5 QuickBooks Online Reports You Should Run Regularly

There are numerous QuickBooks Online reports that you should consult at regular intervals; however, you need to review the following five reports at least once a week:

QuickBooks Online’s Dashboard, the first screen you see when you log in, provides an effective overview of your company’s finances. It contains at-a-glance information about your recent expenses, your sales, and the status of your invoices. It displays a simple Profit and Loss graph and a list of your account balances. Scroll down and click the See all activity button in the lower right and your Audit Log opens, a list of everything that’s been done on the site and by whom.

You can actually get a lot of work done from this page. Click the bar on the Invoices graph, for example, and a list view opens, allowing you access to individual transactions. Click Expenses to see the related Transaction Report. Below the list of account balances, you can Go to registers and connect new accounts.

Other Pressing Questions
The Dashboard supplies enough information that you can spot potential problems with expenses and sales, accounts, and overdue invoices. But you’re likely to have other tasks that require attention. How’s your inventory holding up? Are you staying within your budget? How about your accounts payable – will you owe money to anyone soon?

QuickBooks Online offers dozens of report templates that answer these questions and many more. If you’ve never explored the list, we suggest that you do so. It’s impossible to make plans for your company’s future without understanding its financial history and current state.


QuickBooks Online has many reports that can provide real-time, in-depth insight into your company’s financial health.
Comprehensive and Customizable
When you click Reports in your QuickBooks Online toolbar, the view defaults to All. The site divides its report content into 10 different sections, including Business Overview, Sales and Customers, Expenses and Vendors, and Payroll. Each has two buttons to the right of its name.Click the star, and that report’s title will appear in your Favorites list at the top of the page. This will save time since you’ll be able to quickly find your most often-used reports. Click the three vertical dots and then Customize to view your customization options for that report (you’ll have access to this tool from the reports themselves).
Necessary Knowledge
You can, of course, run any report you’d like as often as you’d like. Most small businesses, though, don’t require this frequent intense scrutiny. But there are five reports that you do want to consult on a regular basis. They are:
1. Accounts Receivable Aging Detail. Displays a list of invoices that haven’t yet been paid, divided into groups like 1-30 days past due, 31-60 days past due, etc.
2. Budget vs. Actuals. Just what it sounds like: a comparison of your monthly budgeted amounts and your actual income and expenses.
Warning: Some reports let you choose between cash and accrual basis. Do you know the difference and which you should choose? Ask us.

You can customize QuickBooks Online reports in several ways.

3. Unpaid Bills. Helps you avoid missing accounts payable due dates by displaying what’s due and when.
4. Sales by Product/Service Detail. Tells you what’s selling and what’s not by displaying date, transaction type, quantity, rate, amount, and total.
5. Product/Service List. An accounting of the products and/or services you sell, with columns for price, cost, and quantity on hand.

Customization, Complex
Reports Note that there’s a category of reports in QuickBooks Online named For My Accountant. That’s where we come in. The site includes templates for reports that you can run yourself, but that you’d have difficulty customizing and analyzing. These standard financial reports—which, by the way, you’ll need if you create a business plan or try to get funding for your business—include Balance Sheet, Statement of Cash Flows, and Trial Balance.

You do not need to have these reports generated frequently, but you should learn from the insights they provide monthly or quarterly. We can handle this part of your accounting tasks for you, as well as any other aspect of financial management where you need assistance. Contact us to learn more about our bookkeeping expertise and to discuss areas where we can assist you make better decisions for the future of your business.

How Long Should You Hold On To Old Tax Records?

This is a common question: How long must taxpayers keep copies of their tax returns and supporting documents?

Generally, taxpayers should hold on to their tax records for at least 3 years after the due date of the return to which those records apply. However, if the original return was filed later than the due date, including if the taxpayer received an extension, the actual filing date is substituted for the due date. A few other circumstances can require taxpayers to keep these records for longer than 3 years.

The statute of limitations in many states is 1 year longer than in the federal statute. This is because the IRS provides state tax authorities with federal audit results. The extra year gives the states adequate time to assess taxes based on any federal tax adjustments.

In addition to the potential confusion caused by the state statutes, the federal 3-year rule has a number of exceptions that cloud the recordkeeping issue:

  • The assessment period is extended to 6 years if a taxpayer omits more than 25% of his or her gross income on a tax return.
  • The IRS can assess additional taxes without regard to time limits if a taxpayer (a) doesn’t file a return, (b) files a false or fraudulent return to evade taxation, or (c) deliberately tries to evade tax in any other manner.
  • The IRS has unlimited time to assess additional tax when a taxpayer files an unsigned return.

If none of these exceptions apply to you, then for federal purposes, you can probably discard most of your tax records that are more than 3 years old; however, you may need to add a year or more if you live in a state with a statute of longer duration.

Examples: Susan filed her 2014 tax return before the due date of April 15, 2015. She will be thus able to safely dispose of most of her records after April 15, 2018. On the other hand, Don filed his 2014 return on June 1, 2015. He needs to keep his records at least until June 1, 2018. In both cases, the taxpayers may opt to keep their records a year or more beyond those dates if their states have statutes of limitations that are longer than 3 years. 

Important note: Although you can discard backup records, do not throw away the filed copies of any tax returns or W-2s. Often, these returns provide data that can be used in future tax-return calculations or to prove the amounts of property transactions, social security benefits, and so on. You should also keep certain records for longer than 3 years:

  • Stock acquisition data. If you own stock in a corporation, keep the purchase records for at least 4 years after selling the stock. The purchase data is needed to prove the amount of profit (or loss) that you had on the sale.
  • Statements for stocks and mutual funds with reinvested dividends. Many taxpayers use the dividends that they receive from a stock or mutual fund to buy more shares of the same stock or fund. These reinvested amounts add to the basis of the property and reduce the gain when it is eventually sold. Keep these statements for at least 4 years after final sale.
  • Tangible property purchase and improvement records. Keep records of home, investment, rental-property or business-property acquisitions, as well as all related capital improvements, for at least 4 years after the underlying property is sold.

Tax return copies from prior years are also useful for the following:

  • Verifying Income. Lenders require copies of past tax returns on loan applications.
  • Validate Identity. Taxpayers who use tax-filing software products for the first time may need to provide their adjusted gross incomes from prior years’ tax returns to verify their identities.

The IRS Can Provide Copies Of Prior-Year Returns —Taxpayers who have misplaced a copy of a prior year’s return can order a tax transcript from the IRS. This transcript summarizes the return information and includes AGI. This service is free and is available for the most current tax year once the IRS has processed the return. These transcripts are also available for the past 6 years’ returns. When ordering a transcript, always plan ahead, as online and phone orders typically take 5 to 10 days to fulfill. Mail orders of transcripts can take 30 days (75 days for full tax returns). There are three ways to order a transcript:

  • Online Using Get Transcript. Use Get Transcript Online on IRS.gov to view, print or download a copy for any of the transcript types. Users must authenticate their identities using the Secure Access process. Taxpayers who are unable to register or who prefer not to use Get Transcript Online may use Get Transcript by Mail to order a tax return or account transcript.
  • By phone. The number is 800-908-9946.
  • By mail. Taxpayers can complete and send either Form 4506-T or Form 4506T-EZ to the IRS to receive a transcript by mail.

Those who need an actual copy of a tax return can get one for the current tax year and for as far back as 6 years. The fee is $50 per copy. Complete Form 4506 to request a copy of a tax return and mail that form to the appropriate IRS office (which is listed on the form).

If you have questions about which records you should retain and which ones you can dispose of, please give us a call.

Taxpayers Find Gift Tax Reporting Confusing

Gift taxes were created to prevent wealthy taxpayers from transferring their estates to their beneficiaries via gifts and thus avoid estate taxes when they pass away. But that does not mean only wealthy taxpayers need to be concerned with the gift tax provisions as, under many circumstances, even lower-income taxpayers may find they are liable for filing a gift tax return.

The government uses the gift tax return to keep a perpetual record of a taxpayer’s gifts during their lifetime, and gifts exceeding the amount that is annually exempt from the gift tax reduce the taxpayer’s lifetime estate tax exclusion, which is currently $11.18 million (nearly a two-fold increase from the 2017 exclusion as a result of the Tax Cuts and Jobs Act of 2017).

So what does this have to do with me you ask, since your estate is significantly less than $11.18 million? Well, your estate may be less than $11.18 million now, but what will it be when you pass away? You never know. Another concern is that the IRS requires individuals to file gift tax returns if their gifts while living exceed the annual exemption amount.

Annual Gift Tax Exemption – Under the gift tax rules, there is an annual amount that is exempt from the gift tax, which allows each taxpayer to give up to the specified amount each year to as many individuals as they would like without having to file a gift tax return or pay any gift tax. The annual amount is inflation adjusted, and for 2018 that amount is $15,000 (up from $14,000 in 2017). The recipients of the gifts do not need to be related to the person making the gift.

Example 1: A taxpayer with four children can gift $15,000 to each child for a total of $60,000 without having to file a gift tax return. If the taxpayer is married, each spouse can gift $15,000 to each child, for a total for the couple of $120,000, without having to file a gift tax return.

Example 2: A single taxpayer has one child, a son. In 2018, he gives the son $20,000 to use for a down payment on a home he is purchasing. Because the gift was more than $15,000, the taxpayer needs to file a gift tax return. As long as the amount of the cumulative gifts made by the taxpayer during his lifetime that have exceeded the annual gift tax exclusion amounts in the current and other gifting years is less than $11,180,000, the generous dad won’t be liable for any gift tax on his 2018 gift tax return.

Additional Exclusions – In addition to the annual exemption amount, a donor may make gifts that are totally excluded from the gift tax and gift tax reporting under the following circumstances:

  • Payments made directly to an educational institution for tuition (payments to Sec 529 qualified state tuition saving plans are not direct). This exclusion includes college and private primary education but does not include books or room and board.
  • Payments made directly to any person or entity providing medical care for the donee (recipient).

In these cases, it is crucial that the payments be made directly to the educational institution or health care provider. Reimbursement paid to the donee will not qualify for the exclusion. The tuition/medical exclusion is often overlooked, and these expenses can be quite significant. Parents, grandparents, and others interested in reducing the value of their estate should strongly consider these gifts.

Please give us a call if you have questions.

Why Am I Being Audited by the IRS?

With the 2017 filing season currently behind us, notices have started to appear in mailboxes. While the IRS letterhead strikes fear into the hearts of most Americans, a vast majority of those notices are nothing to fear, since most of them are computer-generated and referring to outstanding tax bills you haven’t paid yet or errors on your tax return that can be easily addressed. Simply getting an IRS notice is not indicative of an audit.

With the numbers in for 2016 tax returns per the release of the IRS’s 2017 data book, fewer than 1 percent of individual tax returns were selected for a field or correspondence audit, which gives most people a 1-in-160 chance. But the Taxpayer Advocate Service watchdog group says that it’s actually 6.2 percent of tax returns, or a 1-in-16 chance of being audited. While audits demand back-up material and examining your past tax returns opposed to simply fixing errors or paying your unpaid tax bills, some of those computer-generated notices are more pernicious in their documentation requests and count in that 6.2 percent. “Audit flags” that don’t merit a full tax return audit but a partial one also count.

An incredibly minute amount of the hundreds of millions of individual tax returns that get filed every year will be audited. But if you want to know why you’re under audit or what the risk factors are that increase the likelihood of being audited, here’s what you need to know about the IRS audit process.

1. You were incredibly unlucky and got randomly selected.
In 2017, only 934,000 tax returns were audited, with 71 percent of them being done by mail, opposed to field audits (those intimidating series of face-to-face meetings you see in movies). Of this number, a microscopic portion were randomly selected.
The IRS always audits an incredibly tiny sample of tax returns, but the likelihood is still extremely low given that the incidence of random selection was reduced under the sequestration in 2013 and remained low even after the IRS petitioned for more funding. But if you are low or middle income with a relatively simple tax filing situation and wondering why you’ve been audited, you were part of that tiny random selection.

2. Your tax return has a common audit flag.
Even if you have legitimate deductions, credits and income substantiation, there are certain lines on your tax return that are rife with errors and fraud across the board. These include the charitable contribution deduction, home office deduction and adoption tax credit.
Specific tax benefits prone to error and fraud like the Earned Income Tax Credit have their own separate due diligence process. But the above three items are the most common triggers for an audit, even just partial audits, given the vast propensity people have in underestimating these items and not having them properly documented. People tend to overestimate the value of non-cash charitable contributions and frequently lack the substantiation for these deductions. Adoption is an incredibly long and expensive process, and even though it is a legitimate tax benefit in which the adoptive parents will have substantiation, it also equates to a tax credit that can spread out over numerous years and result in paying little or no tax. Because of this, the IRS flags these tax returns frequently.
The home office deduction is another area where people tend to overestimate both eligible expenses and the percentage or square footage of the home being used for the deduction. This deduction can also generate a business loss, resulting in paying little or no taxes. Because of this, the IRS is likely to flag tax returns that have suspiciously large home office deductions.

3. Someone tipped off the IRS that you could be cheating on your taxes.
The IRS has a whistleblower program that awards up to 30 percent of the taxes collected and resultant penalties. If your ex-spouse suspects that you fudged your Goodwill donations or that co-worker who doesn’t like you overheard you say, “They never check!” with respect to that side hustle you didn’t report, it’s possible they could’ve anonymously tipped you off to get a quick payday.

4. If you’re a small business owner or freelancer and someone with whom you do business was audited, you have an increased likelihood of being audited.
Even if your client, supplier or other business associate was not committing tax fraud or malfeasance but simply got audited, people and companies that they paid or received money from are likely to be next. If they didn’t correctly report payments made, the IRS will want to see how the payers’ or recipients’ tax returns also match up.

While random selection has a low probability, most audit flags are beyond your control. Always have proper substantiation in case you get that information request.

Our tax relief experts are available to assist you and take the stress out of resolving your IRS notice in the shortest amount of time possible. Please contact us with any questions and if we can be of assistance.