Nov, 5 2020 Meeting Notes
/This is our last official luncheon of the year, soon you will receive an email about pairing a seasoned member with a newbie Member. Dec 3 11:30-1 is the time that you will connect with who you are paired with.
Nov 19 4-5 is our happy hour
Happy hour with Woodard group is dec 17 4-5, mark your calendar
No luncheon or happy hour in Jan.
Next Woodard luncheon will be Mon Nov 9, will be hosting a zoom watch party for
Scaling New Heights!!
Introductions
This month’s speaker - one of our own members Diana M. Chung, CPA! Diana has thirty-five years’ experience in accounting, including thirty-three years in public accounting. Her first two years were spent auditing small businesses with theInternal Revenue Service in San Francisco. Her training and experience in this environment assist in representing clients before tax examining authorities. Her next four years were spent providing accounting, tax and financial services to individuals and small businesses in San Francisco. After those initial years, Diana returned to Oregon and concentrated mainly in tax preparation and tax planning services. She has experience working with S Corporation, C Corporations, Partnerships, Individuals and Non-Profit tax planning and preparation. Diana especially enjoys consulting with clients just starting business to help them determine the best entity structure for their operations and educating them on the various tax filing requirements for their business. Diana is a graduate of Oregon State University with a bachelor’s in business administration and concentration in accounting. She also has a Master of Taxation from Portland State University. She is a Certified Public Accountant in the State of Oregon and is a member of the Oregon Society of Certified Public Accountants and the American Institute of Certified Public
Topic - What CPAs need from Bookkeepers and vice versa!
Our firm requires signed engagement letters so that clients know what to expect and what documents we need (reconciliations, source documents, etc), majority of this is stuff that the bookkeeper will provide. Our focus is on the balance sheet for business tax returns. There is a night & Day difference when clients try to do their own books and when they are use a bookkeeper who knows what they are doing. It’s going to save them money, give them better books, and better information.
Sample Business Tax Return Document Request List
Backup copy of accounting software file, or copy of general ledger
Balance Sheet & Income Statement
Bank Statements & Reconciliation reports for the month of Dec for all bank accounts (Most important thing I will talk about today, because how comfortable do you feel about the accuracy of reports if the books haven’t been reconciled?)
Detailed aging report of AR & AP (cant write off bad debt for cash basis)
Copies of Inventory Reports
Schedule of all fixed asset additions & dispositions during the year (description of each asset purchased sold or disposed along with purchase or sales price, date bought or sold, and copies of financial arrangements involved (IRS threshold is 2500)
Federal & State quarterly payroll reports (form 941 & OQ for all quarters, form 940, W-3s & W2s)
Copies of all new loans or leases entered during the year
Copies of any loan or CC statements showing balance as of 12/31 & year end reconciliation report
List of annual officer wages
For each kind of life insurance, list the amount of premiums paid during the year and the kind of policy it relates to.
Copies of any 1099 including Misc, K, Div, S, etc.
Copies of any federal, state, or local tax authority bills, refunds or notices
For those filing in the city of Portland license/Multnomah county biz income tax return, please note the amount of gross income earned from services or products provided within Pdx and within Multnomah county. Please list sales separately for each jurisdiction unless they are the same.
Notify us if the biz had registered to do biz in another state or may be deemed to be operating in another state since using the filing of the prior year returns. Operating in another state may occur, but is not limited to, registering to do business in a state, having inventory or property in a state, having employees or IC in a state or sales into a state or sales into a state exceeding the states threshold
Update shareholder names & addresses if different from prior year
Current chart of accounts include account numbers and names if applicable
What CPAs Need from Bookkeepers
1. Prior Year AJES to be recorded.
2. Balance sheet source documents at Year End.
3. Reconciliation of bank statements and credit card statements at month end rather than middle
of month for December 31.
4. Understand unresolved bookkeeping matters, i.e. client didn’t provide bookkeeper with
information needed to record complete transaction.
5. Whether the client was required to issue forms 1099 and if yes, whether the forms 1099 were or
will be issued. This is a fairly new question on business tax returns, included sole proprietorship
and rental schedules.
6. Personal preference - Use of standard chart of account numbers- helps with entering &
recording AJES.
7. Accounting for PPP Loans- brief description of how it was handled in the books.
Paycheck Protection Program (PPP) Loans.
1. The CPA will need to know:
a. Amount of PPP loan
b. Amount of PPP loan forgiven
c. Qualifying amount and category of expenses for which PPP loan was used.
d. How the accounting has been recorded on the books (loan treated as revenues, loan,
reduction of expenses.
2. Most businesses will record the funds received as a loan on the balance sheet and accrue
interest at 1%.
3. Once the loan is forgiven, it can be removed from the balance sheet with corresponding
qualified expenses reduced.
4. Costs paid to third parties to secure the debt should be deferred and amortized over the term of
the debt, such as document preparation costs, advisory, accounting and legal fees.
5. IRS stated in Notice 2020-3 that for federal purposes, PPP loan forgiveness may be excluded
from gross income by an eligible recipient by the CARES Act. However, the IRS issued Notice
2020-3 in April 2020, which states that expenses associated with the tax-free income are
nondeductible. CPAs will need a copy of the loan forgiveness paperwork to determine the
expenses that will not be deductible on the 2020 federal tax return.
6. For Oregon Corporate Activities Tax purposes, the PPP loans will not be subject to this tax.
What Bookkeepers Need from CPAs
1. Year-end adjusting journal entries
2. As there are differences in how each CPA firm handles client information, it is helpful to
understand how the CPA views the following:
a. Meals expense
b. Fixed asset capitalization policy
c. Home offices
d. Personal vs business expenses
3. Assistance recording business acquisition and real estate acquisition transactions.
4. Loan amortization schedules
5. Personal use of company vehicles for inclusion in payroll
6. To understand if the books are on the accrual vs. cash method of accounting
7. Collaboration on how to fix mistakes in the books, especially prior year mistakes
Misc
*When doing cleanup, I create a new equity account called “Adjustments” and put in things that may adjust prior year numbers. Respectively create a dummy bank account called “Journal” so that you can easily track what needs to be handled.
*If clients often adjust prior year items, close the month and add a password!
* Biz accounts close on the last day of the month, personal accounts close mid month