Setting Up Quickbooks Component three What to Do with the (rest of the) Tax Lines

 By David Roberts

 I have to apologize as there are some lines here that would trigger an entirely separate write-up, and but are not employed by 90% of the companies making use of Quickbooks as their accounting software. I am sorry that these definitions are so brief but should you need clarification please do not hesitate to e-mail me.

 •I. K-1 Tax Lines

 The K-1 tax form is a little bit like a mutt form on the tax return. Mainly it concerns the division of profits and expenses in a partnership, trust or corporation so if your firm is not a partnership or corporation these specific tax lines won’t apply to you. Some individuals receive a K-1 since they are part of a group of men and women who own a trust or portfolio that generates income by way of the year. That income is split up into the designated percentages amongst those in that group. 1 example of this would be the trust left to a group of siblings that generates income through the year, the eldest receiving 60% and the 1 or far more siblings receiving an equal share of the remaining portion. Each sibling would receive a 1065B which would then be employed to fill in the K-1 form.

 

Schedule K

 

•1. Rentals Income – Utilised when a partnership or corporation earns income from rental property.

 

•2. Rentals Expenses – Self explanatory but make sure you can break down what your actual expenses are versus what you believe you are spending. Ads, Management fees, mileage to go collect rent or inspect difficulties with the house, all play a component in reducing your income and tax liability.

 

•3. Portfolio – Interest – CD’s – when a CD is component of an investment it earns a special place on the K1 form apart from interest from the US Treasury which is the next category.

 

•4. Portfolio – Interest – U.S. Treasury (bonds) etc. Many of these bonds are non-taxable income and numerous of these non-taxable bonds pay decent interest rates.

 

•5. Portfolio – Dividends – What would usually be on a 1099 DIV form in the case of a partnership, corporation or trust that owns stock will go on the K1.

 

•6. Portfolio – Royalties – Income received from copyrights, patents, oil, gas or mineral properties. Check your portfolio to see if your mutual funds are becoming invested in these type of organizations.

 

•7. Other Income – the all-purpose IRS junk category. Other. If you can’t fit it into one of the other categories, put it here.

 

 

Deductions -

 

•1. Charitable – yes, partnerships, corporations and trusts can donate to worthy causes and obtain the same advantages of writing off these donations to offset income and to foster goodwill in their communities.

 

•2. Other – If you can’t fit a deduction anywhere else, put it here.

 

 

Investment Interest

 

 

•1. Foreign Tax – Some mutual funds invest globally and thus you end up paying some foreign taxes. Occasionally these foreign taxes are deductible, that is a entirely different write-up I haven’t written as of however.

 

•2. Reduction in Offered Taxes – one more category put on your 1099DIV at the end of the year. Most companies will not use this category, I have been doing this for 9 years and have but to service a client that uses this category.

 

 

•II. Balance Sheet Tax Lines

 

 

While a lot of the lines that have been covered can easily go into this income or that expense category, the balance sheet covers the accounts that would be considered assets, liabilities or equity.

 

 

•1. Money – this would be your bank accounts, your cash on hand or petty money accounts. It would contain any account that is immediately available as liquid assets.

 

•2. Accounts Receivable – If you accept payment on credit terms, all amounts that you are waiting to be paid would be classified as A/R. There are organizations out there now who will pay cash for your receivables, which in cases of extreme cash flow restrictions would be an option. The percentage you get even so will be considerably decreased and isn’t an choice for a lot of smaller business owners.

 

•3. Allowance for Poor Debts – This is the strategy I discussed earlier about figuring in advance that .five – 2% of your A/R will never pay and being able to claim that as such against your A/R.

 

•4. US Government Obligations – Rare to be utilised, but if you have back taxes or debts owed to the government on a payment strategy or standard payments, use this box.

 

•5. Tax Exempt Sec. – If the company owns any bonds or tax exempt securities, these are assets that pay out based on the ‘loan’ made to the payor.

 

•6. Other Existing Assets – These are assets that can be effortlessly and quickly converted to cash within a year’s time, CD’s, Bonds, etc.

 

•7. Loans to Shareholders – Just as it is feasible for a shareholder in a corporation to loan cash to the company, it is also feasible for the shareholder(s) to borrow money from the business. Keep in mind that this kind of loan is strictly regulated and is one of the reasons that the Enron executives were more closely scrutinized and prosecuted, simply because the loans had been below market value for excessive amounts that could never have been repaid.

 

•8. Mortgage Real Estate Loans – If your enterprise involves the collection of loan amounts for actual estate purchases, this would be the account to put those payments into.

 

•9. Other Investments – Are there any other investing activities that your company participates in that generates income either directly or by way of depreciation or amortization of assets?

 

•10. Buildings – Your developing will be included on the balance sheet as becoming a positive addition to your assets and their value, the loan for the obtain of the buildings however will be on the liability side. There ought to be a separate fixed asset account showing the original cost of the developing.

 

•11. Accumulated Depreciation – the yearly quantity deducted from the VALUE (not the Price) of the building, vehicle, etc. Accumulated means all the prior year’s accumulated deductions for this asset. This quantity if added correctly will appear on the chart of accounts as a negative figure.

 

•12. Land – Land does not depreciate, even so the cost of the land is an asset and should be included in the accounting.

 

•13. Accumulated Amortization -

 

•14. Other Assets – Assets that can not be put into any of these categories. Intangible assets, like goodwill, etc.

 

 

 

 

 

Balance Sheet Liabilities

 

•1. Accounts Payable – These are the accounts you owe that are on credit. This is for goods, services or merchandise you purchased on credit.

 

•2. Short Term Mortgages Payable – In a time of extreme money flow require, sometimes a organization owner will take out a short term mortgage with collateral. Brief term means it ought to be paid within 12 months.

 

•3. Other Current Liabilities – All liabilities that will be paid off within 12 months.

 

•4. Loans from Shareholders – When the firm is strapped for cash and the owners/shareholders are not the funds is put here so that when it is taken out it is completed so as a repayment on the loan from the shareholders, with interest, and is not taxable, apart from the interest gained personally to the shareholder.

 

•5. Long Term Mortgages/Notes – Mortgages on property, notes payable to businesses or people that don’t anticipate payment within a years’ time.

 

•6. Other Liabilities – All liabilities not fitting in other categories go here.

 

•7. Capital Stock – The number of shares authorized for issuance by a company’s charter, including both typical and preferred stock. Generally the value assigned to every share is but that is up to the individual company owner.

 

•8. Paid In Capital – capital received from investors for stock, also referred to as contributed capital.

 

•9. Treasury Stock – stock reacquired by a corporation to be retired or resold to the public. Not to be regarded as when calculating an earnings per share ratio, dividends or for voting purposes.

 

Numbers 7,8 and 9 are typically meant for firms with the intent to sell their stock or go public. For these categories I would suggest getting guidance from a CPA prior to attempting to undergo that procedure your self.

 

 

M-1

 

The M-1 is a form employed for corporations with income or assets over ,000. It is a comparison to the beginning years balance sheet to the end of year’s balance sheet. The use of Quickbooks makes this preparation less complicated as the details flows easily from the Quickbooks file to numerous various types of tax preparation software program. (Lacerte, ProSeries, etc) The price of these tax preparation software is usually prohibitive for a business that doesn’t specialize in tax preparation, so seek out a preparer that uses 1 of these two systems.

 

 

1. Net Income Per Books – the income minus expenses on books flows by way of to here.

 

2. Depreciation Per Books – ditto.

 

3. Expenses on Books not on Return – consult a tax expert just before putting any of your accounts into this category!

 

four. Income on Books not on Return – once again, consult a tax skilled before utilizing either of these categories.

 

 

 

 

8825A-E

 

If your corporation or partnership owns 1 or much more rental actual estate properties, the income and expenses are assigned to one of these accounts. The A, B, C etc are for separate rental properties so you can maintain track of up to five different properties.

 

 

Gross Rents – how much rental income did you obtain for this property. Advertising – how significantly did it price you to advertise this property as becoming for rent? Auto and Travel – how many times did you travel to the property for maintenance, collection of rent, etc. Cleaning and Maintenance – tenants can at times make a mess, how much did the carpet cleaning, painting, etc price you? Commissions – did you hire somebody to assist you rent the place? Pay them and deduct it here. Insurance – this would be for property and casualty insurance on the property in case you get sued or an individual hurts themselves while living on or exploring your property. Legal and Expert Fees – did you have an attorney draw up the rental paperwork? Interest Expense – typically reported on the 1098 of the property. Repairs – outside of regular cleaning, was anything damaged that necessary repairs? Taxes – Actual estate taxes, county taxes, etc Utilities – Are you paying utilities to maintain up appearances even though you are trying to rent the property? Are you paying utilities for the tenant? Wages – do you have somebody on staff who is your “property manager”? Split up their wages amongst the properties for accurate bookkeeping! (but pay them with 1 check. Misc. Expenses – pest control, security, etc would all go here.

 

Hopefully this article has helped you further your Quickbooks education on tax lines. Remember the old adage, “Garbage in, Garbage Out!” Put in properly, your reports will be much more accurate, and decidedly more beneficial to you and your accountant.