Author: Unison Globus

Categories
Tax Preparation

What is Tax Liability: Definition, Calculation, and Example

You are familiar with tax liability, which refers to the amount of tax an individual or business owes to the government based on their taxable income, deductions, credits, and other factors. In this article, we will provide a comprehensive on what is tax liability, how it is calculated, some examples, and ways to reduce it.

Understanding Tax Liability

Tax liability is an essential aspect of taxation. It varies depending on the type of taxes applicable, the taxpayer’s income level, the tax bracket, and the deductions and credits available to them. It is calculated based on the applicable tax rates and the taxpayer’s taxable income.

Taxable income includes all sources of income, such as wages, salaries, self-employment income, investment income, rental income, and other sources. Deductions and credits are subtracted from the taxable income to determine the final liability.

Tax deductions are expenses that can be subtracted from the taxable income to reduce the overall tax liability. Some standard tax deductions include mortgage interest, charitable donations, state and local taxes, and medical expenses.

Tax credits, on the other hand, are a dollar-for-dollar reduction in tax liability. Some common tax credits include child tax credit, earned income tax credit, and education tax credit. Tax credits can significantly reduce tax liability, making it an essential factor to consider while calculating tax liability.

How to Calculate Your Tax Liability

You need to be familiar with how to calculate tax liability accurately. It is calculated by multiplying the applicable tax rate with the taxpayer’s taxable income. The tax rates vary depending on the taxpayer’s filing status and income level.

Standard deductions for 2023 are:

  • $13,850 for single filers
  • $13,850 for married couples filing separately
  • $20,800 for heads of households
  • $27,700 for married couples filing jointly

2023 Tax Brackets

 

Tax Rate Single Filer in 2023 Married Filing Separately in 2023 Married Filing Jointly in 2023 Head of Household in 2023
10% $11,000 or less $11,000 or less $22,000 or less $15,700 or less
12% Over $11,000 Over $11,000 Over $22,000 Over $15,700
22% Over $44,725 Over $44,725 Over $89,450 Over $59,850
24% Over $95,375 Over $95,375 Over $190,750 Over $95,350
32% Over $182,100 Over $182,100 Over $364,200 Over $182,100
35% Over $231,250 Over $231,250 Over $462,500 Over $231,250
37% Over $578,125 Over $346,875 Over $693,750 Over $578,100

To calculate the it, multiply the taxable income by the applicable tax rate and then subtract any applicable tax deductions and credits.

An example demonstrates this…

Let’s look at an example of how a hypothetical flow-through entity would calculate its federal income tax liability using these tables. Assume Helly’s Widgets earned $300,000 in taxable income in 2022, and Helly files a joint tax return with his wife, Bendy.

Helly’s tax liability would be:

$30,427 + 24% of the amount in excess of $178,150 (or $29,244).

The total tax due for your friend Helly is $30,427 + $29,244 = $59,671.

Important: To calculate your client’s state tax liability, locate your client’s state’s standard deductions and tax information and follow the state’s instructions. Some states have a flat tax, while others have graduated brackets.

How to Reduce Your Tax Liability

You should be aware of various ways to reduce tax liability. Here are some ways to reduce tax liability:

Maximize tax deductions

As discussed earlier, tax deductions can significantly reduce tax liability. Therefore, it is essential to identify and maximize all tax deductions available such as

  • Business expenses
  • Using your car for business purposes
  • Using your home for business purposes
  • Itemized deductions
  • Education deductions
  • Healthcare deductions
  • Investment deductions

Contributing to retirement accounts

Contributing to retirement accounts such as 401(k), IRA, or Roth IRA can reduce the taxable income, thereby reducing the tax liability.

Take advantage of tax credits

Tax credits such as child tax credit, earned income tax credit, and education tax credit can significantly reduce tax liability. Therefore, it is essential to take advantage of all eligible tax credits, such as:

  • Family and dependent credits
  • Income and savings credits
  • Homeowner credits
  • Healthcare credits
  • Education credits

Plan for capital gains and losses

Capital gains and losses can significantly impact tax liability. By planning for them in advance, taxpayers can reduce their tax liability. For example, if a taxpayer has realized capital gains, they can sell some investments at a loss to offset the gains and reduce the tax liability. Capital gains are taxed differently depending on whether they are long-term or short-term. If your client held an asset for one year or less and sold it for a profit, the gain is considered a short-term capital gain and is included in their income.

If they hold an asset for more than a year and sell it for a profit, it is considered a long-term capital gain and is taxed. There are capital gains thresholds, which are analogous to income tax brackets.

2023 Capital Gains Tax

Capital Gains Single Filer in 2023 Married Filing Separately in 2023 Head of Household in 2023 Married Filing Jointly in 2023
0% $44,625 or less $44,625 or less $59,750 or less $89,250 or less
15% $44,626 to $492,300 $44,626 to $276,900 $59,751 to $523,050 $89,251 to $553,850
20% $492,301 or more $276,901 or more $523,051 or more $553,851 or more

Charitable donations

Donating to charities is a noble act and helps reduce tax liability. Taxpayers can deduct charitable donations from their taxable income, reducing it.

Use a tax professional

It is always recommended to seek advice from a tax professional to identify and maximize all tax-saving opportunities. A tax professional can guide tax deductions, credits, and other tax-saving strategies that can significantly reduce tax liability.

When it comes to tax deductions, you can either itemize (add up all of your client’s deductions) or take one standard deduction (a single lump sum deduction of $12,950 for single taxpayers, $19,400 for heads of households, or $25,900 for married filing jointly).

The standard deduction is the best option if you don’t have many deductions to claim.

If you have a lot of deductions, you should probably itemize. Check out The Big List of Small Business Tax Deductions to ensure you claim every possible deduction.

Check out The Big List of U.S. Small Business Tax Credits to see if you qualify for any tax breaks.

What is Federal Income Tax Liability?

Federal income tax liability is the amount of federal income tax that an individual or business owes to the federal government based on their taxable income. Federal tax is a tax levied by the federal government on individuals, businesses, and other entities that earn income. The federal government uses tax revenue to fund various programs and services such as defence, social security, and healthcare.

Federal tax liability is calculated based on the taxpayer’s taxable income, which is their total income minus any deductions or exemptions they are eligible for. The tax rate applied to the taxable income varies based on the taxpayer’s income bracket.

It is important to note that federal income tax liability is just one component of the total tax liability that an individual or business may owe. Other taxes, such as state and local taxes, may also contribute to the total tax liability.

It is essential to have a comprehensive understanding of federal income tax liability as it is a crucial component of the overall tax liability. This knowledge can provide better tax planning and advice to clients, ultimately leading to a better client experience.

In order to reduce federal income tax liability, individuals and businesses can employ various strategies such as maximizing deductions, contributing to retirement accounts, taking advantage of tax credits, and planning for capital gains and losses. It is also essential to stay up-to-date on changes in tax laws and regulations, as they can significantly impact federal income tax liability.

Deferred Tax Liability

In addition to the current tax liability, taxpayers may also have a deferred tax liability. Deferred tax liability refers to the taxes that will be payable in the future due to temporary differences between book and tax accounting. For example, if a business records revenue in its books but defers recognition for tax purposes, it will have a deferred tax liability.

Deferred tax liabilities can be reduced by accelerating expenses or delaying revenue recognition. However, it is essential to note that these actions can significantly impact the financial statements and should be carefully evaluated.

The final road…

Understanding tax liability is crucial for individuals and businesses to ensure they are compliant with tax laws and regulations. You play a significant role in guiding your clients toward minimizing their tax liability. By following the tips mentioned above, taxpayers can effectively reduce their tax liability and save money.

As a leading outsourcing firm, Unison Globus offers expert tax preparation and accounting services to help your clients navigate the complex world of tax liabilities. Our team of experienced tax professionals can assist you in maximizing your clients’ tax deductions, taking advantage of tax credits, and identifying opportunities for reducing their tax liability. We also provide timely and accurate tax preparation and filing services, so you can focus on growing your business while we take care of the rest.

Contact Unison Globus today to learn more about our tax preparation and accounting services, and take advantage of our free trial offer to experience the difference for yourself. Let us help you and your clients save time, money, and stress by streamlining your tax processes and ensuring compliance with all relevant tax laws and regulations.

Categories
Auditing

Internal VS External Audit: Difference between Internal and External Audit

Internal Audit VS External Audit

Internal VS External Audit

You understand the importance of maintaining financial transparency, accuracy, and compliance for your clients. One way to achieve this is through auditing, a process of examining and verifying financial records to ensure they are reliable and compliant.

However, there are two types of auditing services that you can provide to your clients: internal and external audits. While both types of audits may seem similar, they differ in their focus, scope, and approach. Understanding the differences between these two types of audits is essential for selecting exemplary service for your clients.

In this article, we’ll explore the key differences between internal and external audits to help you provide the best auditing services to your clients.

Internal VS External Audit – An Introduction

When it comes to financial transparency and accountability, there are two critical types of auditing services that every organization should be aware of: internal and external audits. As a CPA firm, you need to understand the differences between these two types of audits and their focus, scope, objectives, and goals to provide your clients with exemplary service for their unique needs.

Understanding how external auditing works can help internal auditors better prepare for an audit and ensure that their organizational reporting and documentation meet requirements. It can also provide valuable talking points when explaining the internal audit report function to management, the board, or other stakeholders. According to the Institute of Internal Auditors’ Global Perspectives and Insights report, there are several key differences between internal and external audits.

Internal VS External Audit – Audit Purpose

Internal Audit

Analyzes and improves organizational controls and performance.
Evaluates the organization’s entire risk and control landscape, risk management effectiveness, and implications for organizational strategy and performance.

Identifies the risks that alerts leaders to these risks, could prevent an organization from achieving its goals, and proactively recommends improvements to help reduce the risks.

External Audit

Focuses primarily on financial and compliance controls.
Has no responsibility to evaluate governance, risk management, and compliance (GRC) activities or suggest improvements, except for identifying corrective actions needed to address noncompliance issues or reporting internal control problems that may arise in their audit work.

Internal VS External Audit – Audit Focus

Internal Audit

Assesses organizational health holistically, determining whether business practices support strategic objectives and identifying risks that could impact those objectives.

External Audit

Auditors from regulatory agencies or government look for any compliance deficiencies or violations.

Focuses on whether the organization’s business accounts accurately and fairly represent its financial performance.

Is primarily backward-looking and reactive.

Internal VS External Audit – Audit Scope

Internal Audit

Provides insights and suggestions to management covering all governance, risk, and control processes.
Is preventative and ongoing.

External Audit

Tends to happen annually or at least once every five years.
For compliance audits, the scope is determined by the regulatory body conducting the audit.

Has a scope limited to financial statements.

Internal VS External Audit – Primary Audience

Internal Audit

Reports directly to the board of directors, senior management, the audit committee, and/or other groups within the organization’s own governance boundary.

Provides governance assurance.

External Audit

Reports to a different audience, which may include shareholders, regulators, company members, customers, or investors that are not part of the organization’s internal governance structure.

Is part of a wholly independent third party.

Internal VS External Audit – Auditor Skills

Internal Audit

May come from a variety of academic or professional backgrounds.
Objectivity and independent assurance are key principles.

Despite having a vested interest in the organization, internal auditors should still be independent of the activities they audit.

External Audit

Are certified accountants (for financial audits), compliance professionals, or government employees (for compliance audits)?
May be requested by potential or existing customers to verify that an organization is meeting their requirements.

Employment Relationship

Internal Audit

Reports to the senior management, audit firm/committee and/or board rather than the business areas being audited.
Maintains objectivity through “no professional or personal involvement with or allegiance to the area being audited.” Internal audit departments can facilitate better communication and coordination by ensuring their risk assessments, reports, work papers, and other documentation are prepared and in an easy-to-use format.

External Audit

Is not an employee of the organization being audited?

Although internal and external audits’ purpose, focus, and outcomes differ, they can share information to avoid duplication and improve audit coverage.

Internal VS External Audit – Focus and Scope

Internal audits focus on identifying potential risk areas, evaluating internal controls’ effectiveness, and improving internal processes. As a CPA firm, you can use internal audits to provide management with insights and recommendations for improving the organization’s financial controls.

External audits, on the other hand, are focused on evaluating the accuracy and reliability of financial statements and ensuring compliance with applicable laws and regulations. As a CPA firm, you can provide assurance to stakeholders, such as shareholders and regulators, by conducting external audits.

Internal VS External Audit – Objectives and Goals

The primary objective of internal audits is to help the organization improve its internal processes, identify risk areas, and ensure compliance with internal policies and procedures. Internal audits can help your clients improve their internal processes and mitigate potential risks.

External audits, on the other hand, are designed to assure stakeholders that the financial statements are accurate and reliable and that the organization complies with applicable laws and regulations.

Internal VS External Audit – Standards and Regulations

Internal and external audits are subject to different standards and regulations. It is essential to understand the standards and regulations that govern these audits. Internal policies and procedures typically govern internal audits.

Internal audit report is guided by internal audit standards and best practices, such as the International Standards for the Professional Practice of Internal Auditing (IPPF) and the Institute of Internal Auditors (IIA) standards.

While external audits are governed by auditing standards and regulations, such as the Generally Accepted Accounting Principles (GAAP) and the International Financial Reporting Standards (IFRS), Generally Accepted Auditing Standards (GAAS), and the Sarbanes-Oxley Act (SOX). Compliance with these standards and regulations is essential to ensuring the effectiveness and integrity of the auditing process.

Internal VS External Audit – Stakeholders and Reporting

Internal and external audits have different stakeholders and reporting requirements. It is essential to understand the reporting requirements for each type of audit. Internal audits are typically conducted for management and the board of directors, and the results are reported to these stakeholders.

External audits are conducted for a broader range of stakeholders, including shareholders, regulators, and creditors, and the results are reported in the company’s financial statements.

Internal Audit – Pros, Cons, and Impact

Pros:

Provides a more comprehensive review of an organization’s operations and processes, including risk management and governance practices.
Helps identify and mitigate risks before they become more significant issues.

Provides recommendations for improving internal controls, risk management practices, and compliance with laws and regulations.
Can help improve the overall efficiency and effectiveness of an organization’s operations.

Helps ensure compliance with internal audit standards and best practices.

Cons:

May need more independence or objectivity, as internal auditors are employees of the organization they are auditing.

It may need more expertise or resources in certain areas, such as complex financial transactions or regulatory compliance.

May have a different level of oversight and scrutiny than external audits.

Impact on CPA firms:

As a CPA firm, offering internal audit services can help you provide a more comprehensive range of services to your clients and help them improve their internal control systems and risk management practices.

External Audit – Pros, Cons, and Impact

Pros:

Provides an independent and objective assessment of an organization’s financial statements, which can increase stakeholder confidence in the organization’s financial reporting.

  • Helps ensure compliance with accounting standards and principles, such as GAAP and IFRS.
  • Can help identify material misstatements or errors in financial reporting.
  • Can help improve the overall accuracy and reliability of financial statements.
  • Can help identify weaknesses or gaps in internal controls.

Cons:

  • Can be more expensive than internal audits, as external auditors may require more time and resources to complete their work.
  • May provide a different level of an in-depth review of an organization’s operations and processes than internal audits.
  • Can be disruptive to an organization’s operations during the audit process.

Impact on CPA firms:

As a CPA firm, offering external audit services can be a significant revenue stream, as organizations are required by law to have their financial statements audited annually. However, competition in this market can be intense, and maintaining independence and objectivity is critical.

Overall, both internal and external audits play an essential role in ensuring financial transparency and accountability for organizations and can provide opportunities for CPA firms to offer valuable services to their clients.

The final road…

In conclusion, as a CPA firm, you have the expertise to help your clients choose the exemplary auditing service for their specific needs. However, sometimes your clients require additional support in areas such as bookkeeping, tax preparation, and financial reporting. This is where outsourcing services from firms such as Unison Globus can be valuable.

By partnering with Unison Globus, you can offer your clients a comprehensive range of financial services, providing them with the peace of mind that their financial reporting and compliance needs are being taken care of by experts in the field. With your firm’s auditing expertise and Unison Globus’ outsourcing services, your clients can easily achieve their financial goals.

Categories
Accounting and Bookkeeping

The Definitive Guide to Accounting Outsourcing: What You Need to Know

Accounting Outsourcing

The Rise of Accounting Outsourcing Services

As small to medium-sized accounting practices grow and expand, many are turning to outsourced accounting as a solution to common challenges. But what exactly is outsourced accounting, and why has it become so popular in the accounting and bookkeeping industry today? In this definitive guide, we’ll examine what outsourced accounting is, why it’s becoming more popular, and what it could mean for your business.

What is Outsourced Accounting?

Outsourced accounting involves assigning accounting, bookkeeping, and/or compliance work to accounting professionals in another country. Business owners typically partner with an outsourced accounting services provider who presents them with qualified candidates for screening and onboarding as new team members. This approach allows owners to delegate day-to-day work to their new global team members, freeing up time to focus on the core business and growth.

  • Accounting outsourcing involves contracting an external service provider to handle a business’s accounting functions.
  • This includes bookkeeping, accounts receivable, accounts payable, and personal and business tax returns.
  • Accounting outsourcing services providers typically use cloud-based software to provide real-time access to financial data.
    The outsourced team can communicate via video calls, emails, and other virtual channels.
  • With outsourced accounting services, businesses can access the benefits of having an in-house accounting team without the cost and commitment of hiring full-time staff.

Why is Accounting Outsourcing Becoming More Popular?

Firms are turning to outsourced accounting solutions to counter several common pressures, including:

Price pressure

Advances in cloud accounting technology have led to lower client expectations for compliance and administrative services.

Talent shortage

Attracting and retaining qualified accountants is challenging, especially as they tend to fall on the higher end of the pay scale. This squeezes margins on more routine work, drying up the recruitment pool.

Capacity crunch

Owners often need help to complete procedural work and leave time for high-margin strategic work, leading to a need for new solutions to remain competitive.

Greater competition

With competitors anywhere from across the country to across the globe, growing your capacity also means matching your reach.

Why Outsource Accounting Services?

Outsourcing accounting functions can free up time and resources, allowing you and your staff to focus on core competencies and growth while providing better services to clients. With specialized expertise, technology, and greater flexibility, outsourcing can be a valuable tool for businesses looking to reduce costs and improve efficiency.

At Unison Globus, we offer cloud-based outsourced accounting services that can help you achieve your business goals. Here are some of the ways we can help:

Bookkeeping

Our team of experienced bookkeepers can help you maintain accurate and up-to-date financial records, giving you real-time insights into your business.

Accounts payable and receivable

Our outsourced accounting services can help you manage your accounts payable and receivable, ensuring that payments are made and received on time.

Financial reporting

We can provide you with timely and accurate financial reports, allowing you to make informed decisions about your business.

Tax compliance

Our team of experts can help you stay compliant with tax laws and regulations, minimizing your risk of penalties and fines.

Cloud-based accounting

Our cloud-based accounting services can provide you with 24/7 access to your financial data from anywhere, at any time.

If you’re considering outsourcing accounting services, be sure to assess potential service providers and avoid common outsourcing mistakes. At Unison Globus, we provide guidance and support to help you get started. Check out our services page and sign up for a free trial today to see how we can help you focus on your core business and provide better services to your clients.

Moreover, keeping mind the additional reasons to outsourced accounting services are:

  • Accounting outsourcing services can save your business time and money while improving the quality of work.
  • By accounting outsourcing, you can access specialized expertise and technology that may not be available in-house.
  • Accounting outsourcing can also provide greater flexibility to adjust staffing levels based on business needs.

Overall, outsourcing accounting services can help your business focus on core competencies and growth rather than administrative tasks.

Benefits of Outsourcing Accounting Services

Accounting outsourcing offers several key benefits for accounting firms, including:

  • Increased capacity, efficiency, and profitability: Outsourcing provides a holistic solution to common business challenges.
  • More time to focus on business development and providing a better client experience.
  • A better work-life balance for owners and staff.
  • The ability to fill roles more quickly with qualified staff.
  • Lesser-Known Benefits of Outsourcing Accounting

In addition to the above benefits, accounting outsourcing can also offer the following:

  • Increased ability to promote local staff to help with higher-level work.
  • Happier staff and staff retention due to reduced pressure and more manageable workloads.
  • Cost-effectiveness due to savings on technology and infrastructure.
  • Business continuity in the event of power outages or other disruptions.
  • Increased productivity and competitiveness.

Addressing Concerns About Accounting Outsourced Solutions

While accounting outsourced solutions offer many benefits, some business owners may need help with the impact on the local job market. However, outsourcing does not necessarily lead to job replacement. Instead, it offers a solution for firms to grow their capacity and remain competitive while still providing valuable services to the local community.

Factors to consider before outsourcing

Before deciding to outsource accounting or other business functions, it is essential to consider a few factors. These include defining your objective for outsourcing, assessing potential service providers, and evaluating your ability to communicate with a global team. Additionally, it is recommended to appoint a local “champion” to manage the outsourced team.

Roles to outsource

Several roles can be outsourced, including financial services, accounting functions, executive assistants, corporate secretaries, data analytics assistants, client service assistants, paraplanners, financial planning assistants, mortgage broker assistants, HR assistants, recruitment support assistants, IT assistants, integrations specialists, marketing coordinators, social media managers, and business development associates. Outsourcing these roles can save time and resources and provide a high ROI.

Avoidable outsourcing mistakes

To ensure a seamless outsourcing process, it is essential to avoid common pitfalls, such as delegating the most challenging work first, failing to create standardised workflows, not getting clients and local staff onboard, hiring only one remote team member, and not taking the time to understand the global team’s culture and fully integrating them into the company. It is recommended to meet with the global team in person at least twice a year to foster a sense of belonging and articulate their value within the company.

Global team ambitions

Outsourced accounting services and other business functions can be a low-risk, high-reward prospect, provided the correct steps are taken. If your firm is considering outsourcing, Unison Globus is available to provide a Accounting Outsourcing Strategy and one-on-one chat to help with the inception and rollout of your global team.

Outsourced Accounting for Small Businesses: Benefits and Considerations

Small businesses frequently face resource and budget constraints, making it difficult to maintain an in-house accounting team capable of meeting their needs. By outsourcing accounting services to a reputable provider, small businesses can benefit from a cost-effective solution. Outsourcing enables access to specialized expertise, advanced technology, and scalability, all without the burdensome overhead costs associated with hiring and training a full-time accounting team.

With outsourced accounting, small businesses can focus on their core competencies, such as marketing, product development, and customer service, while leaving accounting functions to the experts. This can help increase operational efficiency, reduce errors and fraud, and provide a better customer experience by ensuring accurate and timely financial reporting.

Benefits of Outsourcing Accounting for Small Business

Another significant benefit of outsourcing accounting services for small businesses is access to a wide range of services. Whether a small business needs basic bookkeeping services or more advanced financial analysis and reporting, outsourcing providers can tailor their services to meet the business’s specific needs.

For example, Unison Globus provides various outsourced accounting services, including bookkeeping, payroll processing, tax compliance, financial reporting, and analysis. Their team of experienced professionals can help small businesses save time and reduce costs by streamlining accounting functions and providing valuable insights into their financial performance.

Small businesses should also consider the potential risks and challenges when considering outsourcing accounting services. For instance, selecting the appropriate provider can lead to improved work quality, mitigating the risk of data security breaches or legal and regulatory compliance problems. Small businesses must conduct thorough research on potential providers, assessing their experience and reputation. It is crucial to verify that the chosen provider has robust data security measures in place to safeguard sensitive financial information.

In conclusion, outsourcing accounting services for small businesses looking to reduce costs, increase efficiency, and specialized access expertise. Small businesses can focus on their core business by partnering with a reputable provider like Unison Globus while leaving accounting functions to the experts.

How to start with Outsourced Accounting Services?

  • Define your objective for outsourced accounting services to provide direction to your team.
  • Assess potential service providers to find a good fit for your business.
  • Determine whether you have the capability to communicate with a global team and consider appointing a local champion to manage the team.
  • Typical accounting functions that are outsourced include bookkeeping, tax returns, and executive assistant tasks.
  • Avoid common outsourcing mistakes such as delegating the most challenging work first and not integrating the outsourced team fully into your company culture.

Conclusion: Is Outsourcing Right for Your Firm?

Outsourced accounting services can be a game-changer for accounting firms, freeing up time and resources to focus on core business and provide better client services. It reduces costs, improves efficiency, and provides access to specialized expertise and technology.

Assessing potential service providers and avoiding common outsourcing mistakes is crucial. Unison Globus can provide guidance and support to help you get started. Check out our service page and sign up for a trial today.

Categories
Accounting and Bookkeeping Auditing Tax Preparation

What Parameters to Consider while Evaluating a “Better CPA”?

CPA Parameters

Best CPA Parameters Overview

Are you looking for the best CPA for your organization? Let me say that it is not that easy to hire the best as per your need. There are 478,783+ CPAs currently employed in the US. Though, to hire best one you need to consider some parameters.

Let us talk about some of those in this blog which are as follows:

1. Industry Expertise

Choose a CPA with experience working with clients in your industry, as they will have a better understanding of the unique accounting requirements and regulations that apply to your business.

2. Professionalism and Communication Skills

Look for a CPA who is professional and has strong communication skills, as this will be important skill for negotiations and for building a productive working relationship.

3. Service Offerings

Ensure that the CPA provides the specific services you need, such as tax preparation, bookkeeping, or financial planning and Audit.

4. Availability and Responsiveness

Choose a CPA who is available when you need them and is responsive to your requests and inquiries.

5. References and Reviews

Check references and read reviews from previous clients to get a sense of the CPA’s reputation and quality of service. By considering these factors, you can make an informed decision about which CPA is best for your needs.

Skills that make a better CPA

1. Technical Accounting Knowledge

A strong foundation in accounting principles and concepts is essential for a CPA, as they will be responsible for preparing and analysing financial statements, conducting audits, and ensuring compliance with relevant regulations. So, technical accounting knowledge is one of the CPA parameters.

2. Taxation Expertise

Tax laws and regulations are complex and constantly changing. A CPA with expertise in taxation can help clients minimize tax liabilities, ensure compliance with tax laws, and make strategic tax planning decisions.

3. Analytical Skills

A CPA should have strong analytical skills to interpret financial data, identify trends and patterns, and make sound financial decisions.

4. Communication Skills

A CPA should be able to communicate financial information clearly and effectively to clients and stakeholders, including non-financial professionals.

5. Problem-Solving Skills

A CPA should be able to identify and solve complex financial problems, using their knowledge and expertise to provide strategic solutions for clients.

6. Ethical Standards

A CPA should adhere to high ethical standards and maintain confidentiality when dealing with sensitive financial information.

7. Technology Skills

A CPA should be proficient in accounting software, data analysis tools, and other technology used in the accounting profession.

What can the CPA do for better client results? 

Accounting is a very intricate and detail-oriented business and while it may seem mundane and repetitive, one size doesn’t fit all. A detailed understanding of your client’s business and their day-to-day workings is a must to provide the optimal results for your clients. Here are four things we suggest every CPA should do to provide a personalized and optimal results for their clients. 

1. Build Domain or Industry expertise

With changing regulatory and business requirements, it is important that you are savvy with the business and the industry of your client. This not only helps you provide them with the right guidance but also stay on top of any regulatory, compliance or industry changes happening in their domain. After all, agility and quick response are two traits that can set you apart as a CPA amongst your peers or competitors.  

2. Create a Vertical Team of Cross-domain Experts

The world of finance and accounting is so deep that it’s impossible for a single person to know everything. It’s always beneficial if you work as a panel or a team. Apart from basic accounting and bookkeeping a team that is savvy in corporate law, financial analysis, compliance and banking can go a long way to support your client and build credibility for your CPA practice 

3. Upskill Yourself

We understand that it’s not always possible to find the right talent, especially in our field, but it is possible to continually upskill yourself in areas that can not only help your client but also you as a business owner.  

4. Get Help where you need it

When the going gets tough don’t be afraid to ask for help. Outsourcing your work to a well-qualified and reliable partner with infrastructure, expertise and resources is the best way to build your credibility and support provide personalized and optimal results for your clients. Outsourcing also enables you to grow your practice quickly and efficiently without increasing your costs. 

Conclusion: CPA Parameters

As we shared all information in detail, we are now confident that you’ll be able to find best one for your needs. Although, if you are still confused to hire one, let us make your task easy. Contact our experts at Unison Globus and they’ll get you the best.

Categories
Tax Preparation

All You Need to Know About Tax Installment Payment

All You Need to Know About Tax Installment Payment

Taxpayers only pay tax on last year’s earnings. If the tax is over 10,000 rupees, it must be paid within the Act’s deadline. The Act includes Advance Tax provisions to ensure income reaches the government quickly.

What is Tax Instalment Payment?

Tax instalment payment is payment made in advance to reduce your upcoming tax liability. If you are a sole proprietor and expect to owe more than $3,000 in taxes this year (in the form of income tax or HST), you must make anticipated tax payments each quarter.

Tax instalments are not taxes for the current year which can be paid in instalments, unless you arrange a payment plan with CRA.

Due dates

Whether you are obliged to pay income tax instalments or HST payments (or both), these installments have separate due dates.

HST

April 30th

July 31st

October 31st

January 31st

INCOME TAX

March 15th

June 15th

September 15th

December 15th

* Installments of HST are due one month following the end of each financial quarter. These dates are based on the assumption that you run your business as a sole proprietor and that your fiscal year ends on December 31.

Don’t worry if you missed your payment – You can avoid paying interest on late payments by either paying your next installment early or by paying more than the required amount for that installment. You will be able to earn “installment credit interest” if you do so.

Overpaid your installment – Good news! You are eligible for a refund! Or the option to have the excess payment applied to the installments for the next year!

Tax installment payments allow you to be ahead of your tax responsibilities so you don’t have to worry at year’s end. Get tax preparation outsourcing help from professionals here.

Unison Globus has pool of experienced tax preparers who are ready to help you with your Tax Installment Payment.

Tax Installment Payment

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Accounting and Bookkeeping

12 Killer Accounting Podcasts to Add Value to People in Industry

12 Killer Accounting Podcasts to Add Value to People in Industry

Accounting Podcasts

Let’s face it: when we’re searching for something enjoyable to pass the time, we frequently turn to podcasts. However, because there are millions of possibilities to pick from, particularly in accounting, finding the ideal fit can be a lengthy endeavor. But not anymore!

We’ve compiled a selection of the best accounting podcasts, which cover a wide range of business topics and offer helpful advice that can be beneficial to even the most successful accountants in public accounting.

Don’t hesitate to listen to one or more of these episodes. It’s possible that you’ll find your new favorite playlist among these.

Green Apple Podcast

The Green Apple Podcast by John Garrett brings the bizarre and extraordinary to the surface by interviewing guests who try to be unique in order to stand out in their respective businesses.

With accounting professionals, lawyers, consultants, and other thought leaders on the podcast, you’ll enjoy learning more about their interests and how they incorporate them into their enterprises for more business enlightenment and independence.

Cloud Accounting Podcast

This podcast, hosted by Blake Oliver, CPA, and David Leary, is a cloud accounting podcast that focuses on how businesses may use current cloud accounting technologies to improve their operations in each weekly edition. They discuss many subjects, such as:

  • Accounting and finance apps
  • Accounting technology
  • Cryptocurrency and emerging tech
  • Cloud stories
  • Remote work and cloud tools
  • Online sales and marketing tips
  • How to manage a modern practice

Accounting Influencers

Martin Bissett and Rob Brown host the Accounting Influencers podcast, which focuses on the following:

  • accountancy and fintech news
  • commentary around this news
  • practical ‘what works’ tips and expert interviews

The podcast is CPE-accredited, promoted via social media, and commercially supported, with over 21,000 listeners in 150 countries, primarily in the United States and the United Kingdom.

Unison Globus Public Accountant

The Unison Globus Podcast features ongoing, in-depth talks on some of the hottest accounting trends with some of the industry’s most prominent business leaders and successful entrepreneurs.

Every episode will leave you with a minimum of one new tidbit of knowledge.

Future Firm

The finest aspect of Future Firm with Ryan Lazanis is that each episode is only a few minutes long. It is always packed with excellent, actionable advice.

This one is highly suggested because it won’t use much of your time but will prompt you to consider practical methods to improve your company.

Aly & Andrew’s All Aussie Accounting Adventures

If you’re interested in opening and operating your own accounting firm/small business, or if you want to learn more about this topic, Aly & Andrew’s All Aussie Accounting Adventures is the audio book for you.

Aly and Andrew give pearls of wisdom and sensible guidance based on their own personal experience with the process in each episode.

Accounting Best Practices with Steve Bragg

Accounting Best Practices with Steve Bragg, hosted by entrepreneur, author, and accounting expert Steve Bragg, will allow you to stay on top of all current challenges so that you miss nothing.

Each episode of this podcast is roughly 7-8 minutes long, making it ideal if you’re short on time and like processing information quickly.

Bean Ninjas

Bean Ninjas are unquestionably experts in providing world-class bookkeeping, accounting, virtual CFO, and tax services to 7- and 8-figure eCommerce firms seeking to scale.

This is evident in their monthly podcast episodes, which provide essential accounting and business advice for the professional development of anyone interested in the public accounting field.

Journal of Accountancy Podcast

Besides publishing The Journal of Accountancy decided to produce a related podcast.

The program frequently discusses significant accounting challenges and the most recent accounting news.

Taxgirl Podcast

The Taxgirl Podcast focuses on critical information on tax tips, money, cash flow, and making wise financial decisions. All themes are timely, educational, and easily understood. It allows you to remain knowledgeable about the most significant concerns in the world of taxes. New episodes are released regularly.

Scaling New Heights Podcast

Cutting-Edge Training for Small Business Advisors: The ‘Scaling New Heights’ podcast is created for accountants and other business advisors. It offers access to essential training from the annual Scaling New Heights conference throughout the year.

Each weekly broadcast features an interview with a prominent guest who is either a previous Scaling New Heights presenter or an upcoming conference presenter. It is approximately 30 minutes in length and is accessible on iTunes, Player FM, and Stitcher.

Grow My Accounting Practice

A show for accountants and bookkeepers seeking to expand their practices. We delve deeply into both the theoretical and actionable strategies you need to expand your practice as you’ve always envisioned.

You will learn about marketing, sales, hiring, management, pricing, and everything else required to expand a business. The only topic they do not discuss is accounting skills. They provide you with business skills. You already possess them.

Read also: Outsourcing from Marketing lens – Why India is the preferred choice of Outsourcing

Podcasts are becoming increasingly popular in the business world, as they integrate the strengths of radio, television, and the internet into one convenient medium.
Streaming podcasts on any device is hassle-free, as it doesn’t require any special software or hardware.

Compared to watching videos or reading articles, podcasts demand significantly less effort from the listener.

Gone are the days of carrying around physical newspapers like the Financial Times; now, you can access a wealth of information and stay up-to-date with the latest developments right at your fingertips.

So, listen to these 12 killer accounting podcasts on your daily commute, at work, or in your free time. Some are motivational, some are educational, and some are inspiring.

Want to outsource accounting or bookkeeping services? Click here.

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Tax Preparation

W2 vs 1099: Difference Between 1099 and W-2 Tax Forms

w2 vs 1099

W2 vs 1099

With a rise from 12.9 million in 2017 to 23.9 million in 2021, the number of independent contractors in the US is rising.

As the number of people working as freelancers or independent contractors continues to rise, you may need to adjust how you file your taxes this year. It can be confusing to know which tax form to use to report payments to an independent contractor vs. an employee, even if you know that 1099 is used to report payments to the former.

A different set of laws than an independent contractor binds a full-time employee.

Independent contractors are not considered employees. One recruits Independent contractors on a project-by-project basis or to complete duties within a set period of time.

This means they must supply their own tools and supplies for the task and that the client has no say in the manner or location. Businesses and independent freelancers should always have a formal contract when working together.

On the other hand, a full-time worker regularly reports to work or performs their duties at an agreed-upon offsite location. In addition to having to withhold taxes for things like Social Security, health insurance, and more, employers also get to decide when, when, and how their workers get their jobs done.

Comparing 1099 Workers vs. W-2 Employees

Checkout main differences between 1099 and W-2 employees below.

W2 vs. 1099 1099 Workers W-2 Employees
Payroll taxes Pay their own federal income tax. There are two components to this tax: 12.4% goes to Social Security, and 2.9% to Medicare. Medicare and Social Security take up 15.3% of an employee’s salary, each of which is split in half between the employer and the worker.
Benefits Not eligible for health care, tools and resources owned by the company, or company retirement plans. Eligible for benefits such as health, dental, and vision insurance, retirement programs, and discounts on goods and services
Tax forms Forms are filled out by companies to document contractor payments. The federal, state, and self-employment tax payments made by a contractor will not be reflected on their 1099 form. A document used by businesses to report to the Internal Revenue Service (IRS) and state and local tax authorities on the income and tax withholdings of their employees.

With so much emphasis on compensation and legal protections for workers, it’s easy to forget that the correct classification of your personnel determines which tax form must be filed with the Internal Revenue Service.

How does the IRS decide who qualifies as a 1099 worker and who must file a W2?

The Internal Revenue Service (IRS) compiled a set of questions that can be used to classify employees as 1099 contractors or employees. In general, these aid employers in determining how much sway they have on an employee’s autonomy. Several factors are as follows:

Behavioral

Does the employer have the ability to mandate how much work an employee must do or how they must do it?

Financial

Who has the ultimate decision-making authority over the worker’s salary, equipment and supplies, and expense reimbursement: the company paying the bill?

Type of Relationship

Did the employer and employee enter a written contract outlining the terms of their relationship, including compensation, perks, and time off? Is this a continuing business between them?

With the potential for severe penalties and misclassification at stake, all businesses must take their time while answering these questions in preparation for filing their worldwide payroll. Misclassification can lead to lawsuits and severe damage to their reputation. Thus, it can be challenging to attract top staff and subject them to potentially hefty fines for infractions of tax legislation.

Fill out an SS-8 form and submit it to the IRS if you need help deciding how to classify an employee.

You could be debating right now whether it would be better for your business to recruit a 1099 worker or a W-2 worker. However, no matter your company’s standing, you can benefit financially.

What is a 1099 employee?

A 1099 worker is an independent contractor and not a full-time employee. 1099 employees, also known as freelancers, independent contractors, and self-employed workers, pay their own income taxes to the IRS each year.

Since 1099 employees are considered independent contractors, they are free to work for anybody they choose and are not limited to a single employer. 1099 workers often charge per contract because they simultaneously provide services to multiple companies.

To give some examples of 1099 employees:

  • Freelance writers who work on an assignment basis without set hours
  • Consultants who help your company with a clear start and end date
  • Gig workers who perform services receive payment through an app
  • Freelance designers and developers who work project by project

For tax purposes, every single sort of 1099 worker (regardless of industry, the scope of work, or level of expertise) must complete a 1099 form.

1099 tax form

Businesses that pay independent contractors or other non-employees throughout the tax year must file IRS Form 1099-MISC during the tax filing season. 1099 form is typically unnecessary for individual tax filers. The only time this is different is if you are a small business owner and you have hired an independent contractor. If not, the burden of completing and filing 1099 forms falls on businesses and financial institutions by January 31st.

There are different types of 1099 employee forms to fill out for different types of contractors:

• Form 1099 – These are the forms used by firms to report payments made to a freelancer or contractor within a given accounting period.

• Form 1099-MISC: Miscellaneous Income – If you have worked as an independent contractor or if you are self-employed with multiple clients, please fill out this form. Complete a separate 1099-MISC form for each customer who paid $600 or more. A company should complete a form for the IRS (commonly called Copy A) and provide a copy to the contractor (called Copy B)

• Form 1096 – Complete 1096 form to provide a summary of all 1099s you filed and sent to the IRS by the end of January.

Earnings reported on 1099 forms are generally not subject to withholding taxes. This is a significant distinction between independent contractors, who receive 1099 forms, and regular employees, who receive W-2 forms.

Streamline 1099 filing and issue forms seamlessly. Reach out for stress-free solutions now!

What Is a W-2 employee?

In most cases, workers fall into the W-2 category.

An employee who obtains a W-2 tax form from their employer is known as a W-2 employee. W-2 workers are the most common type of workers in the United States.

They clock in daily, do their jobs, and get salary biweekly or monthly. W-2 employees sign an agreement for an extended period of time for ongoing employment, while 1099 employees work contract to contract.

When hiring a full-time employee, businesses have more say over their hours, responsibilities, and workload than they do with 1099 workers. Employers withhold Social Security and Medicare benefits on W-2 forms, which employees are entitled to receive.

Or any other position where your company has the authority to choose the employee’s schedule and working conditions, in which case they will be a W-2 employee. Then, you will be responsible for providing them with the necessary equipment and training. An employer must file a W-2 tax form for each employee who is eligible to receive a W-2 wage statement.

W-2 tax form

The W-2 documents an employee’s earnings, benefits, and tax withholdings for a given tax year. Any employee, whether they worked for you part-time or full-time, must have a W-2 filled out for them by their employer. Any worker who received $600 or more in taxable wages or who had taxes withheld from their pay should receive a W-2 from their employer.

One must file W-2s by January 31st of the following year, the same deadline as for 1099 employees.

Employers with W-2 workers need to deduct and contribute to the federal government through Social Security and Medicare taxes.

W2 vs 1099: Which is better for you?

Despite the seeming complexity, it often helps to compare the two states visually.

Both W-2 employees and independent contractors can contribute to your company’s success, but it’s up to you to determine which is best for you. Think about the following factors when you weigh your options:

  • Is this a one-time project with limited repercussions, or will it have an ongoing impact on the business?
  • Is someone available immediately with a good cultural fit and has skills? Can you hire a freelancer to fill in while you search for the ideal candidate?
  • How much money do you think the new employee should make? Is it better for the business to hire a freelancer or contractor instead of paying a full-time employee in order to save money on overhead?

But there are other factors to think about while talking about W2 vs 1099. A W-2 employee is a good choice if it’s critical for your company that employees stick to a strict schedule, perform only approved duties, and follow established procedures.

Generally speaking, executives are classified as W-2 employees. If you’re not in a leadership position, though, hiring a contractor with the right set of abilities can help you get more done in less time.

If you want to make the best option possible, like with any major business decision, you must consider all the aspects. Let Us Handle Your 1099 Filing – Contact Us!

FAQs – W2 vs 1099

Can you pay a 1099 employee hourly?

You’ll need to discuss payment conditions with the person you’re hiring. Usually, you will negotiate a contract that specifies how and when they will get payment. The most prevalent payment options for 1099 employees are hourly and project-based.

What is a statutory employee on W-2?

Statutory workers can submit claims for work-related costs. A statutory employee, sometimes known as an independent contractor. Then, one gets treatment for the same for tax withholding purposes as a typical employee. The employee is category is statutory if the employer and employee both contribute to Medicare and Social Security.

Do 1099 workers receive social security?

Employers who recruit 1099 workers do not deduct Social Security or Medicare contributions from the worker’s pay. Everyone is entitled to Social Security. Independent contractors, however, pay the entire share of Social Security to the IRS.

When are 1099s due to contractors?

Form 1099s are due by January 31st. If you paid a contractor $600 or more for services delivered throughout the year, you’d need to file a 1099-NEC. Then, submit a copy to your contractor. One need to supply information on January 31st, the year following payment.

How do 1099 employees pay taxes?

Independent contractors submit their earnings to the IRS four times a year with Form 1040-ES, Estimated Tax for Individuals. This is sufficient to pay their federal income tax and self-employment tax obligations. Depending on their state, they may also need to pay state and local taxes.

What happens if you don’t file the 1099 form?

You will typically be notified if the IRS still needs to receive your 1099 form. If you have unpaid taxes, they will retrospectively charge you fines. Also, interest will start on the first day they think you owe tax. Penalties per form can vary from $50 to $280.

Can a W-2 employee also be a self-employed contractor?

A W-2 employee can become a 1099 independent contractor if they meet IRS requirements. A maintenance technician, for example, may own a supply store. One can offer them equipment for the business.

How many 1099 employees may a business employ?

As long as businesses identify 1099 workers correctly, they may hire as many independent contractors as they like. When hiring a 1099 employee, you must have a written contract outlining their role within the company. Contractors earning over $600 a year must submit Form 1099-MISC to the IRS and provide a copy to themselves.

Do you have to pay overtime to 1099 employees?

Contractors are independent workers. The Fair Labor Standards Act (FLSA) says that only workers are subject to minimum pay and overtime regulations. This means that 1099 workers won’t get compensation for working above 40 hours per week.

Want to outsource Payroll Tax? Get tax preparation outsourcing services from experts now.

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Executive Members

IRS Delays $600 Threshold for 1099-K Reporting Requirements by a Year

1099k-reporting-requirements

The Internal Revenue Service (IRS) delays the implementation of the tax reporting change for payment apps like Venmo and PayPal, which will be great news for small company owners and millions of Americans.

As a result, for this tax season, the reporting requirement for payments exceeding $20,000 and 200 transactions in a calendar year will remain unchanged, as opposed to the drastically lower new amount of $600.

“To help smooth the transition and provide clarity for individuals, tax professionals, and the business community, the IRS will delay implementing the 1099-K adjustments. The additional time will eliminate uncertainty during the forthcoming tax filing season of 2023 and provide taxpayers more time to prepare for and comprehend the new reporting obligations.” In a press statement, interim IRS Commissioner Doug O’Donnell stated, “The IRS and Treasury heard several concerns about the implementation schedule for these modifications under the American Rescue Plan.”

The American Rescue Plan (ARP) established this lower threshold in March 2021. The new regulations compel users to disclose financial transactions via payment applications such as Venmo, PayPal, Stripe, and Square for goods or services over $600 in a calendar year.

In addition, the IRS will “soon” publish further information to aid taxpayers and the sector, as well as additional information regarding the delay.

Sen. Joe Manchin (D-W.Va.), a staunch opponent of the new rule, issued the following statement in response to the agency’s announcement: “I am delighted that the Treasury Department and the Internal Revenue Service listened to my request to delay the 1099-K reporting requirement that will damage small businesses and people who sell things online throughout the United States. This will give Congress additional time to amend this regulation, which imposes an excessive burden on our small businesses. I will continue to work with Treasury and my bipartisan colleagues to find a lasting solution that promotes small companies in West Virginia and throughout the United States.”

As previously reported by GOBankingRates, in mid-december, Sens. Joe Manchin and Bill Hagerty (R-Tennessee) proposed an amendment to the $1.7 billion spending package to boost the reporting threshold for third-party payment networks such as Venmo and PayPal from $600 to $10,000. Manchin told CNBC that the $10,000 barrier is the best possible relief for individuals.

Why does this make sense for taxpayers?

Form 1099-K is an informational form often supplied to small business owners or freelancers who receive payments of revenue from a customer via a third-party payment system (e.g., PayPal, Venmo, or Cash App), which is typically considered self-employment income. However, due to the simplicity of Venmo, PayPal, and Cash App, many consumers use these apps to pay for both personal and business-related expenses.

Consider a group of friends who eat lunch or dinner together regularly, and one covers the tab. After the meal, friends reimburse each other via Venmo. Unless the account or payment is labelled as personal, an annual sum above $600 will trigger a reporting requirement. The recipient may receive a Form 1099-K, and the IRS will want this income to be recorded on their tax return. Only correctly categorized business payments (goods or services) will generate Form 1099-K. If a taxpayer feels the amount is not taxable and omits it from their tax return, it will create a discrepancy with IRS systems, which could result in a notice of adjustments and penalties.

If the payments are taxed, taxpayers will be able to justify why they should not be included in their income. By decreasing the barrier from $20,000 to $600, the amount of Forms 1099-K issued will grow dramatically. The delay should give taxpayers more time to acquaint themselves with the rules and, more significantly, to properly distinguish between personal and business payments to prevent incorrectly recognized payments from being reported on Form 1099-K at the end of the year.

The core reason the IRS delayed this? 

This is in response to the public’s serious concerns regarding the ability to comply and the misunderstanding among taxpayers regarding how to report Form 1099-K on income tax returns. The IRS determined that a transition time was necessary due to a lack of public advice and a substantial increase in the load on electronic payment networks.

The IRS acknowledges public concern regarding the ability of TPSOs to comply with the Form 1099-K level of $600. It also believes that people need clarification about how to disclose Form 1099-K payments on their tax returns. Treasury’s Office of Tax Policy and the Internal Revenue Service have received numerous calls and letters from the public and Congress on the Form 1099-K reporting adjustments.

During this transitional time, we anticipate the IRS will issue advice and disseminate information to assist taxpayers with future compliance with the new rules.

Wrap up!

The IRS is delaying by one year the reduction of the threshold for filing Form 1099-K. The $20,000 and 200-transaction limits will remain effective until December 31, 2023.

The rules regarding the reporting of income will not change. Everyone who receives taxable income through third-party networks must still track and report their income. Want to do tax preparation outsourcing? Contact professionals now.

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Accounting and Bookkeeping Management Accounting

The Best Receipt Scanner Apps for You in 2022

The best receipt management apps for you in 2022

Best Receipt Scanner Apps

The best receipt scanner apps must include a document management system, cloud storage, great optical character recognition (OCR) capabilities for high-quality image capture, and automatic data capture to save data entering time.

Accounting software integration may also be an essential function if receipt management is not a component of accounting software, such as QuickBooks Online.

What does a receipt management app do for you?

If you’ve been running your own business or freelancing for a time, you’ll be familiar with the following difficulties:

Keeping massive filing cabinets, as the IRS mandates you to keep records for three years.

Digging through a heap of coffee-stained paper slips. Losing your receipts, so denying you tax deductions
Inputting the contents of your receipts into Excel when you’d rather be doing anything else is a tedious task.

Just getting started? You will eventually tire of all of this.

The top Selections for Best Receipt Scanner Apps are:

  • Dext Prepare
  • NeatFiles
  • QuickBooks Online
  • Shoeboxed
  • Wave
  • Zoho Expense

Dext Prepare – Scanning & Resulting Software

Receipt management is only one of the many features of Dext Prepare (powered by Receipt Bank) that can be used alongside its basic accounting, expense reporting, and analytics features. You may scan documents like bills and invoices using this software on your mobile device.

The data is then analysed by its OCR technology, sent to your accounting software, and sorted in various ways, including by tax and regional classifications. Bookkeepers and accountants will find its Partner Accounts feature particularly useful, allowing them to centralize client management.

Pros

  • QuickBooks, Xero, and Sage Accounting integration
  • Extracts line item data
  • App captures receipts and generates expense reports.
  • Cost, sales, or bank classifications

Cons

  • Not a complete accounting software
  • No built-in cloud storage

Pricing

Business Plus: $25 monthly/5 users; process up to 300 documents per month
Premium: $50 monthly/20 users; process up to 3,000 documents per month
Enterprise: $75 monthly/30 users; process up to 4,000 documents per month

Features

For example, Dext Prepare can parse through the bank records and receipts, pulling out relevant data to file or add in fields. You don’t have to manually review the scanned receipts and bank statements because the extracted data is searchable within the program.

Cost, sales, or bank can sort documents: The origin of a document might be used to categorize it. Any form of disbursement documentation will increase the final price. Include invoices in the total sales amount. Add the bank paperwork.

Our Take

Dext’s line-item data extraction, document classification, and cost classification features are apt to use to handle scanned documents before they are sent to your accounting software. Invoices from clients can be processed in Dext and then transferred to other accounting applications.

NeatFiles – Receipt Management App

Since NeatFiles can store scanned receipts in the cloud and even scan paper receipts, it is our preferred receipt management app. Scan paper documents with the mobile app or an external scanner. The Desktop Utility Scan program allows users to change scanned documents on their desktop computers. NeatInvoices, Neat’s billing software, is fully functional for the duration of your membership.

Pros

  • Easy-to-use interface
  • Combines high-quality scanning, different capture options, and human verification
  • System for reporting expenses, sales tax, and expenditure details
    Monthly rates
  • QuickBooks Online, Xero integration

Cons

  • Two-sided scanning is tricky
  • Not a complete bookkeeping system
  • Unreconciled invoices

Pricing

$29 per month with a 14-day free trial.

Features

You can import files in a few different ways, including using the mobile app, email, or a straight upload. And before you even upload them, you may sort them into categories.

Quickly find the files you need using the dashboard’s filters, which allow you to narrow your search by everything from file format to file size. It is not necessary to go over each point individually.

A NeatFiles subscription includes access to NeatInvoices, a cloud-based invoicing solution. It can generate invoices and send out billing reminders to ensure clients pay their bills promptly.

Our Take

NeatFiles can assist you with maintaining document order, classification, and archiving. It’s an ideal service for companies of any size who need to scan and save endless receipts in the cloud. It’s cheap, and you won’t need to sign up for a separate cloud storage service to keep your files safe.

QuickBooks Online – Best Bookkeeping Software

Receipt management is integral to QuickBooks Online, complementing the software’s other advanced accounting functions like bill paying, payroll, and expense monitoring. It has a mobile app that can snap pictures of receipts; these can then be attached to invoices and sent from an individual’s email account. You can use your computer’s hard drive or your Google Drive account to transfer files. Images in PDF, JPEG, JPG, GIF, and PNG formats are accepted in QuickBooks Online.

Pros

  • Class, location, or project profit-and-loss tracking
  • Access to QuickBooks ProAdvisors
  • Mobile app tracks miles, expenses, and receipts
  • Capture receipts on a mobile device or online
  • Create a receipt email address

Cons

  • Upgrade plans for more users
  • Costlier than competitors
  • No cost variance analysis

Pricing

  • Simple Start: $30 per month per user
  • Essentials: $55 per month/3 users
  • Plus: $85 per month/5 users
  • Advanced: $200 per month/25 users

Any plan includes a 30-day free trial—50% off for three months for new subscribers.

Features

Using the QuickBooks Online mobile app and your phone’s GPS, you can easily track the customers’ driving expenses. In addition, if you forget to record the mileage, you may always enter it afterward.
Financial statements and other reports can be generated, such as A/R summaries, aging schedules, tax reports, A/P summaries, and inventory reports.

Complete accounting capabilities are available in QuickBooks Online. This includes the ability to keep track of inventories.

QuickBooks Online makes it easy to keep tabs on and adjust sales tax rates based on the destination of invoices. You’ll appreciate this function if you serve clients in multiple locations (cities, states, etc.).

Our Take

Because it is flexible and reasonably priced, QuickBooks Online is our top pick for small business accounting software across all sectors. Because you can utilize scanned images for record-keeping and ledger entry, the platform’s receipt-scanning features complement its accounting capabilities. With this low-priced option, you may get all the features you need in a modern accounting program, including the ability to manage receipts.

Shoeboxed – Mobile App for Receipt Scanning

Shoeboxed is a mobile app for managing receipts and keeping track of expenses hosted in the cloud. Either use the app to manage your receipts on the go or send them to Shoeboxed, and they’ll do it for you. The document management system is where all your receipts will go up, making it easy to sort them into different files. The managed files can be used in audits and for general tax compliance purposes.

Pros

  • Mileage and expenditure tracking
  • Shoeboxed can scan Magic EnvelopeTM receipts.
  • Unlimited file storage
  • QuickBooks Online, Xero integration

Cons

  • Limited receipt processing
  • Outdated support page

Pricing

Annually billing cycle:

  • Startup: $23/month for 600 digital and 300 physical documents/year
  • Professional: $47/month for 1,800 physical and digital documents/year
  • Business: $71/month for 3,600 digital and physical documents/year

Features

Included with all subscription tiers is a feature called “Magic EnvelopeTM,” which is essentially a scanning service provided by Shoeboxed personnel on your behalf. Simply drop your documents into the Magic Envelope, and they’ll magically appear in your online Shoeboxed account. The receipts can be returned to you after processing if you choose.

Glean the information from scanned business cards. This makes finding people easy without having to shuffle through business cards.
Receipts can be submitted for processing via this mobile app by simply scanning them—both Apple’s App Store and Google’s Play Market feature the app.

Our Take

If you’re looking for software to help you manage receipts, go no further than Shoeboxed. Shoeboxed will manage your receipts, so you don’t have to, allowing you more time for other, more important activities. Now, all you have to do is sit back and wait for your receipts to be uploaded to your account.

Wave – Cloud-Based Accounting Software

Wave is free, cloud-based accounting software tailored to create invoices, and it also has a mobile app that can scan and upload receipts. You may also choose to upload a picture or PDF of the receipt instead.

Pros

  • Free bookkeeping, invoicing, and mobile receipt scanning.
  • Endless users
  • Multi-currency

Cons

  • Large enterprises can’t benefit
  • No auditing or time tracking

Pricing

  • Free bookkeeping, receipt scanning, and invoicing.

Features

  • Basic accounting features: Wave can track sales, purchases, and banking activities. You can also generate conventional financial statements and specialized reports.
  • Recurring bills: Wave can produce invoices automatically to recurring invoices to save time in the billing process. You can utilize this option for customers that pay a standard monthly price.
  • Payroll: For a low price, you can outsource payroll to Wave and comply with tax regulations as well.
  • Connectors: Wave features many integrations with third-party apps, including Shopify, Mailchimp, and Slack.

Our Take

Wave is what you need if all you need is the ability to manage receipts. Because of its costlessness, it’s ideal for startups, small businesses, and independent contractors. Take a picture of the receipt or save it as a PDF or image file to upload it.

Zoho Expense – Receipt Scanning App

A feature of the Zoho family of products, Zoho Expense, can scan and save digital copies of paper receipts for later use. Drag-and-drop receipt uploading and automatic receipt scanning are also possible. The reimbursement process can be sped up and made more convenient by allowing employees to upload scanned receipts.

Pros

  • Premium and Enterprise plans offer unlimited scanning and storage
  • Best for Zoho Books users

Cons

  • Costly for small teams with minimal vendor bills
  • Interface is confusing
  • Complex learning curve

Pricing

Annually billing cycle:

  • Free plan: Three users, 5GB receipt storage, 20 auto scans
    Standard plan: $3 per active user each month; unlimited users, 5GB storage, 20 auto scans
  • Premium plan: $5 per active user per month; unlimited users, receipt storage; minimum of three users
  • Enterprise plan: $8 per active user per month; unlimited users and receipt storage; minimum of 500 users

Features

The dashboard offers helpful information about expenses and special reports: real-time tracking of payments, reports, and other items.
Regarding reports, the expense approval flow is one of Zoho Expense’s strongest points. Expenses that comply with the company’s policies can be individually reviewed and approved. Approvers can easily reject reports without supporting evidence if a scanned receipt doesn’t accompany them.

If you’re concerned about the safety of your data when using Zoho, you should know that the service employs both SSL encryption and multi-factor authentication. Since Zoho supports SSO (single sign-on), existing users can log in with their existing credentials without registering a new account.

Our Take

To our fellow Zoho Books users: We strongly suggest you check out Zoho Expense. Because it allows you to review and process expenditures before they are recorded in the books, it is also an excellent auxiliary program to your leading accounting software and a great pre-accounting platform. It even helps lessen the accounting staff workload and guarantees accurate cost management.

Receipt Scanner Apps – Our Evaluation

We focused on its fundamental capabilities when evaluating receipt management’s usefulness for your company. These characteristics are:

Accounting software integration

For a more efficient process, the receipt management app must interact with your accounting program to transfer reports and documents for accounting. (Note: Because QuickBooks Online and Wave are accounting software systems, we did not utilize this criterion in our evaluation.)

Cost

A receipt management app is embedded into specific bookkeeping and cost management software. However, you may choose a third-party management tool if it provides more benefits at a higher cost.

Document management system

We looked for a document management system in standalone receipt scanning software that may help you arrange scanned documents into folders and categories for simple access.

Easy to modify and review

Aside from scanning capabilities, the app should provide a dashboard, analytic tools, and search options to allow users to examine, track rapidly, and amend the information. Furthermore, classifications and tags are included to facilitate data filtering.

Multiple capture options

The app must have different approaches for gathering data from receipts. It may either connect to a scanner or use your smartphone’s camera to scan images.

OCR-ready for line item extractions

Manually capturing data from receipts is time-consuming. To extract information from receipts, receipt management apps must have OCR capabilities. Furthermore, it must include intelligence features to extract information accurately into fields or categories.

When To Use a Receipt Scanner App

Do you allow remote employees to purchase supplies and charge them to your company? Even if you work from home, a receipt management app can assist you in processing costs.

A quick way to keep track of receipts

When you manage receipts, you can usually tie them to transactions. The receipt will be very easy to locate if the transaction is ever challenged.

Reduce paper costs

Traditionally, when it came to reimbursement, creating vouchers was the norm, but this practice only increased paper consumption. However, by utilising a receipt scanner and leveraging a receipt management app, you can effectively eliminate the need for paper and streamline the entire process, from recording expenditures to facilitating reimbursement.

You want to declutter your office

Receipts stacking up on your desk aren’t a nice sight. Almost all professionals would despise sorting through hundreds of receipts daily. Instead, you can scan these receipts and then discard them.

Takeaway!

Before settling on a receipt-scanning app, you should carefully examine your company’s workflow and needs. The receipt scanner apps we recommend all have helpful and promising features.

When deciding on software, it’s essential to consider how well it fits your needs, how much it will cost, and how much value it will add to your business. Once you’ve decided what features are most important to you, return here to this list and select the appropriate software. Want to get help from experts? Contact us here.

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Accounting and Bookkeeping

Understanding Accrual to Cash Adjustment with Example: A Quick Guide

Understanding-Accrual-to-Cash-Adjustment-with-Example

Accrual to Cash Adjustment

A company’s finances can be handled using either the cash basis or the accrual basis of accounting. Income is calculated differently in the two approaches. The accrual method of accounting is the most common. However, many businesses employ the cash method instead.

It is crucial to grasp the fundamental distinction between the accrual and cash bases of accounting in order to comprehend the shift from one to the other. So, let’s clear your basics and understand the accrual to cash adjustments for your next finance handling.

Accrual Basis of Accounting – Overview

The accrual basis of accounting is a method of keeping financial records that mandates matching a period’s income and expenses. If you use this method of accounting, you’ll have to tally up your earnings and outgoings in the same accounting period. This holds true irrespective of the cyclical nature of financial flows.

Companies worldwide typically employ an Accrual Basis due to the matching notion. Accurately estimate the profitability over time by comparing the revenues and costs of a specific period.

What does accrued adjustment mean?

Journal entries made at the close of a reporting period to adjust the revenues or expenses shown on the income statement are accrual-type adjusting entries. Following is a breakdown of the four distinct categories of journal entries that you can use to correct for accruals.

Rise in costs due to incurred expenses for which an invoice from the relevant supplier is still pending.

A reduction in the total costs recognized that still needs to be spent.
Earned revenue growth represents money coming in from customers yet to invoice.

A reduction in revenues for revenues that have been recognized but have yet to be earned.

Cash Basis of Accounting – Overview

In contrast to the accrual basis of accounting, which records income and expenses in the period they are earned, the cash basis of accounting records them in the period in which cash is received.

The fundamental principle behind this method of reporting is to account for cash outflows and inflows. Countability is on the period they occur rather than the periods in which the related expenses and revenues are spent.

As the name implies, the cash basis of accounting does not keep any accounts receivable or payable, which is the fundamental distinction between the cash and accrual basis of accounting. On the other hand, the accrual method of accounting puts off the recognition of income and costs until after the fact.

Can you change from accrual to cash adjustment journal entry?

If this is your company’s first federal tax return, the IRS will likely let you choose the accounting system you like, but the agency mandates that you stick with the same technique in subsequent years to ensure consistency. In most cases, you will need to file IRS Form 3115 to get approval to switch from the accrual accounting technique to the cash basis accounting method.

Switch to cash basis accounting method – Eligibility

Most small businesses use a cash-basis accounting system, but the IRS may only allow you to move if your company is structured in a certain way. For instance, you cannot use the cash-basis accounting for the businesses that manufacture, purchase, or sell physical products. Corporations, partnerships, and QPCs are all eligible to employ cash-basis accounting with the IRS so long as they meet specific requirements.

Overview of How to Convert Accrual to Cash Adjustments

Consider the following procedures to make the switch from the accrual cash adjustment tax returns:

Adjusting for accrued expenses

Subtracting accrued expenses from the financial statements is necessary for switching from the accrual to cash adjustment journal entries. If a supplier invoice cannot verify an accumulated expense, reverse it in the financials. The accrued liabilities section of the balance sheet is where you may quickly find this data.

Adjusting for accounts receivables

Adjusting for accounts receivable is also crucial when switching from an accrual basis to a cash basis of accounting. If the money from sales comes in after the designated term ends, write off all accounts receivables.

Adjusting for accounts payable

Accounts payable require adjustment the same way as accounts receivable do in the financial statements. The financial statements should only reflect those transactions for which cash was paid as a settlement in the reporting period in question. Because of this, you can only add costs paid with cash during the reporting period in the financial statement.

Adjusting for prior period sales

Accumulate the sales at the end of the prior period under the accrual basis of accounting. If the cash from these transactions is received after the time they are made, they are shifted back to the period in which payment is due. Since cash payments are still unpaid, in addition to the current period sales, the need to make adjustments stems primarily from this necessity.

Customer prepayment adjustment

Under the accrual system, prepayments from clients would be counted as revenue if the order was completed. These sales must be accounted for in the period corresponding to the time in which the cash was received. This will help you record the orders on a cash basis.

Supplier prepayment adjustment

Prepaid expenses need to be revised in the same way that prepaid revenue (which was treated as a Current Liability under the Accrual Basis of Accounting) was modified. When using the Accrual method of accounting, any costs that the company has prepaid must be reclassified as outlays.

The modifications, as mentioned earlier, are essential for a seamless change from the accrual to the cash adjustment journal entry. These modifications entail switching to a payment schedule solely based on cash inflows and outflows.

Best Software and Services for Accrual Accounting

As your company grows in size and complexity, you should be prepared to switch to accrual-basis-friendly tools and resources. Intuit’s QuickBooks Online, for instance, provides the option to switch between cash and accrual accounting.

One can record Invoices, expenses, employee time, and more using this service, which is available monthly. Collaboration with an outsourcing accounting firm is made more accessible by the widespread use of spreadsheets, which can be quickly shared to reveal a clear picture of financial standing and tax liabilities.

Contact Us to Learn More About Our Financial Management Services.

Accrual to Cash Conversion Formula

To illustrate the change from an accrual to a cash basis adjustment, accountants employ specific formulas. The transition from accrual to cash accounting is simplified as a result.

The formula basically sorts accounts (and their corresponding amounts) into two groups: those that should be eliminated from the financial statements and those that should be reinstated. Here is a quick rundown of what happens throughout the transformation.

The following are the types of expenses that need to be subtracted from the balance sheets:

  • Accrued (or outstanding) expenses
  • Outstanding Income (income not yet settled for by debtors)
  • Accounts Receivable
  • Accounts Payable

The same logic applies to the following accounts that need to be re-established in the financials:

  • Advanced Income
  • Advance Expenses (Prepaid Expenses)

Also, the following formulas are used to convert some lines of the financial statements from the accrual to cash adjustment formula:

1. Cash Sales = Beginning Balance of Accounts Receivables + Sales Revenue – Ending Balance of Accounts Receivables.

2. Cash Payment for Expenses = Ending Balance for Prepaid Expenses + Expenses in the Income Statement + Beginning Balance for Accrued Expenses – Beginning Balance for Prepaid Expenses – Ending Balance for Accrued Expenses.

3. Cash Payments for Purchases (Merchandise Inventory) = Ending Balance of Merchandise Inventory + Cost of Goods Sold + Beginning Balance of Accounts Payable – Beginning Balance of Merchandise Inventory – Ending Balance of Accounts Payable.

The primary goal of the accrual to cash adjustment formulas

As mentioned earlier, the primary goal of the accrual to cash adjustment formulas is to remove the effects of transactions that have been recorded but not yet settled in cash from the financial accounts. As a result, all of the previously recorded income and expenditures must be updated to reflect those already settled in cash.

Reviewing one’s bank records and comparing one’s cash inflows and outflows is also a quick and easy way to make the transition from an accrual to a cash adjustment journal entry. The remaining sum represents the profit made during the specified time frame. Businesses that want to better understand their profitability in cash on hand often switch from an accrual to a cash basis.

In addition, unlike the cash basis of accounting, the accrual basis of accounting considers several different accounts.

Case in point: Money owed and expenses that have already been incurred. It is common practice for businesses to transition to a cash basis to have a clearer picture of how their operations truly perform in terms of cash flow.

Accrual Accounting and Cash Basis Accounting Example

So, you run a company that offers machine sales.

In the books, cash sales are not recorded until the receipt of cash or a check, meaning that if $5,000 worth of equipment is sold, the transaction remains unrecorded until payment is received.

Under the accrual approach, income of $5,000 is recognized on the day of the sale. Even if you don’t get the money for a few days, weeks, or months.

This also holds true for financial outlays. For example, if a corporation uses the cash method to keep track of its finances, any bills over $1,700 one would record, once one makes the payment. On the other hand, if the corporation uses the accrual technique, the $1,700 will be deducted from its cash on the day it pays the payment.

A best-of-both-worlds option

Businesses can benefit from combining cash and accrual accounting methods. Hybrid accounting is the term for this type of approach.

By combining traditional and contemporary accounting techniques, businesses better monitor their cash flow and assess their sustainability over time. For the IRS’s approval of the hybrid approach, however, you must adhere to specific guidelines.

  • A company must utilize the accrual method of bookkeeping for purchases and sales when keeping track of inventories is essential to reporting revenue.
  • If a company reports its earnings using the cash method, it must likewise disclose its expenditures similarly.
  • If you record your expenses using the accrual technique, you must also use it to calculate your income.
  • One can assume a Cash Basis use along with any other reporting technique.

FAQs

Is it better to file taxes on an accrual or cash basis?

Keeping a sufficient cash reserve for tax payments is a major benefit of cash-basis accounting, which is why many businesses choose it. The accrual approach may be preferable to have the most reliable data possible for yearly income projections.

Is cash accounting in accordance with GAAP?

According to GAAP, the cash-basis method of accounting is unacceptable. Companies that adhere to GAAP guidelines should use the accrual-basis accounting approach.

Payroll is affected differently by cash and accrual accounting; is that so?

Payroll is a necessary component of any organization, big or small, that employs people. A company’s Accumulated Payroll account is an example of an accrued expense from processing payroll.

That account is a liability on the balance sheet and contains all employee earnings. Payroll is a good example of an account that lends itself well to accrual accounting, as it has both an accruing and a cost component.

Which types of financial reports are most sensitive to changes in accounting practices?

Your accounting technique will influence the statement of cash flows since you calculate the net income differently.

You record Expenses and earnings in the income statement as soon as you receive or make them.

However, the balance sheet includes accounts like accumulated liabilities and accrued payroll that are likewise affected by the selected accounting system.