How to Setup Payroll for Job Costing

Posted by Bruce Mc on Sep 21, 2010 in Bookeeping, Payroll service, QuickBooks | 0 comments

Many of my clients believe that setting up payroll in QuickBooks for job costing is frustrating and difficult. There are several steps that need to be taken in order for payroll to flow properly to the job costing reports, especially if you want to include payroll taxes and benefits. The step-by-step instructions below will help guide you through the setup. Then you won’t have any problems.

These instructions assume you have a subscription to QuickBooks payroll. If you are trying to use job costing with a non-QuickBooks payroll provider, you will not only make your bookkeeping more time-consuming, but also introduce opportunities for errors to be made.

Please try L & R Tax Preparations on line payroll service if you do not have one at this time. We’re using Intuit web hosted Payroll service for our online payroll clients.

Here are the steps:

Set up Preferences:

1. Go to Edit > Preferences > Company Preferences and select Payroll & Employees

2. Select “Full Payroll” or “Complete Payroll Customers”

3. Check “Job Costing, Class and Item tracking for paycheck expenses”

4. Go to Time & Expenses

5. Select Yes under “Do you track time?”

6. You may also want to check “Create invoices from a list of time & expenses”

Set up Payroll Items:

1. Go to Lists > Payroll Items

2. Edit every Addition and Company Contribution item to ensure that “Track expenses by job” is checked

3. Payroll items can only map to one expense account, so you may want to setup separate ones for COGS and overhead payroll expense

4. You can’t assign or have two payroll items for payroll taxes

Set up Employee Records:

1. Go to the Employee Center and double-click on employee name

2. Change Tab to Payroll & Compensation Info

3. Check “Use time data to create paychecks”

If you want to Set up Default for New Employees:

1. Go to the Employee Center and select Manage Employee Information > Change Employee Default Settings

2. Check “Use time data to create paychecks

Set up Workers Comp:

1. Setup workers comp at Employees > Workers Compensation > Setup Workers Comp

2. Setup your workers comp codes at Employees > Workers Compensation > Workers Comp List

3. Go to Lists > Payroll Items to double-check that the Workers Comp payroll item has “Track expenses by job” checked

Using Timesheets

1. Go to Employees > Enter Time > Use Weekly Timesheet

2. Complete all information including both a payroll item & a service item (these are different) – mark as billable if you do time & material billing

3. You may want to add a customer job for overhead

4. Consider using Time Tracker or WorkTrack Time Card so employees can enter their own time.

L & R Tax Preparation also offers TimeTrackingSalesSheet for its payroll clients.

If you have more questions concerning payroll or setting up payroll please feel free to contact us at L & R Tax Preparation.

For more readable information:

Social Security and Medicare (FICA) Taxes

Posted by Bruce Mc on Sep 16, 2010 in Accounting, Bookeeping, Employee, Payroll service | 0 comments

Social Security and Medicare (FICA) Taxes

The Federal Insurance Contributions Act (FICA) is a federal law that requires you to withhold two separate taxes from the wages you pay your employees: a social security tax and a Medicare tax. The law also requires you to pay the employer’s portion of these taxes. Unless you have employees who receive tips, the employer’s portion will be the same as the amount that you’re required to withhold from your employees’ wages.

Each of the FICA taxes is imposed at a single flat rate. Currently, the social security tax rate for employees is 6.2 percent and the Medicare tax rate is 1.45 percent. The taxes are unaffected by the number of withholding exemptions an employee may have claimed for income tax withholding purposes. You simply multiply an employee’s gross wage payment by the applicable tax rate to determine how much you must withhold and how much you must pay.

Let’s assume you have one employee, to whom you pay gross wages of $500 every two weeks. You must withhold from each paycheck $31.00 in social security taxes ($500 x 6.2%) and $7.25 in Medicare taxes ($500 x. 1.45%). You will also owe equal amounts ($31.00 in social security and $7.25 in Medicare) as the employer’s portion of the taxes. In other words, each $500 wage payment will create a combined FICA tax liability of $76.50.

The social security tax is subject to a dollar limit, which is adjusted annually for inflation. For 2010, your obligation to withhold and to pay the social security tax for an employee ends once you’ve paid that employee total wages of $106,800.

However, there is no ceiling on the Medicare tax. You must continue to withhold and to pay the Medicare tax regardless of how much you pay an employee.

For 2010 only, you may be exempt from the employer’s 6.2 percent portion of the social security tax with respect to any employee hired after February 3, 2010 if that new employee was unemployed (or was not employed for more than 40 hours) during the 60-day period leading up to the date you hire him or her. This exemption is provided by the provisions of the HIRE Act enacted by Congress on March 17, 2010. Check the IRS website for information on this special tax exemption.

If you have more questions feel free to contact me.

If you feel you need payroll services please see my web page Payroll or Online Payroll. if you have payroll questions please contact us here: payroll@lrtaxprep.com.

Reads from Last Week

Posted by Bruce Mc on Jul 25, 2010 in Information, Opinions, Week in review | 0 comments

Five Critical Facts About Business Growth is a video blog post from Chad over at Bordeaux and Bordeaux in Charlotte North Carolina. I haven’t posted much from his blog but that’s because I am to lazy to watch so I can’t really say if they are worth watching or not. However I did watch this one and every business owner needs to watch this one. He discusses the following five facts about business growth:

There is no such thing as a mature business or market.
Not all growth is good growth. Some growth can be disastrous for your Company.
Growth is a mentality – created by the leaders within a Company
Balance growth is the key to long-term prosperity.
Growing your business is much less risky than NOT growing your business.

If the rest of his video posts are like this I have been missing some things. Keep up the great work my friend.

Unfortunately, most young adults find themselves on their own when entering the “real world” without guidance about money and how to manage it. 7 Things About Money I Wish I Knew in My 20s is a great post.

IRS Presents: Five Facts about the Making Work Pay Tax Credit

Are you opening a new business this summer? The IRS has many resources available for individuals that are opening a new business. Here are six tax tips the IRS wants new business owners to know. IRS Presents: Six Tax Tips for New Business Owners.

Have you ever wondered how banks can offer higher than average interest rates on savings or checking accounts? Banks are in the business of making money, even if that means taking a loss sometimes. While that might sound counter-intuitive, it often works out well in the long run. So, How Do Banks Make Money by Offering High Interest Rates?

During the NATP annual conference my friend RDF ran some really great reruns. If you missed them please visit The Wondering Tax Pro

Your 2011 tax burden

Are you ready for a Roth?

Don’t fall for health care tax rumors

How To Prepare for Tax Increases Next Year In this Sluggish Economy

Am I Saving Enough Money For Retirement and How Much You Should Be Putting Away in 401K or IRA Accounts

LLC vs S Corp

Tax Relief FAQ: You Received a CP-504 Notice From the IRS for Back Taxes You Owe – What Does This Mean?

Back Taxes Aren’t Your Only Problem When Concealing Income from the IRS

This Month’s Runner Up for the Strangest Tax Form

Is extreme remodeling a charitable contribution?

Recording Fixed Assets

“Tax Cuts Will Expire” – Geithner

Me, me, me. It’s all about me.

What the Heck is Basis, Anyway?

Don’t Get Too Anxious to Stuff Just Anything into Your IRA

How Would the Expiration of the 2001 and 2003 Tax Cuts Affect Individual Taxpayers? With just a week left before Congress leaves town for the August recess, the fate of the 2001 and 2003 tax cuts is up in the air.

Last week I wrote About The Three Most Common Payroll Tax Mistakes and I shared one of my reasons and thought process as to why I have started writing about non-tax stuff. Truth is as the non-tax stuff goes, the bookkeeping is very important for your taxes. The IRS even tells you in Publication 583 (1/2007), Starting a Business and Keeping Records “Except in a few cases, the law does not require any specific kind of records. You can choose any recordkeeping system suited to your business that clearly shows your income and expenses.” As I read the second sentence or even interrupt it, the IRS is saying to you (business owners), it doesn’t matter if you use QuickBooks, Peachtree, or even Microsoft Office Accounting (before it was discontinued), but you need something “that clearly shows your income and expenses.” I promote QuickBooks because it is in my opinion, with over 12 years as a self-employed tax accountant, that QuickBooks is the best suited for those who keep their own books.

The Three Most Common Payroll Tax Mistakes

Posted by Bruce Mc on Jul 20, 2010 in Accounting, Bookeeping, Payroll service | 0 comments

There is no doubt that the laws surrounding payroll and payroll tax submission are difficult to master, even for the tax accounting professional.

Simple attention to the details can often reduce the risk of missing a tax payment, or making an incorrect deposit. Below are three common mistakes that can typically be avoided easily:

Submitting Deposits Late – Once you have withheld taxes from the employee, it is important to know when and how these taxes, along with the employer contributions, must be paid. There are many regulations at the Federal and State levels that dictate when and how payments are to be remitted. If payments are late, penalties and interest can be assessed. Contact your accountant, bookkeeper or payroll vendor to find out your payment obligations.
Late or Incorrect Payroll Tax Return Filings – There are numerous Federal and State returns that must be filed for payroll taxes, including withholding, unemployment, local and school district taxes. All have different reporting requirements (paper, e-file, mag media, etc.) and due dates. If proper procedures are not followed, penalties and interest can be assessed.
State Unemployment Insurance Rates not Updated -Most States update employer SUI rates annually. It is important to update the payroll software with the new rates, so taxes are properly paid. Underpayment of taxes can result in penalties and interest. Once again, contact your CPA, accountant, bookkeeper or payroll vendor for this information.

Avoid the Obligations Altogether – Outsource it.

Most small employers recognize they are unable to stay abreast of all their payroll tax obligations. Many outsource payroll to a payroll vendor. The vender deals with preparing the payroll and tax obligations for the client. IRS audits, payments and inquiries are directed to the payroll vender, which has teams of payroll and tax specialists on staff.

While the concept may sound foreign at first, thousands of employers have found that a payroll provider is precisely the cure to the payroll tax headaches they have been looking for.

Learn more about Payroll Tax services here.

Consider the following statistics:

The tax code (the basic law written by Congress) is 2,840 pages.
The IRS regulations add an additional 46,000 pages.
The combined number of forms for businesses and individuals is now over 480

Internal Revenue Code (IRC) 6656 reviews penalties for late payments of payroll deposits. A deposit only ONE day late will result in a penalty equal to 2% of the delinquent amounts. It jumps to 5% for payments made 6 days late, and doubles to 10% for payments made 16 or more days late. A recent report states that over 1 MILLION tax penalty statements are sent out quarterly.

Choosing a Payroll Provider —

Posted by Bruce Mc on Jun 25, 2010 in Choosing a preparer, Opinions, Payroll service, Preparer | 1 comment

There comes a time in every small business owner’s life when they start thinking about moving payroll from their living room computer into the hands of a hired professional.

View L & R Tax Preparation Payroll Video

Shopping for a payroll professional, as well as anything else, requires a little research.

Having just moved my company largely online with on line everything (including payroll) I thought I should put some information out for everyone. So, here are some key questions everyone should ask themselves before choosing a payroll provider.

Before you commit to a payroll provider, ask these questions.

1. What type of payroll provider service will address my needs best?

With traditional payroll services, you phone in, e-mail or fax your payroll information every pay period. These methods require you to establish a set time every pay period for you to submit your payroll. Traditional services also calculate taxes and other deductions and offer various payment methods for employees.

Online payroll has been available for nearly a decade. This service usually allows you to enter payroll hours from one Web site and will make all payroll tax calculations and deductions. Paycheck stubs and W-2s are available for employers and employees on a secure Web site, and direct deposit is usually included. Some, can and will file and pay payroll taxes on your behalf. (L & R Tax preparation now offers this service)

Payroll software, like online payroll, allows you to enter payroll information at your convenience and will perform necessary calculations. However, you are responsible for debiting your bank account, printing checks or arranging for direct deposit and handling IRS penalties and notices.

2. What are the biggest concerns about outsourcing payroll?

Most people agree that payroll would be an easy if it weren’t for payroll taxes, withholdings and other calculations such as 401k, or accrued leave time. If you don’t want to stay on top of strict IRS rules and regulations, choose a payroll service that will do the work for you.

Additionally, if you’re considering software or a phone/email/fax solution to process payroll, make sure they offer direct deposit. You’ll save your employees time, and you won’t have to be in on payday to hand out checks.

Although you probably won’t think of it immediately, online access for pay stubs and payroll records can save hours of tedious work. If an employee has ever asked you to provide the last six months worth of pay stubs for mortgage purposes, you know the advantages of offering employees self-service payroll accounts.

3. What if something goes wrong?

If it’s important for you to be able to speak with someone on the phone when you have a question about payroll, ask if they offer live, U.S.-based customer support. And if you’re one to work on Saturdays, you’ll want to make sure someone will be available to assist you then.

Phone support can be a lifesaver if you receive IRS penalties and notices. It’s not uncommon for businesses to receive these penalties or notices in error. If you don’t want to be on the phone directly with the IRS resolving the issue, make sure your payroll service has tax experts who will work with the IRS on your behalf.

Fitting in time for a call about a small payroll question is not on most small business owners’ lists of top priorities. Make sure your payroll service offers a comprehensive, easy-to-use online help database.

4. How does outsourcing my payroll help me stay in compliance?

Many services calculate payroll and provide direct deposits but don’t handle payroll tax deposits or filings. They may say they assist with those tasks, but if you want the most inconvenient and riskiest part of payroll off your plate, make sure your provider will deposit and file federal, state and local payroll taxes on your behalf.

If payroll taxes are the riskiest part of payroll, new hire reporting is the second. In a recent poll, 95 percent of business owners were not aware that federal and state law mandates that all new hires be reported to the state in an appropriate amount of time. To alleviate worries about compliance, select a payroll provider that reports new hires automatically.

Some payroll services offer more than payroll compliance. For example, your business must post the appropriate labor law posters. If you don’t want to worry about costly fines, ask a potential provider about labor law posters and poster updates.

5. Is it worth it?

Regardless of the method you choose — phoning-in, e-mailing, faxing, or entering payroll online or into software —outsourcing payroll is always faster and more reliable than doing it by hand. Homemade spreadsheets are useful, but a transposed number or erroneous formula can translate into a payroll nightmare as you try to rectify an employee’s pay and amend taxes.

If there’s one thing you can always count on changing, it’s tax laws. And they don’t always change at the beginning of the year. Outsourced payroll, even payroll software, spares you the burden of keeping up-to-date with ever-changing tax tables.

Some closing thoughts.

Outsourced payroll is the same as other outsourced services: You can’t put a price on more time to grow your business and service for your clients. That’s not to say the most expensive payroll service will provide you with the most free time. For example, traditional payroll services are usually the most expensive, yet they require you to set aside time during normal business hours to fax or phone in payroll. Likewise, the cheapest provider may save you money but will likely leave you scratching your head trying to decode payroll tax and compliance laws.

Look for the provider that meets your specific needs. Don’t pay for a service that charges for extras you won’t use. Likewise, don’t try to save money by selecting a service that meets just most of your needs. You want a service that handles all your needs. When you find the right payroll service, the benefits will justify the cost

Unexpectedly out of the office

Posted by Bruce Mc on Jul 31, 2009 in Re post | 0 comments

Due to an unexpected need to be away from my office I am forced to just put this repost up. I’ll be back by Sunday.

Making Work Pay tax credit

April 1^st was implementation day for the Making Work Pay tax credit, and it wasn’t an April Fool’s joke. The American Recovery and Reinvestment Act of 2009 (ARRA), Congress’ most recent effort to “stimulate” our economy, contains this new tax credit, which will affect everyone when filing your individual return. You may be able to take advantage of an income tax credit of as much as $400 ($800 for a married couple) on your personal tax return for the next two years.

The Making Work Pay tax credit served as centerpiece of the tax reduction provisions of the ARRA. President Obama strongly pursued its inclusion in the legislation because it would put money back into the pockets of working people. The annual tax credit (available in 2009 and 2010) is equal to 6.2% of earned income, to a maximum credit of $400 for an individual ($800 for a married couple filing jointly). The Key is “a maximum credit of $400 per working individual”. Dependants have no bearing on this.

Technically, taxpayers will receive the tax credit when they prepare and file their tax returns a year from now for 2009 (and then for 2010 the next year). However, practically speaking, taxpayers that receive wages from employment in 2009 will receive the tax credit in small increments throughout the year. How? The IRS in late February issued a new set of withholding tables structured to informally pay the amount of the tax credit over the course of the year by reducing required withholding amounts on payroll.

The Issue

The new withholding are designed to save employees roughly $10 per week for the rest of the year (40 weeks x $10 = a $400 tax credit). This isn’t working out for a lot of people. Several of my clients have called me because they are having more taken out then the ten dollars, some are even getting as much as forty-three dollars more a week.

This is a problem and will affect refunds and or amount due/s. Why, because you aren’t having as much withheld, and tax tables on your income haven’t changed. Withholdings went down, not income tax on your earnings.

The IRS produced new withholding tables in February and asked employers to implement them by April 1. But, withholding tables are a blunt instrument, unable to precisely assess taxes for everyone’s unique situations. Employers who use the tables don’t know workers’ complete situation, such as whether an employee has a second job or is married to someone who also works. That means some workers will end up with more cash than they’re eligible for under the new credit.

Adjustments may have to be made by individuals to make sure they’re not over- or under-withheld.

Again, the lower withholding may cause some unwanted results for taxpayers with more than one job, two-earner married couples, and high-income taxpayers.

The Fix

The IRS is aware of this issue and warns taxpayers that they (individual taxpayers) are responsible for making sure their withholdings are correct. This means that you are ultimately responsible for making sure you have enough withheld from your checks using your form W-4.

The first thing you can do is make sure your employer has these new tables. The new tables and instructions are found in IRS Publication 15-T. The next thing to do would be to Contact your tax professional and discuss this with them.

If that isn’t a viable option you can contact me I will be glad to help.

Beware, though, because the credit is phased out as your adjusted gross income exceeds $75,000 for individuals ($150,000 for married couples filing jointly). If your income exceeds $95,000 ($190,000 for married couples filing jointly), then you will not be able to receive any benefit from the Making Work Pay tax credit.

Timing is everything, especially with taxes … and tax information.

The IRS has an online calculator that reflects the new stimulus act withholding tables to help you get your amount just right. Armed with your most recent tax return and paycheck stub, you can in 10 minutes or so fill in the required information and get instructions on filling out a new W-4. You should use the calculator now. Then again, later in the year to ensure your assumptions are on track (around the end of October). You can always make a tweak or adjustment with your very final paychecks for the year so you don’t have any penalty or big surprise.

If you don’t have the time to run through the calculator — it involves entering various tax-related figures, including expected credits and the like — there’s another way: Submit a new W-4 filled out the same way as your old form but with one exception: On line 6, add the extra dollar amount to be withheld from each paycheck. See Form W-4 on IRS site (PDF).

The easiest way might be to leave the number of allowances alone, see how much they’re reducing your withholding by and then on line 6 write in that you want them to withhold an extra amount.

But remember: That W-4 stays in effect until you file a new one. If you don’t want the same additional amount to be withheld starting in January, file a new W-4.

There’s a third option: Don’t worry about the credit now, and just wait until you file in 2010 to pay the bill. This is not recommended by me unless your checks are exactly $10.00 more per week.

Making Work Pay tax credit

Posted by Bruce Mc on May 4, 2009 in Exemptions, Filling Status, Form 1040 Information, News Flash, Stimulus payments, Tax Preparation | 0 comments