QuickBooks Accounting

Net Operating Losses Provide Tax Benefits

Net Operating LossFor many businesses, profits vary from year to year. However, with proper planning, even a bad year can be helpful from a tax perspective. Where business deductions exceed gross income, a taxpayer may have a net operating loss (NOL) that can be used to offset income in another tax year, potentially generating a refund of previously paid taxes.

Who May Use an NOL?

NOLs are available to individual business owners, corporations, estates, and trusts. Partnerships and S corporations do not take NOL deductions, though their partners and shareholders may use “passed through” losses on their own returns.

How Is an NOL Applied?

The general rule is that a taxpayer may carry an NOL back two years and forward 20 years, though certain limited exceptions may apply. For example, an individual with an NOL that was caused by a casualty, theft, or disaster may use a three-year carryback period.

In general, the taxpayer will carry back an NOL to the earliest year it can be used and then carry it forward, year by year, until it is used up. The taxpayer may also elect to forego the two-year carryback and carry the loss forward for the 20-year period. However, the general preference is to use an NOL sooner rather than later because a dollar of tax saved today is generally worth more than a dollar saved in the future.

How Is an NOL Calculated?

Calculations of NOLs can be complicated. For example, a noncorporate taxpayer’s NOL is calculated without regard to any personal exemptions or NOLs from other years, and certain deductions for capital losses and nonbusiness items are limited.

If you are tired of overpaying taxes, call 949-759-5626 and ask for Jerry Morey.  Lowering your taxes legally is our specialty.

3 Tasks Entrepreneurs are Better Outsourcing

OutsourceAs a business owner, it can be difficult to delegate important tasks. When you complete them yourself, you know they will be done correctly and in a timely manner. Even so, if you want your business to grow, and keep expenses low, there are three tasks that you should consider outsourcing.

 

Website and Graphic Design

By outsourcing your website and graphic design, you will have access to an expert in the field, on demand. The person or company you outsource to will have the equipment, experience, training and knowledge to provide you with design concepts that would otherwise be beyond your reach.

You will also receive a professional product which is doubly important as your website is your online business card. This is one area that you want and need a professional’s assistance.

Payroll

As your company grows, the complexities of your payroll grow as well. In addition to saving time and money, payroll is one area of your business that the government takes great interest in. Payroll specialists make it their job to stay current in government regulations which means they will keep you and your company compliant.

In addition, payroll companies can provide you and your employees with an added layer of security. This can reduce the risk of embezzlement, identity theft, and interference, by an employee, with company records for financial gain.

Accounting and Tax Returns

Much like payroll, your accounting and tax returns are not an area of your business where you can afford errors. Without specialized tax knowledge, you run the risk of missing deductions leading to paying higher taxes than necessary or to making errors that result in penalties.

One of the main benefits of outsourcing any task is that while you may pay more per hour for the task to be completed, you will save much more money, in the long run, than if you hired a full-time employee when you take into consideration salary, benefits, taxes, health insurance, as well as the overhead to provide space for the employee to work. In the end, outsourcing can be a cost efficient way to expand your business.

 

If you are interested in outsourcing payroll and/or outsourced accounting, then call 949-759-5626 and ask for Jerry Morey.  Our initial consultation is free.

 

Morey and Associates is an Orange County California CPA Accounting Firm.  We service small businesses and high net worth individuals throughout Orange County and have convenient offices in Newport Beach and San Clemente.

Tax Treatment for Bitcoin Payments

BitcoinIf you’ve paid attention to the news the last few years, you will have heard of Bitcoins. In fact, you may even have considered accepting them as payment for services or product sales. Before you do, you’ll want to make sure you have an understanding of how the IRS treats Bitcoin payments.

First, it’s important to be aware of the fact that the IRS does not consider Bitcoins, which are virtual currency, as a legitimate state-backed currency. Instead, they see Bitcoins as property.

This means that the tax rules that apply to property transactions will also apply to payments received in Bitcoins. When a person, or business acquires property, they are required to record the fair market value of the property. This will become the owner’s basis for the property.

Once the property is sold or exchanged, if the fair market value of the property has increased, then the owner will have a taxable gain. On the other hand, if it has decreased in value, the owner will have a loss.

This means that if a business owner sells a product today and receives Bitcoins worth $100 but then converts them to dollars next week and the value has increased to $120, they will have a gain of $20 that will be taxed as capital gains.

This becomes even more complicated when multiple Bitcoin transactions take place. Each transaction needs to be tracked separately and each will have its own gain or loss depending on the current valuation of Bitcoins when they are converted to dollars.  The amount of paperwork and record-keeping becomes significant.

There are a couple of workarounds for this. First, each transaction can be converted to dollars immediately. Secondly, there are now Bitcoin merchant service providers that will deal with all of the backend record-keeping that is necessary. This allows businesses to accept Bitcoins without ever actually dealing with them.

The IRS ruling treating Bitcoins as property turned the Bitcoin world and those who want to accept them on their heads, but technology and even the IRS will eventually catch up to the new reality of virtual currencies, but it may take awhile.

If you are tired of paying too much in taxes, call 949-759-5626 and ask for Jerry Morey.

 

Morey and Associates is a Southern California CPA Firm with offices in Newport Beach and San Clemente.  We service all types of businesses and high net worth individuals.  We also have additional expertise with real estate accounting, dental accounting and medical practice accounting.

 

QuickBooks Online for Orange County Businesses

Switching from QuickBooks desktop or starting fresh with QuickBooks Online? 

QBOWhether or not you’ve ever used accounting software, we think you’ll like using QuickBooks Online. It was designed for small businesses who have little or no accounting experience, and its user interface and navigation should be familiar to anyone who’s been around websites.

We do have to say, though, that if you’ve never used any accounting applications, some upfront training with us might be in order. Once you get used to how your Excel-and-paper accounting system translates to the web, you should do fine. But you’ll save a lot of time and avoid frustration if you learn the basics before you start entering your own company data. It’s easier to explain how things work before you attempt them than to try to untangle a tangled-up company file.

That said, let’s look at what you’ll see on the home page when you first sign into QuickBooks Online.

QuickBooks Online’s home page was designed to give you a quick look at what’s happening with your company’s money. By checking it first thing every morning, you’ll know whether something needs attention immediately. If it does, you can use the links provided here to take care of business.

Using graphs and numbers, the home page gives you the bottom line on your income, expenses, and profit and loss. You can click on practically anything here to see the detail behind the totals – and to do something about it if necessary.

The left vertical pane contains your main navigational toolbar. Click on any link here, and you’ll either go straight to that section – like Customers and Reports – or you’ll get to choose from a number of sub-pages (Taxes | Sales Tax or Payroll Tax, for example). Clicking on Home always takes you back to the home page.

In the upper right corner, you’ll find the Help icon, which gives you access to QuickBooks Online’s searchable help files. If you’re a new user and we haven’t done any training with you, you’re likely to find that these brief explanations don’t answer all of your questions or don’t answer them thoroughly enough. Let us help when that occurs.

It’s a good idea to explore these options early in your QuickBooks Online life:

In Company Settings, you can make your preferences known about many aspects of the site. For example, you can establish the payment terms that will appear automatically on sales forms, and turn fields like Shipping and Discount on or off. You can set up an account with QuickBooks Payments so your company can accept credit cards, and you can choose whether or not to use Classes to categorize transactions (we can work with you on these in training).

Another important item here is Manage Users, which lets you set limits on what other staff can and can’t do in QuickBooks Online.

Directly below the two links in the upper right corner of the home page is a list of your bank accounts and their balances. Since QuickBooks Online can be connected to your online financial accounts, you may see two numbers here: your bank balance according to the bank and to QuickBooks Online.

The most recent Activities will be displayed below your account balances. You’ll see a list of all actions that have been taken by anyone with access to the site, like invoices created and/or sent, and bills paid.

Finally, QuickBooks Online includes a handy navigational tool at the top of the screen that contains three icons. The magnifying glass gives you access to the site’s search tool. Clicking on the + sign opens shortcuts to transaction screens and other commonly-used features. And the third icon displays the most recent transactions processed.

That’s it. Your accounting workflow will make use of the countless other pages within the site, but QuickBooks Online’s home page does a good job of showing you the lay of the land.