QBO Year-End Guide. Closing the year and beginning a new one

Transcription

1 QBO Year-End Guide Closing the year and beginning a new one 12/2013

2 Introduction The end of the fiscal year can be a busy time. In an effort to help make year-end tasks go as smoothly and efficiently as possible, we ve compiled information on the most common activities that are done during the close of one business year and the beginning of a new one. You can go to the sections that pertain to you or read the entire guide, whichever you find the most helpful! Reconciling your Accounts Sending Statements 1099 & 1096 Forms IRS 1099K regulations Reporting for year-end Taxes and your accountant Distributions Paying Sales Tax Closing the Books Budgets Payroll Year-end questions

3 Reconciling Your Accounts If you haven t been reconciling your bank accounts on a monthly basis, you ll need to do so now or financial reports won t be correct when preparing your taxes. To get started, choose Banking > Reconcile, then select the bank or credit card account that you need to reconcile. Fill out the Reconcile Statement window. (If you don t see the Reconcile Statement window, you or another user has already begun to reconcile that account.) If you ve never reconciled, don t worry. Just start with the oldest statement you have, and consult our knowledgebase article KB 1164, Reconciling for the entire year. We have excellent self-help on the reconcile process if you find that you need more help in this area. Our knowledgebase article KB 2910, Why is my reconciliation wrong?, contains useful information on how to solve basic reconcile issues. Back to Table of Contents Sending Customer Statements The end of the year is a good time to remind your customers of any outstanding balances that they owe you, or to send them a statement of their activity throughout the year. Customizing your statements You have a few options when creating statements. You can add aging information that indicates how far unpaid balances are past their due dates. You can also choose to show each line item on the sales transaction or just the memo. 1. Choose Company > Preferences.

4 2. Click on the Form Delivery link on the left. 3. Click on the Statements link at the bottom of this section. 4. Select your options and then click Save. Creating statements one at a time If you only need a few statements, you can create them one at a time. 1. Choose Customers > Customer Center. 2. Highlight the customer for whom you want to create the statement. 3. Select Statement from the New Transaction menu. 4. Select the Statement Type and date. A Balance Forward statement provides a history of all activity (invoices, payments, credit memos, etc.) between Start and End Dates you choose. An Open Balance statement shows only invoices that have an amount owed. A Transaction Statement is like a balance-forward statement, but doesn t have a balance forward and amount due, just the total amount and amount received for the period. 5. Click OK. Then scroll to the bottom and either Print or Send the statement by . Creating statements in a batch If you need statements for a lot of customers, you can create them all at once in a batch. You can also choose to send statements only to customers who owe you more than a certain amount, or other criteria. 1. Choose Customers > Statements. 2. Choose Balance Forward, Open Item or Transaction Statement and enter the statement dates. 3. (Optional) Set your additional statement criteria. 4. Click OK.

5 A list of customers who meet the criteria will appear. Preview or Edit the statements one by one, or create and/or send all of the selected statements by clicking the Create/Send Selected Statements button. Back to Table of Contents 1099 and 1096 Forms What is a 1099-MISC Form? The IRS requires you to file a 1099-MISC form for each vendor to whom you make certain types of payments. The form is called 1099 Miscellaneous Income because your vendor will need to claim these payments as income. You must mail these forms to vendors by January 31 for payments made in the previous tax year. You must also mail these forms to the IRS by February 28 along with a Form For more information on which types of vendors require 1099-MISC forms, consult with your accountant, or see the IRS website ( and type in 1099-MISC in the Search field. Then click on the link for Instructions for Form 1099-MISC. You ll need to have pre-printed 1099-MISC forms before you can create the 1099 forms in QuickBooks Online. You can purchase these forms from Intuit by calling or from other office supply stores. Important things to remember about 1099 forms QBO supports only the 1099-MISC form. There are many different 1099 forms, the most common being the 1099-MISC. QBO can t print state ID# in box 17 or additional state information; this is not required by the IRS. Intuit s 1099 forms are recommended for printing forms must be laser-type forms; tractor-fed forms don t work with QBO. 1099s are always active in QBO Plus with no preference setup required. 1099s are reported on a cash basis.

6 Income- and Equity-type accounts can t be assigned to a box on the 1099-MISC form. QBO can only print s at a time. Creating 1099s in QBO 1. Choose Vendors > Vendor List. 2. On the bottom left of the Vendor List, click Prepare 1099-MISC Forms. 3. The Prepare 1099-MISC Forms screen will open.

7 4. Click Select Vendors. All vendors that you have marked for 1099 tracking will appear in the column on the right. You can add additional vendors by using the Add button. When you re done, click OK. 5. Click Assign Accounts.

8 6. Select the checkbox for the 1099 box needed. 7. Click the Account drop-down arrow and select the account you d like to use for that box. IMPORTANT! If needed, you can have multiple accounts for the same box. Use Select Multiple from the drop-down list and select the accounts you want to use. NOTE 1: Income and Equity accounts are not listed. NOTE 2: Selecting a parent account will not select its subaccounts. If you made payments made to 1099 vendors and used subaccounts, you must also select those exact subaccounts. To include all subaccounts, you must

9 click Select Multiple and choose each subaccount under the parent account. NOTE 3: You can t assign the same account to different boxes. You ll need to edit individual transactions related to that account if you need to assign the same account. You ll need to obtain the advice of your accountant to determine which boxes to use if you re unsure; you can also consult the IRS website and find official instructions for Form 1099-MISC. Preview 1099 and 1096 information 1. Verify that the Tax Year field is showing the correct year. 2. The Show field is set to show vendors/contractors that meet the threshold. Thresholds are set by the IRS, are unique to each box, and can t be changed. 3. The Total All Payments column shows a total of all payments you made to each 1099 vendor. A difference between the Total 1099 Payments and the Total All Payments indicates that you used other accounts on transactions with that particular vendor. This could mean that there may be other accounts that you should also associate with 1099-MISC form boxes. 4. You will see columns for each Box that you checked. In this screenshot we see Box #1 and Box #7. This is where you can see the threshold amount for each box. Click What are boxes and

10 thresholds for more information. 5. Items in red are missing information. You can click on the red item to update from this screen. 6. Amounts in the Total 1099 Payments Excluded column are amounts that will need to be paid on a 1099-K form. See the 1099-K Information section later in this document. Print or E-file 1099 and 1096 Forms The Order now or buy forms links will take you to the website where you can buy the 1099 kit in different quantities and prices. You ll be presented with options similar to those pictured here.

11 Checking your settings as shown helps you make sure the 1099s print properly. Printing the forms Click Print Information Sheet at the bottom of the Prepare 1099-MISC screen. It s a good idea to print this although it s not required. Now you re ready to print the 1099-MISC forms. You can print a sample 1099 on blank paper to check alignment before printing on blank forms; just click Print Sample 1099 in step 3 and make sure your alignment is set correctly. As with printing checks, your version of Acrobat can cause the alignment to be off. Here s what your sample might look like:

12 You can solve most printing problems by making sure that you have selected the proper settings in the Print window for your printer. You can click the Set Adobe Reader print options link in step 1 to see the proper settings to select in the Print window for your printer. Preparing the 1096 form Form 1096 summarizes the information from the 1099 forms you are sending for the tax year. It s a form that you send only to the IRS, and it must accompany the 1099-MISC forms that you submit to the IRS. When you purchase your 1099 pre-printed packet, you ll receive a 1096 form to fill out. NOTE: No Form 1096 is required when you e-file. To prepare the 1096 form and its accompanying 1099-MISC forms, go to the Vendor list and click Prepare 1099-MISC Forms at the bottom left. After you ve verified that you correctly entered all the information for 1099s for the tax year, click Print 1096; you can also print a sample Intuit 1099 E-File Service Intuit's 1099 E-File Service allows 1099 forms to be filed electronically. Benefits:

13 The vendor information you track in QuickBooks is securely uploaded to the Intuit e-file service. No double data entry. You don t need to buy special forms or postage. You can print 1099 vendor copies on plain paper and mail them to your vendors. Or you can a.pdf version to them instead. You can file with the IRS on time even on deadline day. No Form 1096 required when you e-file. Deadlines: mail or s to vendors by January 31. E-file info with the IRS by March 31. Fee for filing applies. Click the Turn on Intuit E-File Service link to get started. For more information about the 1099 E-File Service, see this web page: If you still have questions after reading this article, you can call for further help. IRS 1099-K regulations Back to Table of Contents For tax year 2011 and after, the IRS requires a 1099-K form requiring all Payment Settlement Entities (credit card providers including banks, PayPal, and so on) to report all qualifying payments made to individuals during the prior calendar year (credit cards, debit cards, and stored-value cards, including gift cards). To prevent duplicate reporting to the IRS, the 1099-MISC form from the small business owner must now exclude the payments types listed above; however, it must still include Cash, Check, EFT, ACH, and Direct Deposit payments. To learn about the new IRS regulations regarding filing 1099s, see knowledgebase article KB 4785, Changes to IRS reporting requirements for 1099-MISC starting tax year 2011.

14 Back to Table of Contents Reporting for Year-End The end of the year is a natural time to run reports and evaluate how your business has performed over the last year. Running reports is also an essential part of preparing for taxes. The two most important reports that you and your accountant will need are the Profit & Loss and the Balance Sheet reports. Both of these reports are available directly from the Reports tab menu. Make sure that you customize these reports for your previous fiscal year. For example, if your business runs on a calendar year and today is January 10 th, then set the dates on the report for Last Year or manually enter the dates in the To and From fields at the top of the report. Profit & Loss report IMPORTANT: Don t worry if your Profit & Loss report is totally or partially blank. Chances are that you re running it for this year-to-date and if today s date is January 10 th, then the report is only capturing the last 10 days of transactions. Profit and Loss accounts are referred to as transitory accounts. That is, at the end of each fiscal year, QuickBooks Online will automatically zero out Income and Expense accounts and transfer the net amount (the Net Income or Loss) to the Retained Earnings account on the Balance Sheet. This allows the new year s Net Income account to begin to accumulate new totals for the new year's profits. Retained Earnings account You will notice that your Balance Sheet has an account near the bottom called Retained Earnings. This amount normally stays the same over the course of your fiscal year; however, if you run your Balance Sheet report at the beginning of a new year (dated as of the new year) the amount in the Retained Earnings account will be different.

15 Retained Earnings is a special Equity account that tracks your company's net worth, accumulated over the previous fiscal years. At the end of your fiscal year, QuickBooks Online automatically transfers your net profit (or net loss) to Retained Earnings. There is no actual transaction that takes place. Net Income (income minus expenses) from the previous year moves into the Retained Earnings account. To find out how it was calculated, simply run a Profit & Loss report from the previous fiscal year. Back to Table of Contents Taxes and Your Accountant QuickBooks Online doesn t integrate with Turbo Tax or any other tax software, but it can create reports that help you fill out the TurboTax Interview or a tax return. Profit & Loss as well as the Profit & Loss Detail reports will be the most helpful. You should consult your accountant to determine if transactions have been accurately assigned and to confirm the amounts used for filling out tax forms. You can give your accountant access to your QuickBooks Online company so that he/she can either view or actually make adjustments to the books.

16 1. Choose Company > Manage Users. 2. In the Accountant section, click Invite Accountant. 3. Enter your accountant's address and first/last name (optional). 4. Your accountant will be sent an that contains a link for signing in to your company. 5. Your accountant will be asked to create a user ID before signing in the first time, unless they already have an account with Intuit Business Services. 6. Until your accountant signs in, their status on the Manage Users page is "Invited." After accepting the invitation, their status changes to "Active." Note: It s important not to share your own user ID and password with your accountant. If a user ID and password is shared, QuickBooks Online won t be able to track who makes which changes in both the Activity Log and the Audit Trail. What does all this really mean to you? 1. If you invite your accountant and they already have a QuickBooks Online for Accountants subscription, they'll get a link to access your QBO company. 2. If you invite your accountant and they don't have a QuickBooks Online for Accountants subscription, they'll have a chance to sign up when you send them this invitation. 3. Your accountant will have access to all of the features available in whatever version of QBO you currently have. Making asset depreciation entries Fixed assets such as furniture, computers, vehicles, and buildings contribute to the operating capacity of a business over many years. Because of their long-term value, fixed assets are treated differently than other expenses. Typically, business owners expense the purchase price of the fixed asset over

17 its useful life, not just the year in which the purchase was made. This is referred to as depreciation. You should depreciate assets if you want the depreciation to be reflected on financial statements. If an accountant calculates the depreciation it would be easiest if they make those depreciation entries by accessing the QuickBooks Online company themselves. If you re going to handle this yourself, we have an article to help you. Check out our knowledgebase article KB 2705, Recording and depreciating assets, and click the How do I record the depreciation of my asset? link. Back to Table of Contents Distributions It s not mandatory, but you can choose to distribute profits (retained earnings) to one owner s equity account or to multiple partners at the end of the year. Partner Distributions Below is an example of a General Journal Entry for distributing earnings between two partners. The partners equity accounts need to be credited and the Retained Earnings account should be debited. There may be tax consequences for such a distribution, so you need to check with your accountant before doing so.

18 Owner Distributions Taking funds from the business and paying the owner is called an owner s draw. To record this draw, create a check to the owner (make them a vendor) and select the Owner s Equity account at the bottom. (To record a payment to a partner, a partner s equity account would be selected.) Back to Table of Contents Paying Sales Tax You need to pay your sales tax at a minimum on an annual basis. The Sales Tax Center gives you a way to view your Sales Tax Liability report, see recent sales tax payments, and record your tax payments. We have a wonderful self-help resource that covers everything related to sales tax: see knowledgebase article KB 4731, Sales tax in QuickBooks Online. Closing the books Closing the books is optional. QuickBooks Online doesn t require you to close the books at the end of an accounting period. In fact, you don t need to do anything to close your income and expense accounts. On the first day of the next fiscal year, QuickBooks Online will automatically transfer net income from your Balance Sheet into your Retained Earnings account. That way, you ll know how much money you made in the previous period. In addition, income and expense accounts

19 will be "zeroed out." This allows the new year s Net Income account to begin to accumulate new totals for the new year s profits. You ll see a feature in QBO called Closing the Books which restricts access to transactions in prior accounting periods. Closing the Books doesn t close out the income and an expense account since that s done automatically. 1. Choose Company > Preferences. 2. Click on the Company link on the left. 3. Click on the Closing the Books link on the left. 4. Select the Closing the Books checkbox and enter a date through which your books will be closed. 5. You can select Only warn, which will warn you and any other user when attempting to edit or delete a transaction that s dated before the closing date. The warning will look like this: Or you can choose Warn and require password which requires a password of your choosing before anyone can make a change to any of the transactions dated prior to the closing date. Here s what that looks like: 6. Click Save. IMPORTANT: Make sure you don t set the Closing Date in the future. This will cause you to be warned or to enter your password when Back to Table of Contents

20 entering today s transactions, since they will fall within the closing date range. Budgets The end of the year is a perfect time to think about budgeting for next year. The following is an overview of how budgets work in QuickBooks Online. What is a budget and how does it work in QuickBooks Online? QuickBooks Online budgets are used to estimate future income and expenses. A basic budget includes a row for each income and expense account you want to budget for. As time goes by, the Budget vs. Actuals report compares actual income and expense activity with the expected, or budgeted, income and expense amounts. Important information about budgets: Budgets are available in QBO Plus only Budgets can be created from scratch or from the prior year s data Budgets can contain annual, quarterly, or monthly data A budget can be subdivided for each class, location, or customer Balance Sheet accounts can t be budgeted in QBO Only income and expense accounts can be included in a budget

21 To create a budget: 1. Choose Company > Budgets. 2. The Creating a budget interview begins. Note that this page gives you information about checking some settings. 3. Click Next. 4. Choose between using actual amounts from a fiscal year, starting from scratch, or copying an existing budget. 5. Click Next. 6. Choose between subdividing by customers, classes, or locations, or not subdividing. 7. Click Next. 8. Choose the fiscal year to track for the budget and enter a budget name. 9. Click Finish. The new budget will now open. To make better sense of the data in the budget, click to clear the Show Blank Rows checkbox. The budget shows only those accounts that have data in them. Note: Creating a budget from scratch means you must enter all the data yourself for each month, quarter or year. You can use the Copy Across button to repeat the same amount across all months or quarters.

22 To delete an unneeded account: 1. Highlight the account. 2. Click Clear to clear all data. 3. Click Save & Next. Running Budget Reports When you have all the information entered in your budget, you can run a report. Here s how: 1. Click the Reports tab. 2. Click on the Budgets vs. Actuals report from the Budgets section.

23 3. Notice that you can choose the budget that appears on this report. Click Run Report. For more information about budgets including Budget FAQs, see our knowledgebase article KB 2949, All about budgets. Back to Table of Contents Payroll Year-end center If you have a payroll subscription, you may have year-end questions specific to payroll. Below is how you ll navigate to the payroll year-end center to get those questions answered. 1. Choose the Employees tab.

24 2. Click the 2013 Year End Tasks, Tips, and Checklists banner, shown here: 3. You ll be presented with a screen which will show you all the payroll year-end resources available. Back to Table of Contents