Monthly Archives: February 2013

Got a Phone Tree?

Posted on by

The recent inclement weather made me reminisce about phone trees.  Let me explain what a phone tree is.  When I was in the military, every organization had an staff roster roughly in the form of the group hierarchy.  The Colonel would call two or three people below him, they would each call two or three folks below them, and and so on until everyone in the organization got the call.

The phone tree could be used to announce that an emergency had occurred and everyone needed to report as soon as possible.   It was also used when weather events could change our work schedule.  We didn’t have cellular phones, text or a lot of email back then.  Now you could set up a automated roster so easily.  Ah, progress.

Even with technology, you need to have a framework of a plan in case of emergency.  Who will make the decision to close your office due to weather?  Will you close your office in the middle of the day and send folks home?  Will you make the decision the night before the hurricane?  Who on staff will and will not get paid if the office is closed?  If there is a fire, where does everyone meet to do a head count?  There are no right or wrong answers.

You should, either by memo or in your employee handbook, let folks know that these things can happen…how they will be contacted or who they should contact? how is pay handled in these situations?  Setting up a framework can help everyone know what to expect, and his or her responsibility.  It can also help be efficient and keep folks safer.

Your employee handbook and you.

Posted on by

As an employer, when was the last time you updated your employee handbook?

If you are an employee, when was the last time you read it?

My suggestion is that you update your handbook at LEAST every two years.   Not only does labor law change, but your business changes, too.  Hours of operation?  Insurance benefits?  Computer usage policies?  Cell phones in the office?  I could go on for quite while.  How long and thorough your policy manual is is completely up to you.  Make sure it is forthright and have a labor law attorney review your final handbook.

I also suggest staff members read their handbook at least every six months.  Hey, we forget things and you may even learn something new.  Also, it is helpful to read your handbook before asking if that particular holiday is paid.  The handbook is a way to make sure you are following the guidelines, and check up that your employer is doing the same.

An employee handbook sets the tone of your staff attitude.  As an employer, it says to your staff that you intend to treat everyone fairly.  As an employee, it gives you a map of how to behave and succeed at your company.

Employee Handbook = Your Friend.  Really.

Major asset purchases.

Posted on by

Speak with your tax professional about what minimum limit you should track for major purchases (i.e. items over $500, $1000, etc.).   These are items that could be computers, machinery, office furniture, leasehold improvements and so on.  Usually, these items can’t be expensed all at once.  They are amortized over the course of 3 years, 5 years, 7 years, or longer.

Your tax preparer can help you classify these assets and let you know the schedule of depreciation.  A program like QuickBooks can help with tracking individual assets, too.  You can then setup the monthly depreciation expenses so your financial reports will be more accurate.  Also, speaking with your tax professional BEFORE the end of the year can help you plan whether you should make a major purchase now, or delay into the next cycle.

Also, don’t forget to keep good records about these purchases.  Keep original invoices to archive indefinitely.  You should also keep receipts for freight charges, delivery, installation services (i.e. electrician to wire power for a new piece of equipment).  Expenses directly related to the specific asset may also be part of the deprecation schedule.  Keep good notes and make sure your vendors detail their invoices to you accordingly.

Tax law changes each year, and the qualifications for assets also change.  You probably maintain a maintenance record for major equipment.  Don’t forget to keep thorough financial records as well.

Yay! It’s W-2 time!

Posted on by

I have had many a visit from staff members during Q1 regarding W-2 forms.  They file their personal income tax return and they don’t like the final number.  Too much due.  Too much paid in.  Status changes.  Multiple jobs.

While I can’t fill out the W-4 form for them, I make sure my folks understand the the number of deductions they claim is INVERSELY proportional to the amount of tax deducted each payroll.  For example, claiming Single-0 will result in MORE tax taken out than if you are claiming Single-2.  The instructions they provide to the company on a W-4 will dictate how their W-2 will look at the end of the year based on the government’s tax tables.

Part-time employees should be especially mindful.  Depending on the gross payroll, there could be little to no tax deducted.  Again, this is based on the tax tables in a Circular E document.  The completed W-4 and the tax tables create an estimate of what the tax liability could be, but doesn’t dictate how you will actually file the return.

At the end of the year, the part-time employee takes this W-2 and couples it with their full time job W-2, or their spouse’s on a joint return.  They could be unpleasantly surprised by the higher income number but without the additional tax paid into the account.  The W-4 form provides a way to force an additional amount out of each check to cover this gap.

Everyone (you and your staff) needs to understand that one company and it’s paycheck doesn’t know your entire financial situation.  My W-4 with ABC Company doesn’t know if I have another job at XYZ Business, a rental property, win the lottery, etc.  If you are having trouble every year, adjusting your W-4 could be a solution to help to alleviate unpleasant surprises.  Talk to your tax professional when completing your personal return this quarter for 2012.

Buried by credit card receipts?

Posted on by

I had a client that had more than eight credit card accounts.  Some of those had multiple card holders.  To make it even more complicated (as if it were possible), the cards were issued for multiple legal entities within the same business.  Oh yeah, and sometimes they used the cards for personal things.

In perfect  “Bookkeeper-Land”, there would be one card for each entity and business owners would never use it for personal things.  The truth is I can’t think of one business I’ve ever had where this has been the case.  And you know what, that’s my job.  I organize the chaos and work behind the scenes to make it look pretty.

I start by identifying each card by the last four digits as it’s “name”.  Seriously, there are multiple Visa cards and they each have a different financial institution behind them so I can’t call it “Visa” because they might be three of those.  Using the last four digits is handy also when the receipts get dumped on my desk.  Why?  Because that is usually the only identifying quality to tell which account the receipt belongs to.

I make notes on receipts as to why a purchase was made and/or what account it will be coded to.  The receipts can sometimes be small, so I staple them to a sheet of paper to write my notes to the side (i.e. Mr. Doe had lunch with prospective client Ms. Smith).  I keep a folder for each of the cards by the last four digits for incoming receipts.  At the end of the billing cycle, I at least have the receipts sorted and I can then interrogate the primary card holder about the other transactions.  No way around it…you still have to track folks down.

I keep a separate short term asset account on the chart of accounts.  That is where I code the personal items of the owner in case they don’t cut a check back to the company right away.  I don’t want that payment to delay my reconciliation of the account but I have to keep track of it.

It’s not always pretty, but it is the reality.  I like the challenge of the credit card puzzle, I guess.

Job applications. Are you asking what you shouldn’t?

Posted on by

When was the last time you looked at one of your blank job applications?  Are you asking for information that could be used for a selection process with discrimination inadvertently attached?

There are some things you CAN’T ask on an application.  You can’t ask for a birthday.  Most folks know this because you can then tell how old an applicant is.  You can’t ask for an applicants marital status either, nor how many children.  Think about every question…can the answer or non-answer of this question be used to build criteria that is not job related?

There are some things you SHOULDN’T ask.  I put a social security number in this category.  Some folks think you can tell a person’s immigration status by the prefix of the number. Not sure on that one.  I was looking for an Administrative Assistant once back in Washington DC and recieved more than 200 applications for just one position.  That’s a LOT of personal information to take on.

Do you really want to have that kind of personal information for which to be responsible?  Do you want to have a formal policy to every job applicant of how you will be using this data, how long you will keep it, and how it will be destroyed?  With the threat of identity theft, this is a very personal identifier that I don’t think you want unless you really need it.

If the position you are offering requires a background check, of course you are going to need a social security number.  Maybe his or her drivers license, too.  I suggest building a separate form.  You probably aren’t going to complete a background check on every candidate…just the perfect one you want on your team.

Is that transaction really sales tax exempt?

Posted on by

I have run into many folks who claim to be tax exempt.  There are two different kinds of exemption – income and sales.  The federal government does not bestow sales tax exemptions.  A business may show you their letter from the IRS stating very officially “TAX EXEMPT ORGANIZATION.”  This is issued for a variety of reasons from churches, to soup kitchens, to national charities, etc.  This letter coming from the IRS applies only to the federal income tax for the group.

For a group to be exempt from sales tax in the State of Kansas (and in other states I have worked), you must apply with the state.  A business may qualify for this status because they are a charity, or they may be a reseller of goods, they may be in a special development and the state has opted to exempt them.

Kansas has different forms issued for each of these scenarios.  You have an obligation to require the organization or business supply the proper form for their tax exempt situation.  An example is the Kansas form ST-28D for manufacturers and processors.  The purchaser also has an obligation to notify you if some sales are exempt and some are not.  In the manufacturer scenario, tools are not tax exempt however the metal they fabricate into something is exempt.

Keep this form on file.  This signed exemption form signifies the group is taking the responsibility of the sales tax exemption.  It is them literally saying, “I am buying this bread and cheese to make sandwiches.  I am going to sell them and charge my customers sales tax.”  If you must go through a sales tax audit, you have this form that shifts the responsibility of the sales tax from you to them.

On the other hand, if you complete a sale to a group and all they give you is an IRS letter…you are taking a risk that they haven’t been approved by the state in which you operate.  Even when they claim everybody in town accepts their IRS letter.  Your business could be on the hook for the sales tax of the transaction if they have not been approved.  If you have questions, talk to your CPA or even call the Department of Revenue.  They are really helpful…and not as scary as you think.