Employee education and training is an investment that every business owner should make. As a business owner, your company policies should include employee education and training requirements.
Whether you are a business owner or an employee, education and training is part of your daily life – like it or not. We need it in order to deal with new complexities that we face at work, for career advancement, and to obtain certification.
Being a business owner myself, I find myself learning new things on a daily basis in order to make my job easier and more efficient. For example, right now as I prepare this blog post, I’m working with a new piece of software called Dragon Naturally Speaking. Dragon allows me to dictate my blog post instead of physically having to type it. Needless to say, this is a learning experience. But once I master it, creating a blog post is going to be a much faster and more efficient process. I will also then be able to apply this knowledge to other tasks, such as writing or updating our software manuals.
My own background is bookkeeping. Over the years I’ve transitioned from being just a bookkeeper to becoming a software developer. I’ve learned a whole bunch in this job! Performing bookkeeping tasks or providing QuickBooks training to clients did not prepare me for becoming a software developer, writing manuals, creating and maintaining a website, or any of the thousands of other things that I do on a daily basis.
Let’s take support for an example. I find that there is a very, very fine line between how people view support and training. In general, support is defined as helping a user solve a specific problem with the product, perhaps resolving an error message. However, I find that most people define or expect that support includes (or is also) training – not only for our software but for QuickBooks, Microsoft Office, and basic computer tasks such as how to create a new folder or add an attachment to an email.
Whether you are a contractor, a bookkeeper working for contractor, or certified QuickBooks ProAdvisor you need to make a commitment to yourself, to your employees, to your business, and to your clients to obtain the training necessary to perform daily tasks quickly and efficiently and then take what you have learned an apply it. This requires a commitment of your time and sometimes money as well
Training can be obtained in multiple ways. The internet provides some great training opportunities, you can Google something specific and find an overwhelming amount of information for free. Many companies, our own included, provide great training videos for learning their software – free of charge. You can take a class on-line or go to your local community college.
The possibilities are endless for learning, if you just make the commitment.
I hope you found this article to be helpful, if so, please take a moment to leave a comment or share it on your favorite social media site.
Small business owners frequently experience stress and burnout – and I have to admit that I’m no different. Last week was a very bad week – in reality it wasn’t any different than any other week, but it did effect me differently. By rights it should have been a great week because our company celebrated 11 years of being in business on August 16, 2011.
Last week I read a really great blog post from blogging painters called Summer Blues or Burnout? (I really suggest that you pop on over and read it to). As I read it, I felt that John (the author) was talking about me instead of painting contractor when he mentioned:
lack of enthusiasm he was feeling about his business, his chosen profession, and life in general. So what are the symptoms of burn-out? Stress is the main culprit to causing burn-out. Another contributor is boredom. Do you see yourself unable to get excited about your business? Are you doing the same thing day in and day out expecting different results? Perhaps it’s time to step back, take a break and re-evaluate your situation from a fresh perspective.
Pretty much all of these thing describe me perfectly at the moment. I’m tired, I’m stressed, I’m crabby and quite frankly I have way to many things on my plate at the moment and feel totally overwhelmed.
So, I’m going to take John’s advice and step back and re-evaluate until I get some of these things off my plate. If you are wondering what some of these things are, well here is the short list:
- finish installing software and then move all my data to a new computer (my main computer has been displaying that not so wonderful “blue screen of death” followed by crash dumps more frequently – so I ordered a new computer last week and it arrived on Monday and I’ve been an installing fool every since). With luck I’ll be cutting over to that by Monday or Tuesday.
- get the theme for the blog straightened out – I’ve been playing with it quite a bit.
- move our existing website from Joomla 1.5 to Joomla 1.7 – this is a huge project and I don’t expect to have that finished until the end of the year.
- I have 2 other brand new websites that aren’t mine that I’m working on.
- I’m testing, debugging, and documenting 2 new software programs – one of which is a rewrite of our existing AIA Billing program which we want to release later this year.
- the garden is going wild and canning season is about to start! Anyone want cucumbers, zucchini or yellow squash?
- the 3 cords of firewood that we ordered in April will arrive next week, so we need to get that stacked in the greenhouse.
- speaking of our greenhouse, it currently doesn’t have any plastic on it – that’s tomorrow’s project!
- and then we need to prepare for hurricane “Irene” —- oh boy!
It’s very difficult to spend any time on any of the above during normal business hours – so it’s all done before and after my normal workday and on the weekends.
As a small business owner I need to remember the Pareto’s Principle, the 80/20 Rule, it should serve as a daily reminder for all of us to focus 80 percent of our time and energy on the 20 percent of your work that is really important. Don’t just “work smart”, work smart on the right things.
Until things are more under control, I’ll be cutting back blog posts to just Tuesday and Thursday.
How are you managing stress and burnout in your business? Are you like me and beginning to “freak out”?
The benefits of paying the Prevailing Wage Fringe Benefit portion to bona-fide plan is often misunderstood by employers and employees alike.
Prevailing wage jobs, those jobs that are subject to the Davis-Bacon Act and/or State Prevailing Wage Laws, require that all laborers and mechanics {including tradesmen such as carpenters, equipment operators, painters, pipefitters, plumbers, etc.) who perform work on the jobsite are to be paid a set base rate of pay PLUS an hourly fringe benefit rate.
Union contractors automatically pay the total hourly fringe benefit rate to the union hall on behalf of the employee, usually splitting the full hourly rate into specific “funds” – Health & Welfare, Pension, Vacation, etc. When this happens the Union contractor doesn’t pay payroll taxes, worker’s compensation, or general liability insurance on this amount.
Non-Union contractors, on the other hand, can pay the fringe benefit rate to the employee in addition to the stated base rate of pay OR they can pay it into a bona-fide plan on behalf of the employee.
We’ll look at the differences and discuss the benefits to both employees and employers.
In the following examples we’ll be working with a base rate of $41.51, fringe rate of $18.72, a Worker’s Comp experience rate of $10.70 per hundred dollars in wages, and a General Liability Insurance Experience rate of $0.636 per hundred dollars in wages and a standard 40 hour work week.
When the fringes are paid in cash – included in the employees base rate of pay
As an employee you are paid $60.23 per hour ($41.51 + 18.72) x 40 hours = $2,409.20 gross with a net of $1,512.38. As an employee you are paying $896.82 in taxes – see sample paycheck below:
Right click on the image to enlarge it.
As an employer you pay $560.99 in payroll taxes, worker’s comp and general liability insurance in addition to the $2,409.20 gross wages for a total of $2,970.19 to have the employee on the jobsite for 40 hours.
When the fringes are paid to a bona-fide plan on behalf of the employee
As an employee you are paid $41.51 per hour x 40 hours = $1,660.40 gross with a net of $1,101.47 PLUS $748.80 is contributed to the bona-fide plan on your behalf for a total of $1,850.27. As an employee you are paying $558.93 in taxes {in reality that is a savings of $337.89 in taxes) – see sample paycheck below:
Right click on the image to enlarge it
As an employer you pay $1,135.96 in bona-fide plan contributions, payroll taxes, worker’s comp and general liability insurance in addition to the $1660.40 in gross wages for a total of $2,795.86 to have the employee on the jobsite for 40 hours – that’s a savings of $174.33.
Many employers and employees are rightfully cautious about the cost of setting up a bona-fide plan. Many times setting up a traditional 401(k) or 403(b) plan is costly (one customer recently told me that it would cost them $5,000.00 to initially set up the plan) and then the employees must wait until legal retirement age before being able to start withdrawing the money.
The Supplemental Unemployment Benefit Plan (SUB Plan) offered by Prevailing Wage Contractors Association (PWCA) has a start up cost to the employer of $200.00; and provides employees access to the money when they need it most – when they are not working or have missed some time. The SUB Plan can be used to pay an employee when he has a short work period; which is defined as working less than 40 hour in a week or less than 173 hours in a month. Short work periods can be caused by layoffs, bad weather, illness, lack of work, equipment down time or any number of reasons.
For additional information about the SUB Plan offered by PWCA, visit their website – or contact Nancy Smyth.
More about the IRS requesting backups of QuickBooks and Peachtree company files from the Journal of Accountancy, written by Benson Goldstein, J.D.
In a March 29, 2011 letter from Patricia Thompson, chair of the American Institute of CPA’s (AICPA) Tax Executive Committee, to Chris Wagner, commissioner of the IRS’ Small Business/Self-Employed Division, the AICPA communicated its concerns regarding the Service’s program to request the accounting software files of certain small business taxpayers under examination; the letter cites QuickBooks and Peachtree as examples of accounting software actively used by small businesses.
This is a critical matter because the use of accounting software has become commonplace by businesses in meeting the requirement to maintain proper “books and records,” including records involving income, expenses, assets and other pertinent information. If the firm is subsequently selected by the IRS for examination, the Service’s general position is that the entire file must be turned over to the IRS, even though it may contain information:
- from tax years unrelated to the years under examination; or
- even data not normally considered part of a firm’s “books and records” as it is commonly understood for tax administration or audit purposes.
In response to the AICPA’s March letter, the IRS sent a letter on April 20, 2011 to the Institute stating that “it is important an exact copy of the original electronic data file be provided to the examiner and not an altered version.” The Service wants to see the original data file because it would help identify whether there have been deleted or altered entries to the file. The letter elaborates that “the original data file may provide the date a transaction was originally created, dates of subsequent changes, what changes were made, and the username of the person who entered or changed that transaction.”
The AICPA’s March letter urged the Service to begin a dialogue on the issue to ensure reasonable safeguards are put in place “to protect small business taxpayers from turning over more data in an electronic format than is necessary for the IRS to perform an examination.” In addition to requesting further dialogue with the Service, the AICPA has also begun discussions with two of the nation’s accounting software developers about helping CPAs and their small business clients provide the Service with only the data that is responsive and relevant to an IRS examination—but not more. While stating it wants an exact copy of the electronic file, the IRS’ April letter offered the following “suggestions” to address the concerns of CPAs and their clients:
- The client should consider backing up its electronic data files annually at the end of each tax year. This would lessen the amount of data provided to the IRS should the client undergo a subsequent audit.
- The client’s electronic data files may generally be condensed for dates prior to the tax year(s) under audit, but condensed data is not acceptable (according to the IRS) for the years under audit. However, the IRS reserves the right to request another backup file involving data from the archive file created during the condensing process should the scope of the audit expand.
The AICPA will keep members informed about its ongoing dialogue with the IRS about ways small business taxpayers might provide the Service with the necessary data in electronic format (from the software file) while providing taxpayers with appropriate safeguards.
—Benson Goldstein is a senior technical manager (taxation) with the AICPA in Washington.
If you are reading this article then it is likely that you or your client has received a request to submit a QuickBooks file in conjunction with an IRS Audit or an audit by another government agency. The Internal Revenue Service started this new level of enforcement in 2010 in which their agents are now requiring the actual accounting database (be it QuickBooks or another accounting software) as a part of the audit process. Certainly, government revenue departments can use information to gather any sort of data relevant to an audit. In my role in helping clients prepare their files for submission to these governmental agencies I have noticed some patterns in what the IRS seems to be looking into and I wish to share that with you here.
Improper Payments to Owners
Throughout the history of S corporations (can apply to LLCs also) there has been an undefined area in the IRS code relative to wages vs. dividends. Typically the owner/s of an S corporation (which are generally small in nature) earns ordinary income as the manager of the business and earns dividends as an investor in the business. There is an incentive from a tax perspective for the owner to maximize his or her reporting of dividends because dividends are not taxed for payroll taxes (typically 15.3%) which can be a substantial savings to the owner. There is no direct guideline as to how much the owner must pay him or herself to be in compliance with the IRS, but the owner needs to earn a salary commensurate with what someone performing the same work would receive on the open market.
This opens up a large gray area that seems to be of particular interest to the IRS when reviewing your financial database. Additionally the IRS is looking for any improper payments that pass between the owner and the business that are not recorded in the data file. Prior to submitting a file to the IRS, review any such transactions and have an explanation of why they occurred and why you chose to report the transactions as you did.
Improper Payments to Employees
Likewise, improper payments to employees that are not properly recorded as wages are another area of concern. Especially if you or the client is using QuickBooks Payroll Services, you need to review all transactions between employees and the business to assert that all benefits to employees were correctly accounted for in conjunction with your representations on tax forms.
Make sure to also review any non-payroll transactions with employees and search for any transactions where the employee may have been listed as an “other name” or as a “vendor”, because these will certainly be scrutinized during the audit.
Real Estate Concentration
Nearly 70% of customers who contact us to help prepare their QuickBooks file for submission to the Internal Revenue Service are involved in the real estate industry. Whether they are real estate agents, mortgage brokers, construction companies, title companies or otherwise, This would seem to be a substantially larger percentage than chance would predict and so we need to ask ourselves why is the IRS focusing so heavily in this area.
Real Estate has obviously gone through a major boom bust cycle in the United States over the recent years, and it would seem that the IRS is reviewing QuickBooks files to locate significant transfers of money and whether that money was properly classified on the books of the organization. An example of such a misclassification might be taking what should be classified as a capital loss and reporting it as an expense. Additionally the IRS may be looking at transactions to make sure that the owner is materially participating in the business and thus can legitimately take certain deductions.
Whatever the basis for their inquiry may be, it would seem very important that you review all material transactions in detail before you submit your file to the IRS as these large dollar transactions seem to be of special importance in the evaluation process.
What are they not looking for?
Historically IRS audits have focused on businesses that have a large amount of small cash based transactions which can be easily hidden from reporting on tax returns. You may have encountered the occasional restaurant that will charge you $12 to use credit card vs. $9 if you pay cash. That’s because the credit card transaction can be easily traced by the IRS. These are just the sort of organizations that have classically been the focal point of IRS audits, however in our experience we see very few businesses that have an extensive amount of small transactions or businesses with an intensive use of inventory (i.e. retail in nature) among our customers. If you, or your client, are having the IRS request a QuickBooks file and that business has a large amount of transactional data, we would suggest that the IRS is more likely looking to review one of the above areas rather than the small individual transactions alone.
Note: This will not be true if you are being audited by a sales tax agency.
The possibilities of what the IRS is reviewing in your data file are infinite, but hopefully this can provide you a generalized guideline for what is likely going to be examined as a part of the audit process.
