments, overtime calculations, tax withholding and reporting, etc.,
• educate your employees on their rights and responsibilities regarding tips, such as how to report them, how to share them with other employees, how to handle cash tips vs. credit card tips, etc.,
• establish a clear and consistent policy that outlines who is eligible to receive tips, how to divide them among different positions or shifts, and how to track and record them,
• keep accurate and complete records of your employees’ wages and tips, such as time cards, pay stubs, tip reports, tip receipts, etc.,
• review your payroll reports regularly to ensure that there are no errors or discrepancies in your employees’ wages and tips.,
• stay updated on the latest laws and regulations regarding payroll and tip reporting in your location, such as minimum wage rates, overtime rules, tip credits, etc.

Payment Schedule

In most restaurants, employees are paid every two weeks, either through a check or direct deposit. However, the frequency of payment can vary, and some restaurants may choose to pay their employees weekly or monthly.

Most restaurant employees are paid by the hour at the federal minimum wage. Therefore, it’s essential to accurately track each employee’s working hours to avoid any payroll management issues.

This payment schedule only covers the base wage. For employees who receive tips, such as waitstaff, they usually take their tips home in cash. This is a crucial detail to consider when setting up your restaurant’s payroll system.

Tips

In the restaurant industry, tips are a significant part of employees’ income, especially for roles like waitstaff and bartenders. But do tips count as payroll? The answer is yes, to some extent. If employees receive tips, these are considered taxable compensation. This means that as an employer, you have certain responsibilities related to these tips. They can lead to additional requirements for payroll withholding, reporting, and payment. Therefore, if your employees receive tips, it’s important to understand what counts as a tip and manage it appropriately in your payroll system. You can find more about this subject in our “Tips Reporting for Restaurants” blog and other blogs on our website.

Conclusion

Payroll in the restaurant industry can be challenging, but with proper planning, tools and guidance, you can manage it effectively and efficiently. Ensure correct and fair payment for your employees, comply with all tax and legal requirements, and optimize your tax savings by following the practices discussed in this blog post.

In the meantime, if you need tax and accounting services, we are here to help. We serve small businesses and real estate investors. Click here to schedule an appointment.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.

 

In the world of business, efficiency is the key. One area where efficiency can make a significant difference is in accounting. QuickBooks and other  accounting software offer features that can automate many aspects of your accounting processes. This blog post will show some of the areas in which  you can automate your accounting.

Why Automate Your Accounting Processes?

You should automate you accounting processes, because the manual accounting processes can be time-consuming and can lead you to errors. Automation not only saves time but also increases accuracy, provides real-time data, and allows for better financial management. This being said, this doesn’t mean you can only rely on your software. The software can make mistakes if not set-up properly. That is why you should always reconcile your books and ensure that you have accurate financial statements. Before preparing your tax return, we recommend that each account on the Balance Sheet is reviewed and reconciled. And each account on your Profit & Loss statement is reviewed and corrected if necessary.

Automating Invoicing

One of the most tedious tasks in accounting is invoicing. Most accounting software have an option to automate invoicing. You can schedule your invoices, if your operation allows it, to be sent out at regular intervals. This can ensure timely billing without the need for manual intervention. For example, QuickBooks allows you to automate this process by setting up recurring invoices.

Automating Expense Tracking

Importing transactions using a bank feed is one of the most common features offered by accounting software. You should fully take advantage of this feature. For example, with QuickBooks, you can connect your bank account or credit card to automatically import and categorize transactions. This eliminates the need for manual data entry and makes expense tracking effortless, provided that you set up the bank rules properly and you review your books on a regular basis.

It takes accounting and tax knowledge to have accurate financial statements on a tax basis of accounting and can be difficult for a business owner to focus on this aspect. We offer monthly and quarterly services to include review and correction of your books, tax planning and tax savings strategies, tax filings and more that can save you time and provide peace of mind that you do not get in trouble with the IRS and that you take advantage of all the tax savings tools avilable to you.

Automating Reports

If your accounting software has the option to automatically generate and email you on a regular basis reports such as Balance Sheet and Profit & Loss statement, we recommend you set this up. This can help you and your accountant make more informed business decisions. It can also bring to light any tax traps that you might not be aware of otherwise, until tax time.

Automating Payroll

There are many payroll software companies that offer automated payroll services. Again, it is really important to have the initial payroll set up correctly and then every time you have a new employee to set up that employee correctly in the payroll module. You should still be aware of the regulations and the paperwork you need to have when you hire. Even with an automated payroll system, you should still reconcile your payroll tax returns, such as 941 or 940 forms, the state unemployment tax returns, W-3 and W-2 forms, etc. with your General Ledger to ensure accurate filings and financials.

Conclusion

Automating your accounting processes with your accounting software, not only saves you valuable time but also can provide accurate, up-to-date financial data, as long as the automation is done properly. Automation allows you to focus more on growing your business and spend less time on manual bookkeeping tasks, but we always recommend having a professional overseeing your accounting processes.

If you want to automate your accounting system and need help with keeping your financials accurate and audit proof, click here to find out more about our services.

This material is for informational purposes only. It does not constitute tax, legal or accounting advice.