IRS Commissioner John Koskinen announced today that the IRS will begin accepting income tax returns on January 20th, 2015. Many people expected a later start because of the last minute enactment of the Tax Increase Prevention Act of 2014 which President Obama signed on December 19, 2014. In the past these last minute tax bills have caused delays in the start of tax return processing by the IRS because the IRS’ software required updates.
The Tax Increase Prevention Act of 2014 was enacted to extend 51 federal income tax provisions that had expired on December 31, 2013. The tax provisions extended included the $500,000 limit on the election to expense certain tangible assets in the year the asset was purchased, the 50% bonus depreciation, and certain employment tax credits.
Let’s hope the tax software vendors are ready to rock and roll on January 20th too.
Keeping on the Accounting Preferences section, under Company Preferences, we are going to look at a few options a CPA or bookkeeper would use. These are safeguards to try to keep mistakes from happening.
The first is one of the most important warnings QuickBooks can give you! Always make sure the ‘Warn when posting a transaction to Retained Earnings’ box is checked. Unless a CPA or bookkeeper gives you entries to make, you should never post anything to retained earnings. Doing so will cause you and your CPA time and money. The CPA will have to track down the transactions that were made, then reverse them out before they can prepare a tax return.
There are tons of preferences available in QuickBooks. Finding the perfect settings is key.
The second option that might be used after a tax return is completed by a CPA or bookkeeper is Closing Date. This feature can be set with a date and a password. A CPA might use this after the tax return is completed to make sure nobody goes back into that tax year and make changes that would disagree with the tax return. If you have multiple people in your QuickBooks file, this might be a good option when you close out a month. Only the Administrator can set a closing date.
Now we are ready to look at the Accounting Preferences. Under the Company Preference tab, you can turn on account numbers, use class tracking, automatically assign general journal numbers, set warnings, and closing date.
As accountants and bookkeepers, we like to use account numbers. When you turn on account numbers, QuickBooks will automatically assign account numbers to the accounts that QuickBooks automatically sets up. If you’ve added accounts to the Chart of Accounts, then you’ll need to also add those account numbers.
Class tracking is another handy tool. If you need to track income expenses by certain groups then class tracking is a great tool. Once you turn this on, you’ll need to enter classes on your transactions. Then you can run reports by class to show the classes by groups.
There are several warnings that you should make sure you have turned on. These are another internal control that can keep you from making too many mistakes!