CPA Education

Question 1

What type of account should I be recording mileage reimbursement checks?

Answer 1

Expense Account - Mileage Reimbursement

Question 2

When should I be requesting a W-9 and COI from a vendor?

Answer 2

• 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

Question 3

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?

Answer 3

• Gross wages
• Company payroll liabilities

Question 4

With being an S Corp; what % should be going towards payroll?

Answer 4

50-60%

Question 5

What should always be verified prior to making a distribution?

Answer 5

Ensure that we always keep positive equity on the books!

Question 6

Can we make distributions on current year’s profits?

Answer 6

Yes, as long as:
- The net income remains positive
- We continue to have positive equity on the books

Question 7

When writing out a distribution check who should they be written out too and what accounts should be used?

Answer 7

• Each individual (owner) account
• At set % of ownership
• Account: Each individual Member Draw (Stockholder Receivable) account

Question 8

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?

Answer 8

• 5 years
• $18,250
• 2026

Question 9

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?

Answer 9

Use the payroll summary documents to track this information in QB’s.

• Anything over $0.50
• IRS has a $10.00 buffer

Question 10

How much does the CPA charge to have them do our payroll?

Answer 10

$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

Question 11

Does the CPA offer direct deposit for payroll?

Answer 11

Yes; no additional fees.

Question 12

When would be the best time to set up CPA to process our payroll?

Answer 12

Next year prior to first payroll being ran.

Question 13

Over payments to MNSUI account; what did the CPA advise to do with this credit?

Answer 13

Keep the credit in there and they will just have the credit be used each quarter to pay the MN SUI.

Question 14

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?

Answer 14

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

Question 15

Estimated tax payments to MN
- When should this payment be made by?
- What amount should be paid?
- How do we make this payment?

Answer 15

• 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

Question 16

SEP Retirement account
- What are the pros and cons of this?

Answer 16

• 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

Question 17

What did Prudential advise us to do regarding the retirement plan?

Answer 17

Max out our Traditional IRA’s prior to setting up a SEP retirement plan.

Question 18

When determining distribution amounts what are the two most important things to figure out?

Answer 18

• Will the distribution keep positive equity in the business?
• Calculate each persons portion of the distribution based on their % ownership.

Question 19

What types of items need to be added to/added back as income on the Tax Return?

Answer 19

• Meals (typically 50%)
• Entertainment (100%)
• IRS Income Tax
• Personal Use of vehicle
• Capital Gains from selling truck/removing from the company

Question 20

What items need to be subtracted off of the Other Income section on the Tax Return?

Answer 20

• CC points to cash back

Question 21

What items need to be added to the Expense section on the Tax Return?

Answer 21

• Depreciation of the truck

Question 22

What date should be recorded in QB’s for Credit Card payments?

Answer 22

The date indicated on the statement.

Question 23

When a check is received for payment on a project; what date should this payment be recorded in QB’s

Answer 23

The date the check is received should be the date used in QB’s.

Question 24

What would the CPA do if a mistake is made and found out later on with fees and penalties?

Answer 24

The CPA would cover the penalties and fees. We would be responsible for paying the original taxes that were actually due.

Question 25

How does the Safe Harbor election work?

Answer 25

Take last year’s tax liability and times it by 110%; this prevents any penalties for not paying in enough taxes throughout the year.

Question 26

Who is responsible for paying the MN Income Tax?

Answer 26

With the PTE election; the company would pay this tax.

Question 27

As an S Corp who is responsible for paying the IRS Income Tax?

Answer 27

Each individual shareholder at their set % of ownership.

Question 28

What information does the CPA need to complete the Tax Return?

Answer 28

W-2 and W-3
PNL
Balance Sheet
QBB file on flash drive
Vehicle information (% Business use)
Significant Information
% ownership
S Corp now