December 2 - EmployersDuring December, ask employees whose withholding allowances will be different in 2020 to fill out a new Form W4 or Form W4(SP).December 16 - Social Security, Medicare and Withheld Income Tax If the monthly deposit rule applies, deposit the tax for payments in November.December 16 - Nonpayroll Withholding If the monthly deposit rule applies, deposit the tax for payments in November.December 16 - Corporations The fourth installment of estimated tax for 2019 calendar year corporations is due. December 31 - Last Day to Set Up a Keogh Account for 2019

Yes, it’s here again: the end of the year. You probably have a lengthy to-do list full of tasks that must be done before December 31. There’s one task—or rather, a series of tasks—that you should definitely add to that list: year-end QuickBooks cleanup. Following the guidelines provided here will do three things. It will: Ensure that you’ve processed every 2019 transaction (or that you know why you can’t). Give you a sense of closure, knowing that you’ve dealt with all your 2019 financial data. Allow you to start your 2020 QuickBooks activities with as clean of a slate as possible. First Things First Before you start looking at transactions and running reports, check to make sure that your fiscal year is recorded correctly in QuickBooks. Open the Company menu and select My Company. Click the pencil icon in the upper right to open the Company Information window, then click Report Information in the tabs to the left. This window opens: Is your company’s fiscal year recorded correctly in QuickBooks? If not, please contact us. Don’t try to fix this on your own. Account For All Of Your Income You certainly want to have received all the money owed to you by December 31 if at all possible. So, run a report to see which customers have outstanding, overdue balances. Open the Reports menu and select Customers & Receivables | A/R Aging Summary. The first column here will read Current. You don’t have to worry about these customers. It’s the next four columns that will require follow-up. If your default payment terms are 30 days, you’ll see columns for 1-30, 31-60, 61-90, and >90. Customers with dollar amounts in those columns have not met their obligations and are past due by those date ranges. Note: If your default terms are different (like 15 days), you’ll need to customize the report. In the toolbar at the top, you’ll see a field labeled Interval (days). Change it to reflect your own default terms and click Refresh in the upper right corner. If your report contains only a sea of zeroes in those four columns, everyone is paid up. If not, you can send statements

Nobody likes getting mail from the IRS — especially when it's something you weren't expecting. One minute, you're minding your own business and aren't even thinking about that return you filed months ago. The next minute you open your mailbox and see something called a "Notice of Deficiency" — and your anxiety immediately goes through the roof. At this point, the most important thing you can do is to relax and take a deep breath. Getting a Notice of Deficiency from the IRS in the mail doesn't automatically mean you're about to be audited, and in fact, it may not mean anything bad at all. It does, however, require you to keep a few key things in mind to make sure that you respond in the right way. What Is an IRS Notice of Deficiency? Formally known as the CP3219A notice, a Notice of Deficiency is exactly what it sounds like — an indication that the IRS has recently received information that is different from what you originally reported when you filed your tax return for the year in question. To put it another way, something that you put on your return doesn't match with a piece of information that a third party provided to the IRS. The discrepancy could be as simple as a difference between your self-reported income and income reported on a Form 1099. Now, despite the scary-sounding name, this isn't necessarily a bad thing. Depending on the situation, it could just as easily result in a decrease in the amount of tax that you owe as it could result in an increase. The note itself will explain exactly how the amount was calculated, so the first thing you're going to want to do is read it to make sure that you understand — but also that you agree. Moving Beyond the Notice of Deficiency If you agree with the changes as outlined by the Notice of Deficiency, then that’s terrific — this process is almost over. All you have to do is sign the enclosed form (which should be Form 5564) and mail it to the address that is printed on the notice itself. This is called the Notice of Deficiency Waiver, and it just means that you agree to either pay the new amount that you owe or, in a perfect world, agree that you would like the IRS to send you some money that you didn't know you had coming. If you don't agree with the changes, however, note that you do have the right to challenge them by filing a petition with the United States Tax Court — but you have to do so by absolutely no later than the date shown on the notice itself. The court will not consider your petition if you file beyond this deadline. If you don't agree with the changes and you have additional information that can help clear up any confusion, mail all of the supplementary documentation along with the aforementioned Form 5564 to the address on the notice. But keep in mind that doing this does not extend the amount of time you have to file your petition. You should also be aware that if the mistake is something that happened because of identity theft that you suffered, there are additional options available to you. The most immediate involves filling out Form 14039, otherwise known as the Identity Theft Affidavit. You should then call the IRS, speak to a representative, explain your situation and get advice about what they want you to do next. You could also contact the third party that gave the IRS the information that triggered the discrepancy in the first place. If the mistake is theirs, you can ask them to correct it — or at least provide you with more information to help you make your case. If the mistake was a legitimate one on your end, you'll also probably want to go over any other returns that you filed to make sure they don't have the same issue — thus causing even more tax problems down the road. At the very least, you'll want to file an amended tax return to include any additional information that you received (like more 1099s) after you filed your original one earlier in the year. If you owe additional taxes and can't afford to pay right now, don't worry — it happens. You could always set up a payment plan or make other arrangements with the IRS. Depending on the situation, you could also make an Offer in Compromise and settle your bill for far less than you originally owed. Resolving a Notice of Deficiency can be very overwhelming, and if not handled properly, you could end up with an even larger problem than you started with. For more assistance and to get help with your CP3219A notice, contact our office today.

If you asked brand-new entrepreneurs to make a list of everything they think might one day pose a threat to their startup, you'd probably hear a variety of answers with similar themes. Some might be (rightfully) worried about ultimately developing a product in search of a marketplace. Others may be worried about how they're going to overcome the cash flow issues they'll likely face. Others still might be worried about getting "taken for a ride" by the venture capital people they're putting so much of their faith in. While all of these are understandable concerns, none of them should be at the top of that list. The fact of the matter is, the number-one threat to your business isn't an external factor at all. It's the people you've cofounded that business with. While it's absolutely true that founding a business with at least one other person increases your chances of becoming a success, it's equally true that about 50% of cofounder relationships fail, and most of those failures are ugly. This is because cofounder conflict is very real and far more common than many people prefer to assume. But by taking the time to learn as much about it as you can, you put yourself (and your colleagues) in the best position to mitigate risk from these issues as much as possible — before it’s too late. Why Cofounder Conflict Happens Cofounder conflict can ultimately happen for a myriad of reasons, and not all of them are going to be immediately obvious. Sometimes when you start a business with someone else, you don't realize just how incompatible your managerial styles are because you've never had the chance to put them on display. But once your startup is up on its feet and real decisions are being made on a daily basis, you might discover that you and your cofounder have two very different working styles. Other times it comes down to the fact that roles and responsibilities among cofounders are not clearly defined. Who is actually supposed to be doing what? What is your specific job description and how does it overlap with that of your cofounders? What boundaries are in place that give each of you your necessary space, but that also allow you to truly collaborate with one another in the way you need to run a successful business? Another issue could be the absence of stipulations on how “significant future changes will affect the management and control of the business.” Without a buy-sell agreement and succession plan in place, your business is at risk if any major event — like your partner’s death, divorce, or bankruptcy — may occur. Finally, one of the biggest causes of cofounder conflict is that entrepreneurs make the mistake of taking any conflict as a warning sign that something sinister is afoot. The truth is that running a business is hard and there are times where you will have arguments and disagreements with the people around you. This is true regardless of how similar your backgrounds are or how closely your visions align. If you go through life assuming that conflict is something you can totally avoid, you're in for a number of surprises and almost none of them are good. The key to a successful, long-term relationship with your cofounders involves not running from that conflict but embracing it. Have the argument. Talk about your differences. Hash things out and come to a solution together. Every moment may not be as fun as you'd hoped, but you will absolutely come out better for it. Mitigating Cofounder Conflict: Breaking Things Down Here’s the good news: once you've taken steps to learn about what cofounder conflict actually is and why it happens, you put yourself in the best position to avoid it in your own efforts — at least as much as possible. By far, the key to at least relieving some of this conflict involves first identifying why it is happening with your particular startup. Are you having frequent arguments with your cofounders because of significant personality changes? Is it because your work ethics differ a great deal? Do you come from different backgrounds? Do you have totally contrasting management styles? When left unchecked, these differences can form a major chasm that can be difficult to overcome. But if you identify them in your early days as an entrepreneur, you may be able to find a way to meet your cofounders "in the middle," so to speak, to avoid bigger issues later on. Remember that being an entrepreneur and founding a business with someone else ultimately requires a fair amount of give and take. Your startup does not belong exclusively to you and it would be unfair of you to act that way. Therefore, once you start to see conflict develop, don't be afraid to address it head-on... but also understand that you must be willing to make compromises, too. Don't just spend time identifying problems with someone else — offer up solutions of your own. In terms of mitigating some of these potential risks, a buy-sell agreement can be very effective (and should be viewed as a necessity). This legally-binding document “anticipates the intent and needs of the owners, as well as the potential conflicts that may arise among them if one or more wishes to sell his/her interest in the business or is forced to dispose of such interest.” Consulting with a tax and accounting professional during the process of negotiating a buy-sell agreement can be very beneficial for all parties involved. Contact our office for more information. If you acknowledge your startup for what it really is — a collaboration between two or more people — you stand the best possible chance at ending the lion's share of these cofounder conflicts before they've ever had a chance to start. At that point, the proverbial runway will be clear and there really is no limit to what you can accomplish together.

Article Highlights: Employee Gifts Gifts of College Tuition College Student Supplies Electric Car Credit Work Equipment Solar Electric Credit Charitable Gifts Some holiday gifts you provide to members of your family, employees, and others may also yield tax benefits. Here are some examples: Employee Gifts – It is common practice this time of year for employers to give employees gifts. Although gifts are generally excluded from the recipient's gross income, an employee cannot exclude gifts from his or her employer as a gift. However, if the gift is infrequently offered and has a fair market value so low that it would be impractical and unreasonable to account for it, the gift’s value would be treated as a de minimis fringe benefit. As such, it would be tax-free to the employee and tax-deductible by the employer. A gift of cash, regardless of the amount, is considered additional wages and is subject to employment taxes (FICA) and withholding taxes. Caution: When a gift recipient is a W-2 employee, the employer must not issue them a 1099-MISC for a holiday gift of cash; the amount must be treated as W-2 income. This is a common error made by employers. If an employer gives gift certificates, debit cards, or similar items that are convertible to cash, their value is considered additional wages, regardless of the amount. If, as a means of promoting goodwill, an employer makes a general distribution of hams and turkeys to employees, they would not be taxable to the employee and would be deductible by the employer. That also goes for a coupon that is nontransferable and convertible only into a turkey, ham, gift basket, or the like at a particular establishment. However, if that coupon can be converted into cash, then the value would be treated as employee wages. A Gift of College Tuition – An interesting quirk to the gift tax laws is that an individual can pay a student’s tuition directly to a qualified school, college, or university, and it will be exempt from gift tax and gift tax reporting. What student wouldn’t love to have part of his or her tuition paid? It would make a great gift. As an aside, college tuition generally qualifies for a tax credit. Another quirk in the tax laws says that the education credit goes to the individual who claims the child as a dependent, resulting in another gift from the individual who pays the tuition. Example: Whitney is attending college and is the dependent of her mother and father. Whitney’s grandfather makes a tuition payment directly to the college; since it was made directly to the school, Whitney’s grandfather does not have any gift tax issues. Since Whitney is a dependent of her parents, her parents would claim any available tuition credit. Thus, by paying the tuition, Grandpa made a gift of tuition to his granddaughter and a gift of the tuition credit to her parents. College Student’s Supplies – If you have a spouse or child attending college, the costs of certain course materials qualify for the American Opportunity Tax Credit (AOTC) if the course materials are needed as a condition of enrollment and attendance. Thus, for example, if a computer is needed as a condition of enrollment and attendance at the college, the computer’s cost would qualify for the AOTC of the individual who claims the student as a dependent if the individual otherwise qualifies for the credit. Electric Car Credit – If you purchase an electric car as a holiday gift for your spouse or even yourself, you will find that most electric cars come with a tax credit. To qualify to claim the credit on your 2019 tax return, the car will have to be “placed in service” by December 31, 2019. So merely ordering the vehicle, even if payment for it is made at the time when the order is placed, won’t be enough – you will need to receive the car and start using it before New Year’s Day. But before you leap, you should know that the credit is non-refundable, meaning it can only offset your actual tax liability, and that any excess credit over your tax liability will be lost. However, there is an exception when the electric vehicle is partially used for business, in which case the portion of the credit allocated to the business use will become a general business credit that is first applied to the tax in the credit year. Any remaining credit will be carried back one year, and then if not all of it is used still, the rest will be carried forward. Work Equipment – If your spouse is self-employed and you purchase tools or electronics used in the spouse’s business, the costs of these items will qualify as a business tax deduction on the return for the year when the equipment is put into service. Solar Electric Credit – If you and your spouse or another resident of the home decide to gift a home solar system to each other, you will qualify for a non-refundable tax credit equal to 30% of the cost of the home solar property (note that the credit will drop to 26% in 2020). If your tax liability is less than the credit, then the excess credit can be carried over to a future year. The solar credit is available to all residents of the home, even if they do not have an ownership interest in the home. Example: A mother and son live together in a home owned by the mother. The son purchases a solar system; as a result, the son will get the tax credit since he resides in the home. Caution: To claim a credit for the system’s costs on your 2019 return, the installation must be completed by December 31, 2019. Charitable Gifts – Of course, contributions to qualified charitable organizations can be deducted, provided you itemize your deductions. If you are over age 70.5 and have not taken your required minimum distribution (RMD) from your IRA account for 2019, you might consider making direct transfers to the charities of your liking, thereby satisfying your RMD requirement while avoiding taxation of the distribution. Contact your IRA custodian or trustee to arrange the transfer, which would need to be completed by December 31, 2019, to count for 2019. So it’s best not to wait until the last minute to initiate the transfer. Some words of caution about charitable contributions during the holiday season: When you are shopping at a mall and drop cash into the holiday kettle, you won’t get a receipt for your contribution, and a cash charitable contribution cannot be claimed as an itemized deduction without documentation. The same goes for buying and then giving new, unused toys to holiday toys-for-kids drives, which have become very popular. Tip: Save the purchase receipt for the toys and request verification of the contribution from the sponsoring organization. If the drop point is unmanned and it is not possible to obtain a contribution verification from the organization, the IRS will allow a deduction of up to $249, provided you document the purchase of what you’ve donated. Also, during the holiday season, all of the scammers will climb out from under their rocks and do their best to trick you out of your well-intended contribution dollars. Be cautious, and make sure your contributions are going to legitimate charities. If you have questions about how any of these suggestions might impact your tax situation, please give this office a call.

Article Highlights: Watch Out for Charity Scams Tax Exempt Organization Search Tool Tax Benefits of Charitable Contributions Bunching Deductions Qualified Charitable Distributions Substantiation As the end of the year and the holiday season approach, we will all see an uptick in the number of charitable solicitations arriving in our mailboxes and by email. Since some charities sell their contributor lists to other charities, frequent contributors may find themselves besieged by requests from all sorts of charities with which they are not familiar. Watch Out for Charity Scams – You need to be careful, as scammers out there are pretending to be legitimate charities looking to take advantage of your generosity for their gain. When making a donation to a charity with which you are unfamiliar, you should take a few extra minutes to ensure that your gifts are going to legitimate charities. The IRS has a search feature, Tax Exempt Organization Search, which allows people to find legitimate, qualified charities to which donations may be tax-deductible. You can always deduct gifts to churches, synagogues, temples, mosques, and government agencies—even if the Tax Exempt Organization Search tool does not list them in its database. Here are some tips to make sure your contributions go to legitimate charities. Be wary of charities with names that are similar to familiar or nationally known organizations. Some phony charities use names or websites that sound or look like those of respected, legitimate organizations. Don’t give out personal financial information, such as Social Security numbers or passwords, to anyone who solicits a contribution from you. Scam artists may use this information to steal your identity and money. Using a credit card to make legitimate donations is quite common, but please be very careful when you are speaking with someone who calls you; don’t give out your credit card number unless you are certain the caller represents a legitimate charity. Don’t give or send cash. For security and tax-record purposes, contribute by check, credit card, or another way that provides documentation of the gift. Another long-standing type of abuse or fraud involves scams that occur in the wake of significant natural disasters. In the aftermath of major disasters, it’s common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers. Scam artists can use a variety of tactics. Some scammers operating bogus charities may contact people by telephone or email to solicit money or financial information, and they may set up phony websites claiming to solicit funds on behalf of disaster victims. Unscrupulous individuals may even directly contact disaster victims and claim to be working for or on behalf of the IRS to help the victims file casualty loss claims to get tax refunds. Scammers may also attempt to get personal financial information or Social Security numbers, which can be used to steal the victims’ identities or financial resources. Disaster victims with specific questions about tax relief or disaster-related tax issues can visit the IRS website for Disaster Assistance and Emergency Relief for Individuals and Businesses. Tax Benefits of Charitable Contributions – Contributions to charitable organizations are deductible if you itemize your deductions on Schedule A. Generally, the deduction is the lesser of your total contributions for the year or 50% of your adjusted gross income, but the 50% is increased to 60% for cash contributions in years 2018 through 2025, and lower percentages may apply for non-cash contributions and certain types of organizations. Itemized deductions reduce your gross income when determining your taxable income. However, with the increase in the standard deduction as a result of the 2017 tax reform, many taxpayers are no longer itemizing their tax deductions (because the standard deduction provides a greater tax benefit). For those in this situation, there are two possible workarounds: