Tag: Bookkeeping

Why We Run Quarterly Payroll for Our Clients

Posted on by Leave a comment

For many of our clients—especially those structured as S-corporations—quarterly payroll isn’t just a convenience, it’s a strategic and compliance-driven necessity. At Incline Business Essentials, we’ve developed a quarterly payroll model that aligns with IRS requirements and supports proactive tax planning. Here’s why we do it and how it helps your business.

S-Corporation Owners Must Pay Themselves a “Reasonable Wage”

One of the core requirements of an S-corp structure is that business owners who actively work in the company must be paid a reasonable salary through payroll. This salary is subject to standard payroll taxes, and it’s critical to stay in compliance with the IRS. Skipping this step can lead to audits or penalties.

By running quarterly payroll, we help ensure owners are consistently paying themselves a fair wage in a timely manner, while also simplifying the administration of payroll for smaller teams who may not need or want a monthly cadence.

Strategic Tax Planning: Avoiding Year-End Surprises

Another major advantage of quarterly payroll is the ability to strategically manage federal and state tax obligations. We work closely with you and your CPA to estimate the total amount you should be paying into the IRS and your state throughout the year—not just from wages, but including pass-through income that may affect your tax bill.

Once these estimated totals are calculated, we set up additional withholdings through payroll to help ensure you’re on track. This approach:

  • Helps smooth out tax payments over the course of the year
  • Reduces the risk of underpayment penalties
  • Minimizes the shock of a large year-end tax bill
  • Provides peace of mind for business owners who prefer to pay taxes incrementally

Our Process: Collaborative and Tailored

Each quarter, our team:

  1. Coordinates with your CPA (or uses our best estimates based on past tax performance and current year projections) to determine estimated tax obligations.
  2. Runs payroll to deliver your reasonable salary and any additional withholdings needed.
  3. Files and remits taxes to federal and state authorities, keeping your compliance on track.
  4. Monitors and adjusts withholdings as needed throughout the year to reflect changes in business performance or tax policy.

The Bottom Line

Quarterly payroll isn’t just about ticking a compliance box—it’s about using payroll as a tool to manage your cash flow, reduce surprises, and make smart, informed financial decisions. If you’re an S-corp owner, this cadence allows us to keep you aligned with IRS rules and on track for smoother year-end filings.

If you have questions or want to revisit your withholding estimates, let’s talk. We’re here to help make your financial systems work for you—not the other way around.

Why It’s Important to Have Your Bookkeeper Close the Annual Books

Posted on by Leave a comment
bookkeeper

As the year comes to a close, businesses must ensure their financial records are properly finalized. One crucial step in this process is the formal closure of the annual books by a bookkeeper. This essential practice not only maintains financial accuracy but also helps in compliance, decision-making, and strategic planning. But what exactly does closing the books involve, and why is it so important? Let’s explore the key aspects of this process.

What Does Closing the Books Involve?

Closing the annual books is a systematic process that ensures all financial transactions for the fiscal year are accurately recorded and reconciled. This involves several critical steps:

  1. Reviewing Transactions: Bookkeepers go through the entire year’s financial records to verify that all transactions—revenues, expenses, assets, and liabilities—are recorded correctly.
  2. Reconciling Accounts: Bank statements, credit card statements, and other financial records must be reconciled to ensure there are no discrepancies between what is recorded in the books and actual financial activity.
  3. Reconciling Payroll and Sales Tax Accounts: Payroll liabilities and sales tax payable accounts must be reviewed and reconciled to ensure all obligations have been met and recorded correctly.
  4. Adjusting Entries: Accruals, interest expenses, prepaid expenses, and other necessary adjustments are recorded to reflect accurate financial positioning.
  5. Generating Financial Statements: Once accounts are reviewed and reconciled, the bookkeeper generates key financial reports, such as the income statement, balance sheet, and cash flow statement, to provide a clear picture of the business’s financial health.
  6. Reviewing for Errors and Compliance: Any inconsistencies, duplicate transactions, or missing records are identified and corrected to ensure compliance with tax regulations and accounting standards.
  7. Client Book Review: The bookkeeper conducts a final review with the client to ensure all necessary documents are included, outstanding questions are addressed, and any last-minute adjustments can be made before officially closing the books.
  8. CPA Final Adjustments: The CPA will provide any final adjusting entries, including depreciation, to ensure financial statements reflect accurate tax and accounting treatments.
  9. Closing Temporary Accounts: Revenue and expense accounts are closed, transferring net profit or loss into the retained earnings account, resetting them for the new financial year.

Why Is Closing the Annual Books Important?

1. Ensures Financial Accuracy

By closing the books properly, businesses eliminate errors that could impact financial reporting. This helps ensure that all transactions from the previous year are accounted for correctly and that opening balances for the new year are accurate.

2. Facilitates Tax Preparation and Compliance

A well-maintained and closed set of books simplifies tax filings and ensures compliance with IRS regulations. Accurate financial records help minimize the risk of audits and penalties associated with incorrect tax filings.

3. Provides Insightful Financial Analysis

Closing the books provides a clear and complete financial picture, allowing business owners and management to analyze profitability, expenses, and cash flow trends, which can inform better decision-making.

4. Supports Strategic Planning

With properly closed books, businesses can create reliable budgets and forecasts for the coming year. This allows for more effective financial planning and helps set realistic goals based on accurate data.

5. Improves Investor and Lender Confidence

Investors, lenders, and other stakeholders rely on accurate financial statements to assess a company’s performance and financial health. A well-closed financial year reassures them that the company maintains sound financial practices.

6. Prepares for External Audits

If a business undergoes an audit, either by choice or necessity, properly closed books make the process much smoother. Having organized financial records ensures that all necessary documentation is readily available.

Conclusion

Closing the annual books is not just an administrative task—it is a fundamental practice for financial integrity, compliance, and business growth. A professional bookkeeper ensures that this process is handled efficiently, setting the stage for a strong financial start to the new year. Investing time and effort into this process can prevent costly errors, reduce stress during tax season, and provide valuable insights for future success.

Remember that the CPA provides the final end-of-year adjustments. Bookkeepers record financial transactions in the books, while CPAs apply tax law to those records. These transactions include items like depreciation, which is a tax adjustment, not an actual bank transaction.

What are Retained Earnings and Why Should You Care?

Posted on by Leave a comment

As a small business owner, you know that the numbers on your balance sheet matter. But what do those numbers mean? In this blog post, we’ll dive into one of the most important figures on the balance sheet—retained earnings—so that you can understand why it matters and how it can affect your bottom line.

What are Retained Earnings?

Retained earnings, also known as “accumulated profit,” or “profits retained,” is the amount of money left over after a company has paid its expenses and liabilities. This money is then reinvested in the business to cover future expenses or to expand operations. The amount of retained earnings is reported on the balance sheet each quarter or at the end of each financial year. It’s important to keep track of retained earnings because they represent a company’s history of profits and losses, as well as its ability to pay off debt in the future.

In order to calculate retained earnings you’ll need to know two other pieces of information – total equity and net income. Total equity is simply the sum of all assets minus all liabilities, while net income is calculated by subtracting all expenses from revenue for a given period (usually quarterly). To calculate retained earnings, simply subtract total equity from net income – it’s that easy!

Why Should You Care About Retained Earnings?

Retained earnings are an important figure for any business owner because they provide an indication of how profitable your company has been in recent years. If you have high retained earnings, it means that your business has been able to maintain a healthy level of profitability over time; if not, it could indicate that there are issues with cash flow or that you may need to make changes in order to improve profitability going forward. Additionally, having high levels of retained earnings can be attractive to potential investors or lenders who might be interested in providing additional capital for growth or expansion opportunities.

Retained earnings are an important indicator of a company’s financial health and overall profitability. While calculating them may seem daunting at first glance, understanding how they work will help you get a better grasp on where your business stands now and where it could go in the future. Knowing this key piece of information will also make it easier for potential investors or lenders to assess whether they should provide additional capital for growth opportunities down the road. Put simply – if you want your business to succeed long-term, understanding what retained earnings are and tracking them carefully is essential!

The 3 Types of Business Liabilities (And What They Mean for Your Bottom Line)

Posted on by Leave a comment

 If you’re a small business owner, then you know that one of the most important things to understand is your company’s financial statement. In particular, you need to have a firm grasp on your balance sheet—or, more specifically, your liabilities.

But what exactly are liabilities? And what types of liabilities should you be aware of? Here’s a quick overview:

Current Liabilities:

These are debts that need to be paid within one year. Examples include short-term loans, accounts payable, and accrued expenses.

Long-Term Liabilities:

These are debts that won’t come due for more than a year. Examples include long-term loans and bonds payable.

Equity Liabilities:

These are funds that have been invested in the company by shareholders. Equity is not technically a debt, but it is still considered a liability because it represents money that needs to be repaid (with interest).

As a small business owner, it’s important to have a firm understanding of your company’s financial statement—including your balance sheet. Your balance sheet lists all of your assets (what you own) and liabilities (what you owe). Of those liabilities, there are three main types: current, long-term, and equity. By understanding the difference between each type of liability, you can make better decisions about how to manage your finances and grow your business.

How to Avoid the Wrath of the IRS by Understanding the Difference Between Contract Labor and Employees

Posted on by Leave a comment

It’s tax season, and you know what that means… lots of businesses are scrambling to get their paperwork together to avoid any unwanted attention from the IRS. We’ve all heard the term “contract labor,” but what does that mean, and how does it differ from an employee? Don’t fret, my small business owners – I’m here to break it down for you in a way that’s actually kind of fun (I know, controversial statement when we’re talking about taxes). Grab a cup of coffee (or a stiff drink), and let’s dive in.

The first thing you need to know is that the employee vs. contractor classification is based on several factors, not just one. Here are a few questions you should ask yourself to determine whether your worker is an employee or a contractor:

Who controls the work?

If you have the right to control the worker’s actions on the job (when, where, and how they perform their duties), they’re likely an employee. If the worker determines those aspects, they’re more likely a contractor.

Who provides the tools?

If you provide the workers with the necessary tools and equipment to perform their job, they’re probably an employee. Contractors usually provide their own tools.

Is there an ongoing relationship?

If the worker is hired for a set period of time or project, they’re more likely a contractor. If there’s an expectation that their employment will continue indefinitely, they’re probably an employee.

Overall, the more control you have over when, where, and how the work is performed, the more likely the worker is an employee. If the worker has more control and autonomy, they’re usually a contractor.

Now, let’s talk about why this distinction is so important. When you hire employees, you must withhold certain taxes from their paychecks (like Social Security and Medicare) and pay the employer portion of those taxes. You’re also responsible for paying unemployment insurance and worker’s compensation insurance. When you hire contractors, you don’t have to withhold taxes or pay insurance – the contractor is responsible for those things.

However, just because you call someone a contractor doesn’t mean they actually are one in the eyes of the IRS. The consequences of incorrectly classifying workers can be severe – you could be on the hook for back taxes, penalties, and interest. So, always make sure you’re following the rules!

Another important factor to consider is how much control you have over the worker’s rate of pay. If you negotiate a rate with an independent contractor and don’t try to dictate what they charge, you’re likely in the clear. However, if you set a specific hourly wage or salary for a worker, they’re probably an employee.

One final thing to note: some workers are considered “statutory employees,” which means they’re treated like employees for tax purposes even if you consider them contractors. Examples of statutory employees include drivers and delivery personnel who work for you using their vehicles, as well as certain kinds of home-based workers. It’s important to know the rules for each type of worker to make sure you’re in compliance with the law.

Phew, that was a lot of information! The bottom line is this: determining whether someone is a contractor or an employee isn’t always clear-cut. It’s important to consider all the factors and make a well-informed decision. If you’re unsure, consult with a tax professional who can help guide you through the process. Remember, getting this right can save you a lot of headaches (and money) in the long run. Happy tax season!

How to Prepare and File Quarterly Payroll Reports

Posted on by Leave a comment

Every quarter, small business owners must submit payroll reports to their state and the Internal Revenue Service (IRS). These reports are essential for keeping accurate records of employee salaries, wages, and taxes. In this blog post, we will discuss the information required in these quarterly payroll reports and how to prepare them.

What Information is Required?

The information required in a quarterly payroll report varies by state but generally includes:

  • data on employee wages earned each quarter
  • employer contributions made during the same period
  • taxes withheld from employee paychecks

The report will also include detailed records of each employee’s gross wages (wages earned before any deductions) and net wages (wages after deductions have been taken out).

Additionally, employers should provide information on all employees, including their name, address, social security number, and job title/position held at the company or organization.

How to Prepare the Reports

Incline Business Essentials outsources payroll to a specialized payroll provider like Gusto or Quickbooks.  These payroll providers ensure that the reports are remitted to the various jurisdictions in an accurate and timely fashion. Quarterly payroll reporting is included in the service we provide to ensure your company is compliant.

Filing quarterly payroll reports is an important part of running a successful business or organization. The process can be time-consuming, but we ensure this is handled on your behalf.

PCI Compliance 101 – A Beginner’s Guide to Secure Payment Processing

Posted on by Leave a comment

Cyber-security and payment protection are top of mind for small businesses and consumers.  Small businesses are becoming increasingly vulnerable to data breaches and cyber-attacks. And when it comes to processing payments, PCI Compliance is a way to certify that your business meets current cybersecurity milestones.  As a small business owner, understanding payment processing and data security can be overwhelming. That’s why we’ve put together this beginner’s guide to PCI Compliance, to help small business owners understand the basics and protect their customers’ payment information. We hate that we have to think about this at all!

If you accept payments through Intuit/Quickbooks, make sure you read the last section of this blog!

What is PCI Compliance?

PCI Compliance stands for Payment Card Industry Compliance. It was developed by a council of payment card issuers, including Visa, Mastercard, American Express, and Discover, to establish security standards for businesses that process payment transactions. These standards were established to protect customers from payment card fraud and data breaches. Did we mention that this is boring and we don’t want to have to learn about this?

If you accept payments through Intuit/Quickbooks, make sure you read the last section of this blog!

Who needs to be PCI Compliant?

If your business accepts ACH, credit card, or debit card payments, you should be PCI Compliant. Even if you only accept a few payments a year, you are still at risk of a security breach. If your business is not PCI Compliant, you could be at risk of liability, fines, and a damaged reputation. They hit you where it hurts!

How can you become PCI Compliant?

Becoming PCI Compliant involves a series of steps that ensure your business is complying with the Payment Card Industry Data Security Standards (PCI DSS). These standards require businesses to implement certain security measures to protect their customers’ payment card information. The steps to becoming PCI Compliant typically involve completing a self-assessment questionnaire and undergoing a vulnerability scan to identify any potential security issues. Snooze, snooze.

What are the consequences of non-compliance?

If your business is not PCI Compliant, you could be at risk of fines, legal action, and a damaged reputation. In addition, if your customers’ payment card information is breached, you could be liable for the cost of the damages. Ensuring that your business is PCI Compliant is not only a legal requirement but also a crucial step in protecting your customers’ payment card information and your business’s reputation. Hit where it hurts….again.

PCI Compliance is essential for any business that processes payment transactions. As a small business owner, it is crucial to understand the basics of PCI Compliance and take the necessary steps to protect your customers’ payment card information. By implementing PCI DSS security measures and regularly monitoring your systems, you can reduce the risk of data breaches and cyber-attacks, and ensure that your customers’ trust in your business is maintained. Remember, being PCI Compliant is not only a legal requirement, but it’s also good business practice and a sign of your commitment to keeping your customers’ payment information safe.

If you accept payments through Intuit/Quickbooks:

Intuit recently released an announcement requiring businesses to use Intuit merchant services to become PCI compliant. To continue receiving electronic payments through Intuit merchant services, you will need to become compliant. You have likely already received an email from Intuit (yes, it’s in your junk) explaining the process.

Compliance requires that you pay an annual fee of $85-$300 to SecurityMetrics.  SecurityMetrics will provide you with your final price.  

As a small business owner, you have choices.  You can become compliant.  You can change to a different payment processing system.  You can decide not to accept electronic payments.  All of these options have implications for your business and for your bookkeeping system.  Please take a moment to talk with your lead bookkeeper about your options.  For more information, contact your lead bookkeeper to schedule a talk.  

If you decide to become compliant, Quickbooks has partnered with SecurityMetrics to provide a more seamless experience.  For more information about how the process works and to become compliant, here is the update from Intuit. 

Or for a more personalized experience, contact SecurityMetrics directly at 801-995-6400

What is the Difference Between a CPA and a Bookkeeper?

Posted on by Leave a comment

Are you a small business owner, CEO or CFO trying to determine which financial professional you need for your organization? Both Certified Public Accountants (CPAs) and Bookkeepers are important roles in any finance department, but they have different responsibilities. Here’s what you need to know about the difference between CPAs and bookkeepers.

What Does a CPA Do?

A CPA is responsible for providing financial advice, managing taxes, and auditing financial records. They typically focus on long-term planning for businesses as well as individuals. CPAs also analyze complex financial data and create solutions that can help businesses reduce their taxes or increase profits. A CPA may also work with other professionals such as lawyers or consultants to provide the best advice possible.

What Does a Bookkeeper Do?

A bookkeeper is responsible for maintaining accurate financial records of a business’s daily transactions. Common tasks include tracking accounts receivable, accounts payable, payroll, budgeting, and invoicing. The goal of a bookkeeper is to ensure that all transactions are properly recorded so that accurate financial statements can be generated each month.  While bookkeepers don’t usually provide long-term strategies or tax advice like CPAs do, they can assist with analyzing data and making sure everything is up-to-date and accurate. This helps the business make informed decisions by having reliable data on hand at all times.

It’s important to understand the differences between CPAs and bookkeepers when hiring for your organization’s finance team – both play an essential role in helping you reach your goals! While CPAs provide strategic guidance on long-term planning and reducing taxes, bookkeepers keep track of day-to-day operations by tracking expenses and generating accurate reports from this data. Together, both roles are critical components of running an effective finance department!

Balance Sheet Basics – What Assets Can You Expect to See?

Posted on by Leave a comment

A balance sheet is an essential financial document that provides a snapshot of your business’s assets, liabilities, and equity. It serves as a way to track the health of your company by revealing how much money you have coming in and how much money you are spending. But what exactly do all of those assets mean? Let’s take a look!

What are Assets?

Assets are items that have value and can be owned or controlled to produce value. On a balance sheet, they can represent anything from cash to accounts receivable. They can also include tangible items such as machinery and equipment, real estate, vehicles, furniture, inventory, and buildings.

Examples of Assets

Cash

This includes both physical cash on hand as well as funds held in bank accounts or other liquid investments. Cash is important for day-to-day operations because it allows businesses to pay bills, purchase supplies, and make payroll.

Account Receivables

These are payments owed by customers who have purchased goods or services from your business but have yet to pay for them. Accounts receivable is an important asset because it reflects future revenue that has not yet been recognized in the current period.

Investments – Investments include stocks, bonds, mutual funds, etc., which may be held for investment purposes or income generation. Holding investments helps diversify risk within a portfolio and potentially generate returns over time.

Equipment

Equipment refers to any machinery or tools used in order to run the business such as computers, desks, printers, vehicles, and more. Equipment is important because it enables the business to carry out its operations efficiently.

Inventory

This includes any products or materials that are held for sale by the company. Inventory must be tracked closely in order for a business to maintain healthy cash flow levels since selling inventory generates immediate revenue for the business.

As we can see from this quick overview of assets on a balance sheet, understanding what each asset means can help small business owners better manage their finances and stay on top of their financial goals! By familiarizing yourself with these common assets—cash accounts receivable investments equipment inventory—you will get one step closer to achieving financial success!

A Bookkeeper’s Guide to Closing Out the Books for the CPA

Posted on by Leave a comment

If you own a small business, you might find yourself asking the age-old question: How does a bookkeeper close out the books for the CPA? It’s an important question—after all, your accountant can’t prepare your taxes without accurate and up-to-date financial statements. Fortunately, we have an answer. Let’s dive into how a bookkeeper closes out the books for the CPA.

Organizing Financial Records

The most important step in closing out the books is making sure that all financial records are organized and up-to-date. This means that all transactions must be recorded accurately, either in a physical ledger or in accounting software. It’s also important to make sure that all accounts are reconciled and any discrepancies are resolved before sending them off to your accountant. Doing this will help you avoid any potential headaches down the line when it comes time to prepare your taxes. As bookkeepers, we handle this on a regular basis throughout the year.  At year-end, we complete extensive reviews to ensure accuracy.

Recording Adjusting Entries

Once bookkeepers have ensured that all of your financial records are in order, it’s time to record any necessary adjusting entries in order to ensure accuracy. This includes recording accruals such as unpaid wages, prepaid expenses, and accrued income. Interest on loans must be recorded and reconciled.  Payroll reconciliations involve ensuring that the payroll recorded in the books matches the quarterly and annual reports provided to the state and IRS. Double-checking that the Accounts Receivable and Accounts Payable are accurate is another step to confirming that the books can be closed out accurately. These entries must be made prior to closing out the period so that they can be accurately reflected on the financial statements sent to the accountant.

Closing Out Accounts

The final step is closing out any accounts that need to be closed for tax purposes or other reasons. This involves transferring any balance from one account to another (e.g., from a current asset account such as Cash to an income account such as Revenue). This ensures that all accounts reflect their correct balances as of the end of the fiscal year or period being closed out for review by your accountant or auditor.

Closing out books for a CPA can seem daunting at first glance but it doesn’t have to be! With careful organization and attention to detail, we can close out your books before sending them off for review by their CPAs or auditors. By following these steps—organizing financial records, recording adjusting entries, and closing out accounts—you can rest assured knowing we are well on our way towards preparing accurate financial statements for review by your CPAs.