Be Ready for Q4 2022

Can it truly be?  It is almost the final quarter of 2022.  Wow. 

As we approach this quarter, please be aware of the bookkeeping and financial items that will need to be completed:

  1. We will be meeting with you to get through any questions we have about your books.
  2. If you are a business owner who needs to run payroll for yourself, this will need to happen in the next couple of months.  If you haven’t been running a regular payroll, you may need to pay a chunk of change to the IRS/State before the middle of December. Start saving!
  3. We will be gathering W9s to be prepared to issue 1099s in January. We will reach out as needed.
  4. If you need to do some financial planning with your CPA, this should be done October/November.  We can provide your CPA with current financials so that your CPA can: recommend payroll, recommend tax payments that need to be completed before the end of the year, make recommendations for large purchases such as a new vehicle, etc.  

Be ready as we start reaching out to fine tune the books and be as prepared as possible to close your books early in 2022.

Why You Need Bookkeeping

If you run a business, the act of bookkeeping is essential. Let’s start by defining bookkeeping. What exactly is “Bookkeeping?”

Bookkeeping is the process of recording the financial transactions of your company. Bookkeeping categorizes the money coming into your business as income. Expenses refer to money that your business spends in order to operate. The act of bookkeeping organizes your expenses into categories that are used to file your taxes.

Now let’s talk about why this matters.  

File Your Taxes

As a business owner, you will likely hire a CPA to file your taxes. You will need to provide the CPA with your income and your expenses. Your taxes cannot be filed without this information. This leads to the next important reason for keeping an accurate set of books.  

Pay Fewer Taxes

This is probably the most attractive reason to have a bookkeeping system in place. Bookkeeping identifies all of your transactions so that nothing slips through the cracks. You must categorize each and every transaction that goes through your bank account. By keeping an accurate set of books, you will know exactly what you spend on gas or office supplies, or advertising. When you are gathering your data at the end of the year, you aren’t trying to remember how much you spent on that new computer or which client you took to lunch in May. Without a clear bookkeeping system, you will invariably miss out on deductions. You must have a plan and a process to ensure that deductions are captured.

Your expenses must be organized into categories approved by the IRS in order to be considered “deductions”. Without deductions, you will pay taxes on the entire income of your business. With deductions, you will rightfully cut this tax bill thereby saving you and your business money. For example, if your business brings in $100,000 without deductions, you might pay the IRS upwards of $25,000. But, if you can clearly show business expenses of $60,000, you might pay $10,000. This is a tax savings of $15K — not just nickels and dimes!

Track Your Profit

Profit is a key indicator of your business’s success. You can only determine your profitability if you are tracking your income and expenses.

Make Decisions About Your Business

Bookkeeping can help you make decisions about your business. Is it a good time to hire? Should you be increasing your prices? Are you spending too much on utilities? These decisions are guided by your business’s financial health.

Financing

In order to get financing for your business, you will need to provide the lender a set of books showing your income and expenses. Banks will require you to show your expenses vs. your revenue, otherwise known as your Income Statement or Profit and Loss. Bookkeeping will provide this report.

Catch Mistakes

Were you overcharged or charged twice for a service? Are you paying for a subscription that you are no longer using? You will catch these transactions through your bookkeeping because you are looking closely at every transaction.

Where Is Your Money Going?

Through bookkeeping, you will understand where your money is going.  This will help you budget and plan cash flow for the development of your business.

Bookkeeping will save you money by saving on taxes, cutting down on mistakes, guiding you through financial decisions, and improving your cash flow.  Business owners often want to do this on their own. Sometimes this works. But often the books are the piece of the business that well-intentioned owners plan to do and just don’t have enough time in the day.  

Bookkeeping is essential but it does take time, pulling you away from your actual business and preventing you from focusing on your clients.  As a business owner, you wear so many hats.  This is one that you can easily outsource with confidence. Reach out for a complementary consultation to see if our services would be a good fit for your business.

Subcontractor Compliance and 1099s

This is the time of year that we start preparing for 1099s and Insurance Audits.1099s must be issued in January for all appropriate subcontractors. Insurance Audits apply only to those of you whose insurance companies require the annual audit. You know who you are!

Our Incline Team will be working together to facilitate this process. You may be hearing from an unfamiliar team member. Please know that this is our team collaborating and assisting one another to efficiently handle this process.  

Subcontractors and 1099s

As a business, you are required to issue 1099s to any individual OR unincorporated business that you pay more than $600 for a service within the fiscal year. For example, if you pay someone $800 to install shelving in your office, you must issue a 1099 to that individual. If you pay a web design company $3000 to update your website, you must issue a 1099 to that company if they are not a corporation. If you pay rent over $600 each year, you must issue a 1099 to your landlord. There are additional nuances but you get the picture. We will be running vendor reports to determine who needs to be issued a 1099 and will be helping to collect the required W9 from the individual or company. This means we will be contacting your vendors on your behalf.  

Subcontractors and Insurance Audits

Depending on your industry, you may have an annual insurance audit. Typically, this is your insurance company wanting proof that your subcontractors have their own insurance. This is very common in the construction industry although we are seeing this branch out into a variety of industries. We will determine who should be providing proof of insurance and will reach out to collect the insurance certificates. When you audit year cycles, will complete the audit paperwork on your behalf.  

Through all of these processes, we do our best to handle as much as possible ourselves. That being said, we may need contact information from your vendors. We may need clarification about exactly what you are paying the vendors for. We may have a vendor who is not completing the necessary paperwork and will contact you to step in.  

We are starting this process now so that we will be prepared for the January deadline and for insurance audit deadlines. Just know that we are working behind the scenes to ensure that all necessary paperwork is collected to comply with these requirements.

Separate Business Finances from Personal Finances

As a business owner, it is important that you follow basic business practices for the health, security and longevity of your business.  It is extremely important that business financials be separated from your personal finances. 

3 reasons to keep your business finances separate from your personal finances

1.     Avoid Audits

The IRS frown upon the co-mingling of business and personal funds.  You are expected to have a business account. Expenses related to the business should be made out of the business account. Income from your clients should be directly deposited into your business account. This creates a clean and clear money trail which is what the IRS would like to see. 

2.     Protect yourself from liability

If your business is ever in legal trouble or is sued, you want a clear distinction that separates you personally from your business. If you co-mingle funds, you are not “behaving” like a business should. This can lead to you personally being liable for legal issues that should be covered under your business.

3.     Efficient bookkeeping

Keeping your business and personal finances separate ensures that you capture all of your business expenses. Having a separate business bank account streamlines your bookkeeping thereby reducing your bookkeeping costs.

How can you accomplish separating business expenses from personal expenses?

The single most effective way to separate business from personal is to have a dedicated business bank account. Pay for your business expenses out of this account. Deposit money from your clients into this bank account. Contact your local banker to set up your business account. They can walk you through this process. And let us know if you have any questions or need any help.

Colorado Sales Tax – Oh boy, oh boy, oh boy.

sales tax updates in colorado

Yes, we hear you. It’s always something in the State of Colorado. If you have sales tax, please read this!

First of all, this will affect ALL businesses who deliver taxable products in the State of Colorado. If you sell taxable products but DO NOT deliver the products, you can skip to the last section.

Retail Delivery Fee

If you deliver, you must now impose a $0.27 Retail Delivery Fee for every shipment. You will need to collect this $0.27 per delivery and remit this amount to the State of Colorado through your Revenue Online portal.  This fee must be listed on your invoice as a separate line item called “Retail Delivery Fees.”  

Incline Business Essentials is working with Quickbooks to determine how best to track this. If you are going to need to participate in this new requirement, it will complicate your sales tax, and we will be adjusting our prices accordingly. This is a new filing in addition to your current sales tax filing. Stay tuned for additional information.

For additional information, click here or contact the state of Colorado at (303) 238-7378. 

Retailers Who Do Not Deliver

The State is going to automatically sign ALL retailers up for this new Retail Delivery Fee. They have announced that you will have to manually “Opt Out”. If you do not “opt out”, you will receive notices from the State reminding you to remit IF you are required to.  

New Management Software

We’ve come a long way! Your Incline Business Essentials team is committed to providing you with the most excellent service possible. We are continually increasing our knowledge and use of technology to provide efficient services. We are excited to be launching a new software tool, Karbon, that will help us collect information from you and send financial reports to you in a timely manner. 

Karbon helps us track important deadlines and ensures that we complete thorough book reviews on a regular basis. Quality control is essential, and we firmly believe that Karbon will elevate our level of quality and service.

What this means to you: NOT MUCH! 

The change you will see is that when we request information, we will send you a checklist. You can upload documents easily through this request.  Then, you should check-off your task. Checking off your task, notifies us that your task is complete. 

We have tested this with several clients, and so far, so good!  The system is easy to use. Please be aware that when you reply and/or upload documents, this is a fully encrypted and secure system.  

We know that change is hard.  Thank you for your willingness to use this system. Rest assured that it is easy. We appreciate you so much and sincerely thank you for your business!

Contact us if you have any questions about Karbon!

What Is Bookkeeping?

In the simplest terms, bookkeeping is the act of recording every single financial transaction related to a business. This is the bare bones necessity to having financial records prepared for tax filing purposes. Bookkeeping organizes your expenses into categories that are needed for tax filing. For example, all purchases related to office supplies are categorized so that a total spent on these items can be recorded as business deductions on the tax return.

In real business, bookkeeping is so much more than described above.  Bookkeeping services will vary depending on the nature of your business.  Here are some of the primary services that a bookkeeper might handle.

Primary Bookkeeping Services

  1. Track the bank accounts and credit card accounts to ensure that every transaction is captured accurately.  
  2. Track payables and might be responsible for ensuring that bills are paid
  3. Invoice your customers and track receivables
  4. Payroll
  5. Sales Tax
  6. Collecting W-9s from vendors
  7. Provide cash flow reporting
  8. Assist with budget creation
  9. Quarterly tax coordination with CPA
  10. Receipt Management
  11. Act as a liaison between you and your CPA

Bookkeeping is essential in the overall health of your business. Bookkeeping services ensure that you have the information needed to make decisions about your business. Your books are maintained properly to avoid mistakes and missed deadlines. Proper bookkeeping will help you understand your cash flow. Financial reports will be ready for your CPA.  

In summary, a bookkeeper will save you time and money while reducing stress on business owners. The success of your business depends on high quality bookkeeping.

Sick Leave 2022

If you have employees, this is IMPORTANT to your business. PLEASE READ THIS and remember not to kill the messenger!  If you don’t have any employees, your work is done for the moment.  Sit back and enjoy your day.

New Colorado mandates now REQUIRE that all employers provide sick-leave to every single employee.  

Here is the summary of how this will work. Please note, this is a summary. For full details, see links below:

Effective January 1, 2022, all Colorado employers will be required to offer paid sick leave to all employees (full-time and part-time)…Employees will accrue 1 hour of sick leave for every 30 hours worked. Unused sick leave during a calendar year must be allowed to roll over to the next year.

Obviously, this is a significant change. While it is highly impactful to the bottom line for small businesses, it is wonderful that employees will receive the ability to call in sick. As a business owner myself, I understand the impact. I certainly want my employees to receive fair compensation and to be treated well. At the same time, I am always looking at my bottom line. The cost to small businesses must be carefully considered and must now be a part of your business budget. This new legislation makes me extremely happy and a little sick to my stomach all at the same time. I took some Pepto Bismol, splashed some cold water on my face and am moving on to follow the law.

Incline Business Essentials is NOT an HR firm, we are bookkeepers. That being said, we want to inform you of this new requirement and identify how we can help. We are providing you with a quick overview of the new law.  For additional information, it is your responsibility as an employer to adhere to current HR laws.  

For additional information, see links:

Or contact the Colorado Department of Labor for specific questions.

Need Help Tracking Accrual of Sick Leave?

But wait….all is not lost!  Here’s how we can help!  It is important that you are tracking the accrual of sick leave (1 hour of sick leave per 30 hours worked). We can handle this piece for you. If you would like our help, please contact our administrator, Tisha Summerhays at admin@inclinebusinessessentials.com. Tisha will be orchestrating this operation within our company but your account manager will handle the tracking process.  

Setting up this tracking service will be billed as follows:

Gusto Payroll Users

At a flat rate of $200 onboarding and $50 per month for up to 5 employees, $5 per employee above 5. If your employees have difficulties with logins or requesting sick leave, we will bill hourly for assistance.

QBO Payroll Users

At a flat rate of $300 onboarding and $50 per month for up to 5 employees, $5 per employee above 5. If your employees have difficulties with logins or requesting sick leave, we will bill hourly for assistance.

You should update your employee handbook to reflect this new Colorado policy. Don’t have a handbook? You MUST take care of this to protect yourself and your employees. Your business and you personally are vulnerable if you are operating without a handbook. It leaves you open for potential lawsuits and/or fines. While we cannot write a handbook for you, we can facilitate this process through the use of payroll HR experts. Let Tisha know if you are interested. Pricing for this will be on a case by case basis.

Please know that Incline will make this change as seamless as possible. That being said, you will need to be involved. As a business owner, I understand it is HARD to put time and effort into these types of requirements. But here we are. So let’s hold up our heads, square our shoulders and get ready for the work. And know that we will be there to help and support you through these challenges.

If you have any questions, feel free to give us a call at 720-900-1301 or contact us below.

Payroll Onboarding

Do you need to hire an employee? Here are the absolute basics.

Photo by RODNAE Productions on Pexels.com

First, you must be set up for payroll. Your company must have an EIN, a Wage Withholding Account and a Unemployment Account at the very least. This will vary from state to state.

When you have these pieces set up and are ready to hire, you must collect: W-4, I-9, Acceptable Identification. Depending on your state/local requirements, you may also need to collect emergency contacts and report the new hire to your state.

Questions? Give us a call. We can help with the entire process.

This is a guideline only, please know that requirements are constantly being revised.

Bookkeeper vs. CPA

What is the difference between a bookkeeper and a CPA?  What does a bookkeeper do? What does a CPA do? Does my business need both?  Are you confused about these roles? You’re not the only one! Let me help you clarify.

First off, you need both.  Your bookkeeper is the pitcher.  The player with her hands on every play.  The CPA is the coach, guiding you based on the information provided by the pitcher.  It is best for you and your business if you find a bookkeeper and CPA who are able to work together to be sure everything is covered!

A bookkeeper records the numbers: actual financial activity happening within your business. A bookkeeper is responsible for your day to day business transactions: 

  1. Tracking your business expenses and income
  2. Reconciling your bank accounts, credit card accounts and loans
  3. Tracking your payables/bills
  4. Tracking your receivables and sending out regular statements to your customers
  5. Prepare regular business reporting to business owner(s)

These are the basics.  The above tasks should be completed on a regular basis (weekly or monthly depending on your business nature and volume).

Some business may need additional services. We will call these the “fuzzy” tasks.  This is where most businesses experience confusion because these services can be completed by the bookkeeper OR the CPA.  As a business owner, it is important that you identify who will be completing these tasks on your behalf. The CPA may assume the bookkeeper is completing these tasks.  Conversely, the bookkeeper may assume that the CPA is completing these tasks. Ultimately, you are responsible.  

Manage payroll including

  • Running regular payroll to pay business owner and/or employees
  • Complete required payroll deposits as dictated by IRS, State, and local jurisdictions.
  • Complete required Quarterly reports including 941, State Quarterly, Quarterly UI Reports, and any local reporting
  • Enter payroll into the bookkeeping system
  • This may also include tracking benefits if applicable

File sales tax reports and arrange for payment: Quarterly or Monthly as dictated by jurisdiction

File periodic report (annually in Colorado)

While a bookkeeper is responsible for recording the actual numbers, the CPA makes decisions about these numbers based on tax law.  The CPA should advise you about estimated quarterly taxes. The CPA will create your tax return and file your income taxes.  Some CPAs will help with the “fuzzy” tasks, some will not. Your CPA should be licensed and certified. Your CPA will provide additional, in depth analysis of your business.

Your business will operate most effectively if all the players and coaches have open communication. When the bookkeeper and the CPA can work together and are in touch with one another, you and your business will reap the rewards.

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