To learn about some new features in QuickBooks 2011, check out my December 2010 Newsletter.
QBC_Newsletter_December_2010.pdf
Sunday, November 21, 2010
Sunday, November 14, 2010
QuickBooks Newletter November 2010
It is not too early to start planning for your 2010 business tax returns.
Find out how in my November 2010 QuickBooks Newsletter.
QBC_Newsletter_November_2011.pdf
Find out how in my November 2010 QuickBooks Newsletter.
QBC_Newsletter_November_2011.pdf
QuickBooks Newsletter October 2010
Need to change Inventory Prices? Find out how in my October 2010 QuickBooks Newsletter.
QBC Newsletter October 2010.pdf
QBC Newsletter October 2010.pdf
QuickBooks Newletter September 2010
Saturday, September 4, 2010
With Fraud, an Ounce of Prevention is worth a Ton of Cure.
Many small business owners think that Fraud could never happen to them. After all their employees are just like family, and a family member would never do anything to hurt the family. Right?
Unfortunately, that is not necessarily true. Almost by definition, an employee has to be highly trusted in order to get into a position of being able to steal from the company. After being victimized by Fraud where you have had your trust violated and proably have lost a lot of money, you will soon find out that there are additional costs to try to recover your losses from the Fraudster. If you want to take legal action, you need to build a case. If you hire a CFE (Certified Fraud Examiner), you are looking at a retainer upfront, plus fees of $125 or more an hour in order to build your case. Then you need to get the authorities to agree to prosecute.
To make matters worse, the Fraudster often has blown the money on drugs or has a gambling addiction.
That is why is it much cheaper to try to prevent the Fraud in the first place. I am a CFE and I have software that tests for Errors and Fraud. If you want more information, please click here.
Unfortunately, that is not necessarily true. Almost by definition, an employee has to be highly trusted in order to get into a position of being able to steal from the company. After being victimized by Fraud where you have had your trust violated and proably have lost a lot of money, you will soon find out that there are additional costs to try to recover your losses from the Fraudster. If you want to take legal action, you need to build a case. If you hire a CFE (Certified Fraud Examiner), you are looking at a retainer upfront, plus fees of $125 or more an hour in order to build your case. Then you need to get the authorities to agree to prosecute.
To make matters worse, the Fraudster often has blown the money on drugs or has a gambling addiction.
That is why is it much cheaper to try to prevent the Fraud in the first place. I am a CFE and I have software that tests for Errors and Fraud. If you want more information, please click here.
Sunday, June 13, 2010
Buying Or Selling a Home? Learn About the Tax Consequences First
Are you thinking about Buying or Selling a Home? The following article will
give you the facts so you can make a wise decision.
Buying a Home
If you’re like most people, your home is the largest
investment you’ll make in a lifetime. It’s a longterm
investment that plunges most homeowners
into instant debt, but it also provides ongoing tax
deductions, such as mortgage interest and property
taxes. To take full advantage of these deductions,
it’s important to keep accurate records of your
expenses. In addition to the purchase price, you
should keep the following on file:
• Closing costs, such as abstract fees, title and
search fees, recording fees, survey fees, and
transfer taxes.
• Points paid, loan origination fees, maximum
loan charges, loan discount or discount points.
Generally points paid at closing are deductible in
the year of purchase, regardless of who pays them,
unless you elect to amortize them over the term of
the loan.
Tax Deductions
Many new homeowners expect a new home to
lower their taxes. Some are disappointed to find
out that they can’t itemize deductions in the first
year because they only incur mortgage interest and
property taxes for part of the year.
• The lending institution will issue Form 1098
showing interest paid for the calendar year.
• For mortgage balance(s) of less than
$1,000,000 ($500,000 if filing separately) you
can deduct the mortgage interest for your main
home and a second residence. In order for the
mortgage interest to be deductible, the loan
must be secured by the home.
• If the home is not the security for your loan
(i.e., if you borrowed money from a relative),
you cannot deduct the interest.
• Generally, points paid for the purchase of the
main home are currently deductible. Points
paid on a second residence must be amortized
over the term of the loan.
• You can arrange for a home equity loan of up
to $100,000 and still deduct the interest.
Note: Exceeding these limitations will result in a
limited interest deduction.
• You can deduct assessed property taxes in the
year you pay them, even if you saved monthly
in an escrow account.
• In the year of transfer, each party is liable for
part of the property taxes.
• Back taxes you pay on the property become
part of your acquisition cost rather than a
current deduction.
Home Improvements
Homes require upkeep. Some of the work is
ordinary maintenance, and some is expended to
make improvements. It’s important to keep track
of the amounts spent on improvements by keeping
the receipts. These expenses increase the total cost
invested in your home. If the upkeep increases
the value, rather than maintains the value, it is
considered an improvement.
• Normal painting and wallpapering are repairs
unless done as part of a renovation project that
increases the home’s value as a whole.
• Fixing the roof may be a repair, but replacing it
is an improvement.
• Some examples of other improvements include
landscaping, a new driveway, new windows,
fencing, or adding a storage shed.
Selling a Home
• When establishing a selling price, factor in the
cost invested in your home.
• To calculate your gain or loss on the sale,
you’ll need the cost invested.
• If the sale results in a loss, it is a nondeductible
personal loss.
• If the sale results in a gain, you may be able to
exclude the gain up to $250,000.
• You must own and use the property as a
principal residence for at least two of the last
five years to take advantage of the exclusion.
You couldn’t have used the exclusion for
any house sold in the previous 24 months. A
reduced exclusion is available if you had to
sell the home because of a job change, health
reasons, or unforeseen circumstance.
• The excludable gain increases to $500,000 if
you are married and lived with your spouse in
the house for two of the previous five years.
• If you used any portion of your house for
business or rental at any time since May 7,
1997, some of the gain will be taxable.
• For sales after December 31, 2008, the
exclusion does not apply to any gain allocated
to periods of nonqualified use.
• You are not required to exclude the gain on
your residence; you may make the election not
to exclude by paying tax in the year of sale. You
might consider this if you plan to sell another
residence that would qualify for the exclusion
within two years and the gain would be larger.
• Planning is important. If you have high income
and large taxable gain on the sale, you may
want to receive payments under the installment
sale method. By doing so, only the gain from
payments received in the current year would be
taxable. (If you need the proceeds right away,
this option is less desirable.)
• You may want to consider receiving the entire
proceeds, paying the tax, and investing the money.
• Your tax professional or investment consultant
can help you weigh your options.
Divorce
• Often the ownership of a home changes with
divorce. The home may be sold to a third party
or become the sole property of one spouse.
• If one spouse receives the house, no sale
occurs for tax purposes. The cost of the house
stays the same despite paying money to the
other spouse.
• If the home is sold, each owner must
report the sale. If the title is shared, both
will report their portion of the sale on their
individual returns. If one spouse took over
ownership, that spouse has the sole reporting
responsibility despite a decree that may assign
a portion of the proceeds to the ex-spouse.
• If joint ownership is retained after the divorce,
both spouses may be able to take advantage
of the $250,000 exclusion. Ownership and
occupancy by one taxpayer will also qualify the
ex-spouse.
Physical or Mental Incompetency
• The exclusion may still apply if you become
physically or mentally incapable of self-care and
have occupied the home for at least 12 months
out of the past 60 months. Time spent in a
nursing home is counted as occupancy of the
residence in order to exclude the gain on sale.
You must maintain ownership during this period.
Summary
• Coupled with potential tax deductions, home
ownership is now more rewarding than ever
before.
• Consulting your tax advisor can be to your
advantage when making home ownership
decisions.
This brochure contains general tax information for taxpayers.
As each tax situation may be different, do not rely upon this
information as your sole source of authority. Please seek
professional advice for all tax situations.
#808 – © Copyright May 2010
National Association of Tax Professionals
give you the facts so you can make a wise decision.
Buying a Home
If you’re like most people, your home is the largest
investment you’ll make in a lifetime. It’s a longterm
investment that plunges most homeowners
into instant debt, but it also provides ongoing tax
deductions, such as mortgage interest and property
taxes. To take full advantage of these deductions,
it’s important to keep accurate records of your
expenses. In addition to the purchase price, you
should keep the following on file:
• Closing costs, such as abstract fees, title and
search fees, recording fees, survey fees, and
transfer taxes.
• Points paid, loan origination fees, maximum
loan charges, loan discount or discount points.
Generally points paid at closing are deductible in
the year of purchase, regardless of who pays them,
unless you elect to amortize them over the term of
the loan.
Tax Deductions
Many new homeowners expect a new home to
lower their taxes. Some are disappointed to find
out that they can’t itemize deductions in the first
year because they only incur mortgage interest and
property taxes for part of the year.
• The lending institution will issue Form 1098
showing interest paid for the calendar year.
• For mortgage balance(s) of less than
$1,000,000 ($500,000 if filing separately) you
can deduct the mortgage interest for your main
home and a second residence. In order for the
mortgage interest to be deductible, the loan
must be secured by the home.
• If the home is not the security for your loan
(i.e., if you borrowed money from a relative),
you cannot deduct the interest.
• Generally, points paid for the purchase of the
main home are currently deductible. Points
paid on a second residence must be amortized
over the term of the loan.
• You can arrange for a home equity loan of up
to $100,000 and still deduct the interest.
Note: Exceeding these limitations will result in a
limited interest deduction.
• You can deduct assessed property taxes in the
year you pay them, even if you saved monthly
in an escrow account.
• In the year of transfer, each party is liable for
part of the property taxes.
• Back taxes you pay on the property become
part of your acquisition cost rather than a
current deduction.
Home Improvements
Homes require upkeep. Some of the work is
ordinary maintenance, and some is expended to
make improvements. It’s important to keep track
of the amounts spent on improvements by keeping
the receipts. These expenses increase the total cost
invested in your home. If the upkeep increases
the value, rather than maintains the value, it is
considered an improvement.
• Normal painting and wallpapering are repairs
unless done as part of a renovation project that
increases the home’s value as a whole.
• Fixing the roof may be a repair, but replacing it
is an improvement.
• Some examples of other improvements include
landscaping, a new driveway, new windows,
fencing, or adding a storage shed.
Selling a Home
• When establishing a selling price, factor in the
cost invested in your home.
• To calculate your gain or loss on the sale,
you’ll need the cost invested.
• If the sale results in a loss, it is a nondeductible
personal loss.
• If the sale results in a gain, you may be able to
exclude the gain up to $250,000.
• You must own and use the property as a
principal residence for at least two of the last
five years to take advantage of the exclusion.
You couldn’t have used the exclusion for
any house sold in the previous 24 months. A
reduced exclusion is available if you had to
sell the home because of a job change, health
reasons, or unforeseen circumstance.
• The excludable gain increases to $500,000 if
you are married and lived with your spouse in
the house for two of the previous five years.
• If you used any portion of your house for
business or rental at any time since May 7,
1997, some of the gain will be taxable.
• For sales after December 31, 2008, the
exclusion does not apply to any gain allocated
to periods of nonqualified use.
• You are not required to exclude the gain on
your residence; you may make the election not
to exclude by paying tax in the year of sale. You
might consider this if you plan to sell another
residence that would qualify for the exclusion
within two years and the gain would be larger.
• Planning is important. If you have high income
and large taxable gain on the sale, you may
want to receive payments under the installment
sale method. By doing so, only the gain from
payments received in the current year would be
taxable. (If you need the proceeds right away,
this option is less desirable.)
• You may want to consider receiving the entire
proceeds, paying the tax, and investing the money.
• Your tax professional or investment consultant
can help you weigh your options.
Divorce
• Often the ownership of a home changes with
divorce. The home may be sold to a third party
or become the sole property of one spouse.
• If one spouse receives the house, no sale
occurs for tax purposes. The cost of the house
stays the same despite paying money to the
other spouse.
• If the home is sold, each owner must
report the sale. If the title is shared, both
will report their portion of the sale on their
individual returns. If one spouse took over
ownership, that spouse has the sole reporting
responsibility despite a decree that may assign
a portion of the proceeds to the ex-spouse.
• If joint ownership is retained after the divorce,
both spouses may be able to take advantage
of the $250,000 exclusion. Ownership and
occupancy by one taxpayer will also qualify the
ex-spouse.
Physical or Mental Incompetency
• The exclusion may still apply if you become
physically or mentally incapable of self-care and
have occupied the home for at least 12 months
out of the past 60 months. Time spent in a
nursing home is counted as occupancy of the
residence in order to exclude the gain on sale.
You must maintain ownership during this period.
Summary
• Coupled with potential tax deductions, home
ownership is now more rewarding than ever
before.
• Consulting your tax advisor can be to your
advantage when making home ownership
decisions.
This brochure contains general tax information for taxpayers.
As each tax situation may be different, do not rely upon this
information as your sole source of authority. Please seek
professional advice for all tax situations.
#808 – © Copyright May 2010
National Association of Tax Professionals
QuickBooks Newsletter April 2010
Here is a link to my April 2010 QuickBooks Newsletter that will give you some ideas as to how to make sure that your Accounts Receivable do not become delinquent:
QuickBooks April 2010 Tips.pdf
Sunday, January 10, 2010
Preventing Fraud with QuickBooks Software Controls
Earlier I talked about how to use QuickBooks and Segregation of Duties to prevent Fraud. Now I will discuss how to use the software controls within QuickBooks to deter Fraudulent activity.
One of the most important features within QuickBooks in the Audit Trail. The Audit Trail tracks who is making entries into QuickBooks. You especially want to see who is deleting transactions, such as checks. Since QB 2006, the Audit Trail cannot be turned off.
The next thing you want to do is to set up Roles and Passwords to limit each employee's access to QuickBooks. They should not have any more access than what they need to do their jobs. You especially don't want employees to be able view payroll information. Also, since each employee has his/her own sign on to QuickBooks, it is much easier to track them on the Audit Trail.
The next thing to do is to lock prior periods with a Closing Date. You definitely don't want employees to be able to go into QuickBooks and change information from prior periods.
For maximum security, assign a password to the Closing Date.
Finally, make use of QuickBooks reports. The Voided/Deleted Transactions Report and the Closing Date Exception Report are two that you would want to review on a weekly basis.
By following these suggestions, you can improve your chances of detecting suspicious activity in QuickBooks.
One of the most important features within QuickBooks in the Audit Trail. The Audit Trail tracks who is making entries into QuickBooks. You especially want to see who is deleting transactions, such as checks. Since QB 2006, the Audit Trail cannot be turned off.
The next thing you want to do is to set up Roles and Passwords to limit each employee's access to QuickBooks. They should not have any more access than what they need to do their jobs. You especially don't want employees to be able view payroll information. Also, since each employee has his/her own sign on to QuickBooks, it is much easier to track them on the Audit Trail.
The next thing to do is to lock prior periods with a Closing Date. You definitely don't want employees to be able to go into QuickBooks and change information from prior periods.
For maximum security, assign a password to the Closing Date.
Finally, make use of QuickBooks reports. The Voided/Deleted Transactions Report and the Closing Date Exception Report are two that you would want to review on a weekly basis.
By following these suggestions, you can improve your chances of detecting suspicious activity in QuickBooks.
The Triangle of Fraud
The Triangle of Fraud.
In an earlier article I talked about the three major characteristics of a Fraudster. In this post, I will go into further detail. The first element is Opportunity. Employees that would fall into this category would be employees that are very trusted, sometimes very long term employees. Perhaps they are in a position of authority that would discourage other employees from questioning their actions. In any event, they have access to the assets and are considered unlikely to steal.
The second characteristic is Pressure. This is defined as having a Nonsharable Problem. This could be having a drug problem, gambling addiction, family medical problems, etc. In any event, the employee does not feel that he/she can share the problem with the company, usually because it would cause personal humiliation or a loss of face.
The final element is Rationalization. Did you know that many Fraudsters do not consider themselves bad people? They tend to think of themselves as victims of unfair circumstances. Sometimes they think that they are just borrowing the money and that they will pay it back. Other employees think that they are grossly underpaid and taken advantage of, thus they are just equalizing the scales. In any event, the ability to rationalize their actions allows them to begin and continue the Fraud.
When you think about your employees, do any of them share these characteristics? If so, it would be prudent to stay aware.
In an earlier article I talked about the three major characteristics of a Fraudster. In this post, I will go into further detail. The first element is Opportunity. Employees that would fall into this category would be employees that are very trusted, sometimes very long term employees. Perhaps they are in a position of authority that would discourage other employees from questioning their actions. In any event, they have access to the assets and are considered unlikely to steal.
The second characteristic is Pressure. This is defined as having a Nonsharable Problem. This could be having a drug problem, gambling addiction, family medical problems, etc. In any event, the employee does not feel that he/she can share the problem with the company, usually because it would cause personal humiliation or a loss of face.
The final element is Rationalization. Did you know that many Fraudsters do not consider themselves bad people? They tend to think of themselves as victims of unfair circumstances. Sometimes they think that they are just borrowing the money and that they will pay it back. Other employees think that they are grossly underpaid and taken advantage of, thus they are just equalizing the scales. In any event, the ability to rationalize their actions allows them to begin and continue the Fraud.
When you think about your employees, do any of them share these characteristics? If so, it would be prudent to stay aware.
The Threat of Fraud to Small Business
Fraud and Small Business
Did you know that in 2008, the average organization lost an estimated 7% of gross revenues due to Fraud. Also, the median loss for organizations with less than 100 people was $200,000. These statistics come from the "2008 Report to the Nation on Occupational Fraud and Abuse" by the Association of Certified Fraud Examiners. In this down economy, the potential for losses caused by Fraud is especially likely.
The question for you as a business owner is , how can I recognize who might be a potential Fraudster? In this brief article, I will share with you one of the major theories as to who would be likely to steal from you.
In the 1940's, a Criminologist named Donald R. Cressey studied over 200 embezzlers and developed a theory as to what they all had in common. The theory that he developed is known as the Fraud Triangle, and it states that there are three major characteristics of the employees who commit Fraud.
The three elements are: Opportunity, Pressure and Rationalization. Opportunity - usually it is a person in a trusted position, someone who you would probably never suspect. Pressure - usually the employee has a problem that he/she feels that they cannot share. Rationalization - the employee thinks that he/she is really not stealing, just temporarily borrowing, etc. In a future article, I will discuss each of the three characteristics in greater detail.
Did you know that in 2008, the average organization lost an estimated 7% of gross revenues due to Fraud. Also, the median loss for organizations with less than 100 people was $200,000. These statistics come from the "2008 Report to the Nation on Occupational Fraud and Abuse" by the Association of Certified Fraud Examiners. In this down economy, the potential for losses caused by Fraud is especially likely.
The question for you as a business owner is , how can I recognize who might be a potential Fraudster? In this brief article, I will share with you one of the major theories as to who would be likely to steal from you.
In the 1940's, a Criminologist named Donald R. Cressey studied over 200 embezzlers and developed a theory as to what they all had in common. The theory that he developed is known as the Fraud Triangle, and it states that there are three major characteristics of the employees who commit Fraud.
The three elements are: Opportunity, Pressure and Rationalization. Opportunity - usually it is a person in a trusted position, someone who you would probably never suspect. Pressure - usually the employee has a problem that he/she feels that they cannot share. Rationalization - the employee thinks that he/she is really not stealing, just temporarily borrowing, etc. In a future article, I will discuss each of the three characteristics in greater detail.
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