CPA Education Flashcards
What type of account should I be recording mileage reimbursement checks?
Expense Account - Mileage Reimbursement
When should I be requesting a W-9 and COI from a vendor?
- When they are performing a service for us
- Include the total amount paid to them on the 1099
- When in doubt; request the information
- If SSN is provided and not EIN number; use their personal name as the business name
When reverting a Net Income (with wages taken out) to an actual Net Income amount to calculate for the 40/60 rule; what part of the wages must be added back in?
- Gross wages
- Company payroll liabilities
With being an S Corp; what % should be going towards payroll?
50-60%
What should always be verified prior to making a distribution?
Ensure that we always keep positive equity on the books!
Can we make distributions on current year’s profits?
Yes, as long as:
- The net income remains positive
- We continue to have positive equity on the books
When writing out a distribution check who should they be written out too and what accounts should be used?
- Each individual (owner) account
- At set % of ownership
- Account: Each individual Member Draw (Stockholder Receivable) account
How long does the initial Calculated Lease Value of the vehicle remain the same for? What is the current value?When can we expect this to be recalculated?
- 5 years
- $18,250
- 2026
Payroll Service Provider calculations are different at quarter end compared to individual payroll summaries. What documents should I use to track this information? At what amount of discrepancy should I be concerned with?
Use the payroll summary documents to track this information in QB’s.
- Anything over $0.50
- IRS has a $10.00 buffer
How much does the CPA charge to have them do our payroll?
$250 set up fee
$50 per payroll processed
$95 for quarterly payroll filing
$95 for first 5 W-2s at Year End
$50 for annual 940 filing
- Annual cost would be about $1,125
Does the CPA offer direct deposit for payroll?
Yes; no additional fees.
When would be the best time to set up CPA to process our payroll?
Next year prior to first payroll being ran.
Over payments to MNSUI account; what did the CPA advise to do with this credit?
Keep the credit in there and they will just have the credit be used each quarter to pay the MN SUI.
2023 Estimated tax payments made in Q1 and Q2:
- What will we do with the IRS taxes?
- What will we do with the MN taxes?
IRS
- request a refund
- Mailed out request on 11/2/23
- Waiting to hear back from them
MN
- Leave the funds in there
- Will file the PTE tax form
- Add the additional funds prior to year end
Estimated tax payments to MN
- When should this payment be made by?
- What amount should be paid?
- How do we make this payment?
- Due by the end of the year
- 9.85% of you total Net Income come year end
- Shoot for a small refund
- Utilize MN e-Services to make the payment as an estimated tax payment
SEP Retirement account
- What are the pros and cons of this?
- contributions are based on salary (W-2)
- More tax savings
- Benefits all employees - what one gets we all get
- fully deductible to the company
- can contribute up to tax return deadline; can file extension to have more time
- more flexible option
- ability to couple with a 401(k) plan
What did Prudential advise us to do regarding the retirement plan?
Max out our Traditional IRA’s prior to setting up a SEP retirement plan.
When determining distribution amounts what are the two most important things to figure out?
- Will the distribution keep positive equity in the business?
- Calculate each persons portion of the distribution based on their % ownership.
What types of items need to be added to/added back as income on the Tax Return?
- Meals (typically 50%)
- Entertainment (100%)
- IRS Income Tax
- Personal Use of vehicle
- Capital Gains from selling truck/removing from the company
What items need to be subtracted off of the Other Income section on the Tax Return?
- CC points to cash back
What items need to be added to the Expense section on the Tax Return?
- Depreciation of the truck
What date should be recorded in QB’s for Credit Card payments?
The date indicated on the statement.
When a check is received for payment on a project; what date should this payment be recorded in QB’s
The date the check is received should be the date used in QB’s.
What would the CPA do if a mistake is made and found out later on with fees and penalties?
The CPA would cover the penalties and fees. We would be responsible for paying the original taxes that were actually due.
How does the Safe Harbor election work?
Take last year’s tax liability and times it by 110%; this prevents any penalties for not paying in enough taxes throughout the year.
Who is responsible for paying the MN Income Tax?
With the PTE election; the company would pay this tax.
As an S Corp who is responsible for paying the IRS Income Tax?
Each individual shareholder at their set % of ownership.
What information does the CPA need to complete the Tax Return?
W-2 and W-3
PNL
Balance Sheet
QBB file on flash drive
Vehicle information (% Business use)
Significant Information
% ownership
S Corp now
