Business accounting strategies for bank reconciliation

Bank reconciliation

Bank reconciliation is what happens when your business needs to prove or document its account balance. It is the comparison of your monthly bank statement to your internal accounting records. Sometimes these balances do not match and the business needs to identify the reasons for the discrepancy and reconcile the differences.

How to deal with discrepancies when doing bank reconciliation 

There are three reasons why your bank statement and accounting records might disagree. 

  1. Omission. This refers to transactions that appear on the bank statement, but have not been recorded in the accounting records. Such as a customer payment that has bounced, interest received, bank charges and bounced checks. The difference needs to be eliminated by adjusting the company’s accounting records before the preparation of bank reconciliation.
  2. Timing differences. This refers to transactions that are recorded in the bank statement and the accounting records in different periods. For example, an outstanding check which you send to your supplier, but it doesn’t get cashed until the following month. Another timing difference is a “deposit in transit” which is used to categorize monies that have been received but have not yet cleared the bank. Keep track of timing differences that may otherwise cause difficulty in reconciling the company’s cash balance on its financial statements to its monthly bank statements.
  3. Errors. The last reason is accounting errors such as missing receipts, making an entry twice, entering the incorrect number, and neglecting to add interest earned. The best way to correct errors in accounting is to add a correcting entry. A correcting entry is a journal entry used to correct a previous mistake.

For assistance with your bank reconciliation, contact Georgen Scarborough today. Georgen Scarborough is a full-service accounting firm that can customize a suite of accounting and financial management services, such as bank reconciliation, tailored to your needs.

The effects of business restructuring on your financial statements

business restructuring

The economic global impact of the COVID-19 pandemic has been disastrous. It has caused a slowdown in global trade, disruption in supply chains, and changed tourism flows. Over three million Americans filed for unemployment benefits as COVID-19-induced layoffs increased around the US. The full repercussion of COVID-19 and the subsequent lockdown may only be properly understood once all this has passed. 

The impact by industry varies as every finance function has to consider the unique aspects of the company’s financial statements along with their ability to produce quality financial reports with workforces that may be distributed and disconnected due to health and safety considerations.

A company may choose to restructure as a means of preparing for a sale, buyout, merger, change in overall goals, or transfer to a relative. 

Renegotiating financial contracts helps businesses that are short of cash in two ways. First, it allows them to realign the financial and contractual burden associated with their financial obligations so that it matches their current values and cash flows. Second, it facilitates the addition of new capital into the business.

What costs are involved when restructuring your company?

Restructuring Cost refers to the one-off expenses which are incurred by the company in the process of reorganizing its business operations with the purpose of the overall improvement of the long-term profitability and working efficiency of the company and are treated as the non-operating expenses in the financial statements.

The following restructuring costs are considered when calculating restructuring charges:

  • Furloughing of employees 
  • Closure of existing manufacturing plants
  • Shifting of company assets 
  • Writing off or sale of assets
  • Purchasing of new equipment
  • Diversifying business into a new market

To learn more about business restructuring contact Georgen Scarborough to schedule your consultation.

Help from an accountant when filing for bankruptcy

bankruptcy

Bankruptcy can happen to anyone and is not necessarily due to financial irresponsibility. It is often due to job loss, divorce, illness, to name a few. Many people worry that bankruptcy will be a permanent or long-term setback, which is not the case. Your credit score can change in just two to three years after your discharge (most people are discharged after 9 months; however, the bankruptcy will show on your credit history report for 6 years after that date). Bankruptcy

Bankruptcy provides a financial fresh start by eliminating debt that you may have struggled for years to repay. A Certified Public Accountant can help you with areas that your attorney may not be sure about, such as: determining eligibility and discharge, knowing exactly when you should file, procure an offer in compromise, and represent you to the IRS.

What documents do you need when filing for bankruptcy?

Chapter 7 and Chapter 13 bankruptcy are the two most common programs you can use to reduce or eliminate your debt. The documents are the same for both, with slight variations. Make sure to check the guidelines provided by your state and your bankruptcy trustee. You will also be required to present the following documents:

  • Tax returns
  • Income documentation
  • Proof of real estate fair market value and mortgage statements
  • Vehicle registration, proof of value and insurance
  • Retirement and bank account statements
  • Identification
  • Other documents (child support, alimony, etc.)

By law, you are also required to complete a credit counseling class and obtain a certificate before you can file for bankruptcy. 

Bankruptcy is a serious decision and we do not want you to have any surprises along the way. Contact Georgen Scarborough Associates today should you have any questions regarding bankruptcy.

Are children’s summer camps tax deductible?

summer camp

Did you know that summer camp expenses are tax-deductible in some cases? During summer, many American children spend time at camps of various kinds. Although these recreational camps may be rather expensive, you might be able to get a tax credit for these expenses. Let’s take a look at the conditions under which you can claim summer camp expenses on your tax return:

Conditions under which summer camps can be tax-deductible: summer camp

When the camp functions as daycare

If you send your children to summer day camp, you should be able to deduct expenses under the provisions of Child and Dependent Care Credit. This is valid for children under the age of 13 at the end of the relevant tax year. For disabled dependents, there is no age limit. The reasoning behind this condition is that you are not sending your children away merely for their pleasure, but you are putting them in the care of other responsible guardians who can look after them while you are working. 

If there is no one in the household to care for the children at home when school is out 

If your spouse or partner is at home and can take care of the children when they are not in school, you won’t be able to claim these tax deductions. If you and your spouse or partner are both at work or school, then you may qualify for tax credit or deductions. 

They have to attend camp at a real institution

Unfortunately, you can’t just send your kids over to play at the neighbors and qualify for tax deductions. To qualify, you need to make a payment to a recognized person, facility, or organization. When you do your return, you need to furnish details, including the address and identifying number.

The cost of transport isn’t automatically included in deductions 

Unless the transport cost is included in the fees, you won’t be able to deduct the costs expended on getting your children to and from the campsite or location. If the camp fee includes transport, then you may qualify for the tax credit. 

Did you know that you can get tax credits between 20% and 35% of what you spent on daycare? The tax credit you may qualify for depends on the number of children and your AGI (adjusted gross income). At Georgen Scarborough Associates, PC, we can help you to make sense of all these conditions and limits.

For assistance on your tax refund, contact our tax experts to discuss tax deductions and other tax tips.

The PATH Act explained by GSACPA

The path act

According to the IRS, the Protecting Americans from Tax Hikes (PATH) Act was enacted in 2015. This act extends to various aspects that taxpayers should be aware of, including changes to legislation that regulate taxes and extending some laws that would have expired. The act aims to protect taxpayers against fraud. It includes provisions that may affect the taxpayer credits of individuals and businesses. This guide will take a look at those aspects. The path act

What taxpayers need to know about the PATH Act 

The PATH Act extends expired tax laws and introduced new regulations to reduce fraud and to ensure that Americans get the correct refunds from the IRS. The PATH Act now addresses regulations governing Additional Child Tax Credit (ACTC), Earned Income Tax Credit (EITC), and Work Opportunity Tax Credit (WOTC). Although the act may not change the amount of your return or when you receive your refund, it does ensure that certain tax credits are monitored more closely.

The most important aspect to recognize is that the PATH Act will not change how you complete your tax return. Although early filers may experience some delays, these delays afford the IRS opportunities to counteract possible tax fraud.

Key aspects of the PATH Act

Under the Act, some taxpayers who file early for Additional Child Tax Credit (ACTC) or Earned Income Tax Credit (EITC) may receive their refund later. These taxpayers could have to wait until after the 15th of February to receive a refund. The delay allows the IRS to verify information that can help to reduce tax fraud. All pending refunds should be released from the 15th of February, so if you don’t receive your refund within 4-6 weeks after the 15th of February, you may want to visit the IRS website to find out about the delay. 

The Act has retroactively extended the Work Opportunity Tax Credit (WOTC). This is a credit for employers who hire workers from target groups faced with barriers to employment. 

If you’re still unsure about any part of the PATH Act, or if you need more tax tips, visit our website or reach out to talk to a tax expert about your tax refund. 

Tax Tips: The Best Ways to Spend Your Tax Refund

Getting your tax refund is exciting and although you may want to spend it on something fun, our tax tips will help you to make the most of your return to improve your financial wellbeing and set yourself up for a future that is a little less stressful. 

saving in piggy bank

Tax Tips to Help You Make the Most Out of Your Tax Refund: 

1. Pay off your debt 

This should be the priority whenever you have something extra at the end of the month or if you receive your tax refund. Debt can get out of control very quickly, and you should aim to pay off the bills with the highest interest first. Paying off your debt as soon as possible leaves you in a more secure position financially, and it will help you to avoid the stress of debt collectors knocking on your door.

2. Create an emergency fund 

Life can go very wrong, very quickly. Accidents, medical emergencies, car troubles and loss of income can ruin any person financially if there is no emergency fund to cover unexpected expenses. To avoid this, you should build an emergency fund that will help you to cover your living expenses for at least three months, but ideally up to six months. Even if you can’t put such a large sum away, any little bit will be beneficial when misfortune strikes. 

3. Increase your insurance coverage 

Protecting the lives of your loved ones as well as your property is always a sound investment. If you are financially sound in other ways, you can put your tax refund to good use by increasing your insurance coverage to include all property and the lives of your dependents. Accidents, damage and theft, are traumatic experiences which are made even worse by not having adequate insurance coverage. 

4. Boost your retirement

It is never too early to start putting money away for your retirement. Even if you already have a retirement fund, your tax refund can help you to grow it even more. Most Americans are not saving enough for their retirement. 22% of Americans don’t even have $5000 set aside for their retirement. Don’t gamble with your future, instead use your tax refund to prepare for your retirement.  

5. Start a savings fund

Whether you have your eye on a new car, a family vacation or if you’re putting money aside for your children’s education, you can use your tax refund to start saving for those big financial goals that you want to achieve. If you get into the habit of saving instead of getting into debt, your overall financial wellbeing will be much more sound than the average person.

6. Invest 

If you’re already in a sound financial position, you can use your tax refund to improve your situation even further by making a sound investment. Whether you decide to invest in stocks or use the money to upskill yourself, your tax refund can give you the push that you need to set yourself up for financial prosperity. 

7. Make improvements to your home 

The key is to make improvements that will increase the value of your home, help you to save on expenses or that will improve your quality of life. Avoid making improvements that will end up costing you more over the years, like installing a swimming pool that needs constant maintenance. Instead, you may want to improve the insulation in your home to bring down your heating bill or give your house a fresh coat of paint to enhance the aesthetic of the property.  

8. Replace an item that cost you money with a more efficient model 

If you own an appliance that gets used regularly, but it’s not a very efficient model, you can use your tax refund to replace it with something a little more modern. Old refrigerators, washers and dryers tend to use more energy to run, which can make your utility bill soar. Investing your tax refund in a newer appliance can help you to save money over the long run. 

9. Donate to charity 

If you’re in the fortunate position where you have financial stability, you can use your tax refund to help those who are less fortunate than you. Do a bit of research into charities in your area and consider donating to a cause that you feel passionate about.

For more tax tips and information on your tax refund, contact accounting service experts, Georgen Scarborough Associates, PC. today.

Tax Tips for Summer Jobs from Georgen Scarborough

When you think of your summer job, or if you’re starting as an entrepreneur, taxes might not be at the top of your priority list, so here are tax tips that you need to keep in mind. This guide from Georgen Scarborough Associates, PC will help you to make the most out of your summer earnings without getting into hot water with the taxman.

Tax Tips for Summer Jobs and Entrepreneurs from Accounting Service Experts summer

Understand your type of income 

How your income is classified will have a significant effect on your taxes, so it is essential to understand whether you are self-employed, or if a business or company actually employs you. 

There are many forms of self-employment, including being an independent contract worker that performs services such as babysitting, cleaning services, dog walking and many more. Skilled workers such as writers, photographers and designers can also be self-employed as freelancers. The basic premise of self-employment is that you have the power to decide on work you accept, clients you want to work with and the terms of the contract. 

If you’re self-employed, your income will be reported on Schedule C or Schedule C-EZ (profit or loss from business). Self-employed taxpayers can claim business expenses that you may not even be aware of, and that differ from industry to industry. That is precisely why you need the services of a certified public accountant who knows the rules and understands the laws surrounding tax expenses and claims for different industries. 

If you are an employee of a business, your employer will deduct tax from your paycheck, instead of you having to pay estimated taxes to the IRS every year. 

Reporting Income 

Regardless of your employment status (whether you are self-employed, or employed by a company), you will have to report income from all sources on your tax return. There is a threshold for income that you need to cross before you start paying taxes, but even if you don’t cross the limit, you still need to file a tax return. When reporting your income, remember to include income from any side jobs, self-employment opportunities as well as formal employment. 

A source of income that is often overlooked is barter income. This is a form of income where you are paid in goods or services in exchange for the work that you do. For example, if you spend time teaching someone’s child to swim, and they give you a gift card to get your car washed at their car wash business, it is considered income from self-employment and needs to be reported. 

File your tax return 

You should always file a tax return, no matter your income. Sometimes, your income won’t exceed the minimum gross that is set for filing requirements, but even in such an event, you may still want to file if taxes have been withheld from your pay. Your tax return may entitle you to claim money back, or it generates a tax refund if you’re eligible for a refundable tax credit such as the Earned Income Tax Credit or the American Opportunity Tax Credit. 

Although you need not know all the tax rules, if you are self-employed or an independent contractor, you need to keep a record of your income and expenses such as mileage, and materials purchased to perform your job. To make it simple, use a service such as QuickBooks so your information can be exported at tax time.

For more tax tips and information on your summer job taxes, contact accounting service experts, Georgen Scarborough Associates, PC. today.

How to File Past-Due Tax Returns

If you have left filing your tax return too long and it is now past due, you may be incurring penalties and interest on the amount that you owe, and any amount that you are owed may be held back by the IRS until you are up to date with your tax returns. This guide will assist you in filing your past due tax return. 

Filing your tax returns that are past due 

What happens if I don’t file my tax return on time? 

Filing your tax return on time should be a priority to ensure that you don’t incur penalties and interest. Furthermore, failing to complete your tax return may cause you to lose your tax refund (if you have multiple unfiled returns). Unfiled returns can result in a delay in the approval of loan applications, which means that you won’t get approval for a business loan, home refinancing, or federal aid for higher education. 

If you are self-employed, it is vital to file your tax return on time. If you fail to do so, your income may not be reported to the Social Security Administration, and according to the IRS: “you will not receive credits toward Social Security retirement or disability benefits.” 

Failure to file past-due tax returns can result in the IRS taking steps against you, such as filing a substitute return for you (in which case you won’t get credit for deductions and exemptions that you could typically receive). This substitute return will create a tax bill that you need to pay, and if you don’t pay this bill, you will be handed over for collection (which means that the IRS may deduct a levy from your wages or bank account). 

Repeat offenders may receive additional penalties and can be prosecuted criminally for not complying with tax regulations. 

How to file past-due tax returns 

For help in filing your past-due tax return, visit the IRS website, or contact the IRS at 1-800-829-1040 or 1-800-829-4059. You will need to complete the current IRS Form 1040 and mark the return with the year for which you are filing. You can also submit your tax return electronically. If you are experiencing difficulty in filing your return, you may be eligible for assistance through programs such as TCE (Tax Counseling for the Elderly) or VITA (Volunteer Income Tax Assistance). 

What if I owe money on my past-due tax returns? 

If you owe money on your tax returns, you will need to make a payment to the IRS to settle your outstanding balances. If you can’t afford to pay the entire balance immediately, you can apply for a payment plan, temporarily delay collection or find out if you qualify for an offer in compromise. For more information on the options to pay, visit the payment section of the IRS website.  

If you have past-due tax returns, contact Georgen Scarborough Associates, PC, for assistance and advice. Our tax preparation experts are ready to assist you with your past-due tax returns, and tax preparation for individuals and small businesses. 

How to Check Your Tax Refund Status

In the current climate of uncertainty brought on by the COVID-19 pandemic, many taxpayers are eagerly awaiting their tax refunds to ensure that they have adequate liquidity for the challenging months ahead. If you have filed your tax return, this guide will provide more information on checking on the refund due to you. It also includes information about relief measures and announcements made by the federal government relating to the COVID-19 pandemic. 

Checking Your Tax Refund Status

Where do I check on my tax refund status? 

You can check on your tax refund status at this link or by visiting the IRS website and clicking on “Refunds” then navigating to “Where’s My Refund?”. These steps will take you to the “Get Refund Status” page, where you will supply your personal information to display your refund status. 

What do I need to check on my tax refund status?

  • Your Social Security Number (or IRS Individual Taxpayer Identification Number that is shown on your tax return)
  • Your filing status (choose between Single, Married-Filing Joint Return, Married-Filing Separate Return, Head of Household or Qualifying Widow(er))
  • The exact whole dollar Refund Amount that is shown on your tax return

If you are unsure of the information you need to provide, click on the links provided to get clarification and additional information on where to find the information required. 

When can I check on my tax refund status?

You can start to check your tax refund status within 24 hours of submitting your refund through e-filing and 4 weeks after mailing your paper return. 

“Where’s My Refund” tracker  

According to the IRS, more than 9 out of 10 refunds are processed within 21 days or less. If your refund is taking longer, we recommend using the “Where’s My Refund” tool to track the progress of your refund. The tracker displays the progress of your refund through 3 stages:

(1) Return Received

(2) Refund Approved

(3) Refund Sent

The tracker can also direct you to contact the IRS if your refund requires additional review and may take longer than 21 days to process. The tracker provides you with the most up-to-date information on your tax refund, giving you access to the information you need when you need it. 

Measures for Tax Payers during the COVID-19 pandemic

On March 21, 2020, the federal government extended the filing and payment deadlines for all taxpayers to July 15, 2020. 

For the latest information on the measures that are being taken during the COVID-19 pandemic, visit the U.S Department of the Treasury website and the IRS newsroom. 

If you have questions relating to your tax refund or need assistance with your tax preparation, contact Georgen Scarborough Associates, PC, now.  

Help! I Can’t Pay My Tax Bill!

hey its going to be okay

If you have filed your tax return and you need to pay an amount on your tax bill that you can’t afford, there is help. This guide will introduce you to the options that may be available to you and help you to choose which option is best for your case.

hey its going to be okay

3 Options to Help You Take Care of Your Tax Bill

1. Extension of Payment

If you find yourself in the temporary position of not being able to pay your tax bill, you may qualify for a short-term payment plan (or extension of payment). If you can make the payment within 120 days of filing your return, this will be a better option than an installment plan because although you will be liable for interest (and some penalties) it may still work out less expensive than paying in installments. Find out if you qualify here (https://www.irs.gov/payments/ online-payment-agreement-application).

2. Paying in Installments

This is a viable (although more expensive option) for paying your tax bill if you can’t settle the entire amount at once. You may be eligible for an installment agreement for a variety of reasons, and this option will have you paying off your tax bill over a time period of up to six years. If you are granted this option it is important to ensure that your installments are paid timeously to avoid defaulting on the agreement. You can apply online for an installment agreement here (https://www.irs.gov/payments/ online-payment-agreement-application).

3. Offer in Compromise

If you can’t pay your full tax bill or if paying the full amount can cause you to fall into financial hardship, you may be eligible to negotiate an offer in compromise. Various aspects of your unique case will be considered before your application for this option is approved including your income and expenses, your ability to settle your bill, and your asset equity.

This option should be regarded as a last resort. It will not be granted without a thorough assessment. You may also request an appeal (https://www.irs.gov/ pub/irs-pdf/f13711.pdf) if your offer is not approved. Find out if you qualify here (https://www.irs.gov/ payments/offer-in-compromise).

It is important to note that these options will not be available to everyone and that these payment options won’t allow you to skip out on your tax bill. Any late submissions, late payments or failure to file your taxes will result in penalties and interest on your tax bill which you should avoid at all costs. For tax assistance and more information on the best payment option for your specific tax bill contact Georgen Scarborough Associates, P.A.