EMPLOYEE ALERT: Adjustments to W-4 maybe needed under new law

As many of you know that there are many changes taking affect due to the President Obama holding the office, the attempts to revitalize the global economy and to assist with helping the general public ( middle class Americans) keep some money in their paychecks from week to week.

Generally, I write about my experiences within the Accounting world, but this time I wanted to speak to you directly with more so facts based upon the federal government. With that said I have been reading on the new laws taking affect, and thought it would be a good time to advise my readers, supporters and hard workers about the Tax tables that were announced.

Because of the new withholding tables under the American Recovery and Reinvestment Act, some you whho are employees might want to adjust your 2009 FITW (Federal Income Tax Withholding) by submitting a new W-4 now. The Act reduced FITW (Federal Income Tax Withholding) to reflect the Make Work Pay tax credit. But for some employees, that adjustment may result in paying less than the required 90% of FIT (Federal Income Tax) by Dec. 31, 2009, which may lead to penalties.

The penalties for you that receive a refund means less money received back on your refund, the possiblity of actually having to pay money to the government and if maybe even garnishments from your paychecks if you can not afford to pay the IRS (worse case scenario).

Employees most likely to have too little withheld under the new tables are:

• Your Spouse and you both work
• individuals with more than one job;
• You can be claimed as a dependent on someone else’s tax return (since you are not eligible for this credit).
• Pension Income: Non-government pension income is not eligible for the Making Work Pay Credit, and the calculator now accounts for this. If you expect to receive a significant amount of pension income in 2009, you should use this calculator so that you can adjust your withholding appropriately for the second half of the year.
• Unemployment Compensation: The first $2,400 of unemployment compensation an individual receives in 2009 is now tax free. The Withholding Calculator now accounts for this, so enter the full amount into the calculator.

So you may want to use the Withholding Calculator provided by the IRS:

http://www.irs.gov/app/cgi-bin/wh09.cgi/p2/en

The purpose of this application is to help employees to ensure that they do not have too much or too little income tax withheld from their pay. It is not a replacement for Form W-4, but most people will find it more accurate and easier to use than the worksheets that accompany Form W-4. You may use the results of this program to help you complete a new Form W-4, which you will submit to your employer.

2009 W-4 Form: http://www.irs.gov/pub/irs-pdf/fw4.pdf

Here is a link for more information regarding this annoucement: http://www.irs.gov/individuals/article/0,,id=96196,00.html

If you are an employer, here is a notice for your employees (page 73):

http://www.irs.gov/pub/irs-pdf/p15t.pdf

Why should you have the right Bookkeeper?

So many may ask why exactly is it such a big deal about bookkeeping, I mean basically all you need is someone to come in and do a little data entry, and make sure your debits and credits are accounted for right? Wrong!!

You need to be aware of who you hire as a bookkeeper ,make sure they are the right person and have more than just working knowledge of your accounting systems, such as QuickBooks. Why am I so concerned about assuring you hire the right bookkeeper? Well there are 2 major reasons:

Unexpected Time & Money: If you do not hire the correct person to set up and maintain your financial records, you can end up with very costly errors. The most important things can be overlooked, laws can be broken and the reason for initially hiring someone to assist you is now blurred.

Bookkeeping should be seen just like the job of a teacher, it required constant education, focus, patience and understanding. A Bookkeeper should have references, qualifications and proof of ability. When hiring a Bookkeeper you are going to get what you pay for and quantity doesn’t always equal quality. Acquiring the right Bookkeeper will cost you somewhere in the midst of $18-$45 an hour if they are not affiliated with a CPA firm, if affiliated with a CPA firm you are looking at $75 and up per hour. There are some valuable Bookkeepers that could possibly be hired at a rate lower than the average but they are very few, as most Bookkeepers know their worth.

Many (so called) “bookkeepers” are claiming they have many, many years experience working in an office environment, paying the bills and collected the monies owed to the company. But in reality, just putting in a creating a check out of the system or taking a payment from a customer does not constitute you as a Bookkeeper, this just means they can process a data entry function. The real question is, “Do they know that if you create a credit from here it could cause a debit there?” Or that reconciliation of credit cards and bank accounts are sure way of missing on money made or money paid? Or do they know about what the Sales Tax rules are for your industry? Or what consists of a COGS (cost of goods sold) account, and where that should be in a P & L (profit and loss) Statement?

If the Bookkeeper or Office team member that maintains your financial records misses any minute detail in their accounting of debits or credits, or deletes an entry in the general ledger, doesn’t reconcile your credit cards or bank accounts, or creates journal entries to hide mistakes this could drive the cost of your CPA fees during tax time to go up by 30-50%, it could cost you several months of corrections, findings and auditing which depending on the cost of your CPA’s bookkeepers or an outsource could costs you almost as much as half the yearly salary or subcontracted wages you initially spent. Now your time is no longer focused on your businesses day to day functions, its now all in focused on looking up invoices completed last February, or remembering what charge was in this credit card or researching whether or not you overpaid or underpaid.

The right Bookkeeper will be able to not only assist you in the day to day financial transactions, but she/he should also be able to implement internal control processes to assists in the organization, education and continual growth of your business. Your Bookkeeper should allow you to run your business not your business run you.

Just remember that saving a few dollars now could cost you thousands of dollars later and the once place you should not want to cut corners on is you’re the financial responsibility of your business.

Employee or Subcontractor

So here I am again, writing a little something to help educate you the business owner, or you the employee. I have noticed that with the economy being on an either flat line or downward spiral, many businesses have had to cut back. These cut backs consists of their employees due the high costs of payroll, workman's compensation, medicare & social Security. Normally the average employer will pay approximately 18-20% in addition to the employee's agreed upon pay rate.

For example:
ABC, Corp hired an office administrator by the name of Sarah at an annual salary of $36,000 a year. Sarah would gross (bring home before taxes) $1,384.62 every two weeks. This $1,384.62 would cost the employer on average a total $1,661.54 which is an additional $276.92 bi-weekly, $553.84 every month or $6,646.04 every year for just this one employee. ABC, Corp is now technically paying Sarah a salary of $42,646.04.

As you can tell by the example this is a very costly employee. Therefore, many employers, small business or even large corporations are turning to so called "subcontractors" or the "independent contractors". In many aspects these types of individuals are very beneficial because there are no pensions, insurances, training, and extra money spent on payroll. However, many companies believe that anyone can be considered a "subcontractor" or the "independent contractor", this is not true.

Most administrative staff is not considered a subcontractor or independent contractor because the employer normally sets the hours, the rules and the training as well as materials. However, commissioned sales representatives could possibly be based as a subcontractor or independent contractor because they normally supply their own materials (such as postcards, flyers, business cards, etc. ), they also do not need training on the job requested of them.

A good rule of thumb is to determine whether or not a person is considered subcontractor or employee is the following:

They can be divided into three categories:

• Behavioral control evaluates whether you have the right to direct and control how the work is done (training and instructions)
• Financial control considers whether you have the right to direct and control the economic aspects of the work (significant investment, expenses, opportunity for profit or loss)
• Relationship of the parties looks at how you and the worker view your relationship (employee benefits and written contracts).

All facts and circumstances of your situation must be examined to determine whether a worker is an employee or subcontractor. No single factor provides the answer.


Also, it is best practice for a business owner to have every subcontractor complete a W9 form (link provided below) as well as keep detailed record keeping of what monies are paid out to the subcontractor. If the subcontractor is paid by the small business more than $600 per year the employer is legally required to provide a 1099 so that the subcontractor can claim the untaxed income on their personal tax return. If the subcontractor is Incorporated or LLC the business owner does not have to provide them with a 1099 as they file corporate taxes whether pass through or not.

If you have the right accounting or bookkeeping personnel these rules should be known as this could cause serious penalty to the business owners.

For more information about subcontractors from the IRS:
http://www.irs.gov/pub/irs-regs/subcontractorsfaq&a.prn.pdf

If you want the IRS to determine work status (subcontractor status)complete form SS-8:
http://www.irs.gov/pub/irs-pdf/fss8.pdf

If you want to complete or have your subcontractors complete a W-9:
http://www.irs.gov/pub/irs-pdf/fw9.pdf

Bookkeeper Vs. Accountant

In the last couple of months I have been helping out a Flooring Wholesale company get their company on track. They have had many run ins with bookkeepers stating they were QuickBook experts, many Accountants telling them they were a CPA just to find out they weren't and this has just been in the last 6 months alone, so you could only imagine the chaos in their record keeping.

With that said, they had many of these so called "CPAs" tell them incorrect information when it comes to sales tax. One Accountant told them to be sales tax exempt, the other told them they didnt have to pay sales tax, while others just didn't know what to do with their sales tax. Furthermore, their new so called "Accountant" stated again they need to be sales tax exempt. As I discussed the formalities of how inaccurate he was, he debated with me. Here I am a Bookkeeper, former Regional Financial Analyst and Regional Accountant... going toe to toe with an incorrect Accountant who will not stand corrected.

As I evaluated & researched the knowledge of many in the Flooring Sales & Installation industry, I have come to the conclusion there is a lot of confusion regarding sales tax in this industry so I wanted to advise those Florida businesses that fall in this catergory of the rules:

In any Flooring Cash & Carry sale (these are the sales with no installation services provided by the retailer), the customer is to pay the sales tax at the given rate of Florida plus the county rate (or discretionary rate) here in Martin & St. Lucie county the total sales tax would be 6.5%. If the total sale comes to $5,000 or less you would charge the full 6.5% sales tax figure, however if the sales is over $5,000 you would only charge the Florida Sales tax rate of 6% and a flat $25.00 instead of the 0.5% for the county/discretionary sales.

Example 1: Your purchased 500 sqft of laminate at $4.29. The total sale would be $2,145 so the sales tax that would be charged would be $2,145 * 6.5% = $139.43

Example 2: If you purchased 1,500 sqft of laminate at $4.29. The total sale would be $6,435 so you would charge the customer 6% = $386.10 and $25 (instead of the 0.5%), the total sales tax would = $411.

If this company were to do what they call a Furnish & Install contract, which is selling the product and installing it, there would be no sales tax charged to the customer or from my discussion with the FDOR auditor, no sales tax owed to the FDOR on that sale because you are providing a home improvement service. This is and only if a company is doing what they call lump sum billing, which is basically figuring in the sales tax, price of material, freight and labor into one lump sum figure.
The retailer would pay taxes to the suppliers however, nothing is owed to the IRS.

If you do not do lump sum billing then retailer must pay sales tax on materials to both the suppliers and the FDOR.

Also, another issue found is if an Accountant or other Accounting Professional states you should become sales tax exempt, this is the incorrect terminology. What they are trying to convey is to get a Resale Certificate, however in the Flooring industry mentioned this is a bookkeeping/accounting nightmare as now you must pay use tax, which is the tax used on the exact total of materials used.

Please see FDOR publications:
Sales Tax Filing Instructions: http://dor.myflorida.com/dor/forms/2009/dr15ezcsn.pdf

Discretionary Information:
http://dor.myflorida.com/dor/forms/2009/dr15ezcsn.pdf

Flooring dealers:
http://dor.myflorida.com/dor/tips/tip03a01-03.html

Who's Watching YOUR Money? 7 Tips for Hiring the Right Bookkeeper!!

I thought i would start our first blog wwith some great advice from a worthy source. Enjoy!

While I’m a strong advocate of hiring virtual assistants, there are two things that no entrepreneur should ever fully delegate: marketing and bookkeeping. The marketing and the bookkeeping of your business can easily make or break you (just think “new” Coke and Enron). That said, if bookkeeping is not your forte, hire someone to do it – you will save so much in frustration – just be sure to keep your fingers in the books . If you choose to hire a bookkeeper, keep the following in mind:

1. Get QuickBooks.

For ease of use, I highly recommend using QuickBooks and hiring a QuickBooks ProAdvisor. QuickBooks ProAdvisors have taken certification exams to insure that they know the system. I have used QuickBooks both for myself and my clients since 1996 and highly recommend it for its ease of use/understanding.
The online version is great in that you can see the latest version of your books at any time and eliminate the annoyance of emailing files back and forth and wondering who has the latest version.

2. She must see both the forest AND the trees.

You want your bookkeeper to be detail-oriented AND to see/understand the big picture. She needs to know what happens consistently – every month – and update your books without bothering you for items she should know about.

3. She must know your industry.

You don’t want to have to train your bookkeeper on your industry language, standard industry income or expense categories or other basics. The more up-to-speed she is, the faster she can hit the ground running and the sooner you will have good data. If she doesn’t know your industry however, be sure to give her a rundown of lingo and how you refer to your customers/clients/tenants in order for you to get the most meaningful reports out of the gate.

4. She must provide timely reporting.

In hiring your bookkeeper, insure that you put in a provision for when you want to see monthly financial's. The date will depend on when your bank month ends – give her a few days after that date to reconcile your accounts and produce reports. At a minimum, you want to see a profit & loss, balance sheet and cash flow statement.

5. She must know accounting terms and still speak “English”.

Your bookkeeper needs to know the difference between assets, liabilities, income, expenses and equity and be able to provide your accountant with the necessary data upon request. At the same time however, if you are not “numbers oriented”, she also needs to be able to explain the financial statements to you in plain English.

6. She must be trustworthy.

Hiring someone to keep track of your bookkeeping requires a level of trust between you both. You need to feel comfortable that she will keep track of your information and maintain your confidentiality. At the same time, if she pays your bills and has access to your bank accounts, you must also trust that she will not abuse that privilege. And make no mistake, it is a privilege to have someone (particularly in a virtual relationship) trust you with their finances, their checkbook and their business.

Good business sense demands that you protect yourself “just in case”. I highly recommend that, in addition to a confidentiality agreement, you insure that your bookkeeper is bonded and you get a copy of that bond.

7. She must have great communication skills.
If your bookkeeper will be communicating with your clients and vendors, she must represent your business as you would. Whether virtual or in-house, it’s critical that your bookkeeper be a positive force that further enhances relationships. The question of money can, at times, be a sensitive matter. You need someone who recognizes that and communicates appropriately.

Article Source: http://knol.google.com/k/sandra-martini/whos-watching-your-money-7-tips-for/17o27xexy9947/27#