Issues with inaccurate books

Having inaccurate books can be detrimental to your construction business. How do you know where you stand financially? How do you know if you can pay your bills? Or your employees? Is your business growing?

It all comes down to having accurate books. You need a good set of financials to successfully run your business with peace of mind. Without accurate books, the bank won’t approve that loan you need for new equipment, or you won’t be able to purchase new lots. You won’t have the right information if you are faced with a worker’s compensation audit and you won’t be able to file your taxes either. Once you get behind, the pile just keeps growing and so do the questions about your financial status. Bookkeeping is probably the last thing on your to do list, but it is certainly one of the most important. 

Why it matters

It is so incredibly important to know your financial status, in real time. (And to note, this is not the amount of money that is in your bank account!) You will be able to confidently make decisions for your business and have a clear picture of where you stand, giving you the ability to see patterns for opportunity and growth. Especially when times are ever changing, having current financials will help you pivot and adjust accordingly. Simply put, accurate books = peace of mind.

Not enough time? 

It all sounds great, right?! But it takes so much time. Is your time better spent organizing receipts, determining job related cost vs. overhead costs, reconciling all transactions, comparing QuickBooks to project management software or would having the time to actually run and grow your business be more productive? There are so many things that go into accurate books, this process could take you awhile.

No worries! There’s help!

That’s where 24hr Bookkeeper comes in. We are the experts and want to take on the challenge to get your books current. Because we are specialized in construction bookkeeping and accounting, we know common issues you face and we know how to fix them. No matter the size of your project or how complicated it might be, 24hr Bookkeeper can provide you with current financials that you can trust. You can focus on running your business while we get your financials up to date. Leave your outdated books behind! Head into 2021 without the stress and worry of this year’s books weighing you down.

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What is your financial foundation?

What do we mean when we say your “financial foundation or base”? This is made up of your chart of accounts, cost codes and list items and needs to be set up in a way that makes sense for your business. When it is set up, you will be able to file your taxes correctly and also produce accurate financial reporting. This includes:

• Classes
• Customer lists
• Vendor Lists
• QuickBooks Online (QBO) functionality settings
• QBO bank connections
• Recurring transactions
• Custom reports

Importance of your foundation

Similar to building a house, you need a strong foundation for the long term stability of the structure. For your financials, you similarly need a base or foundation for all of the numbers to make sense and give a clear and accurate picture that decisions can be based on. This piece is so important and oftentimes is overlooked. If your foundation is not in place, you will likely have some of these issues:

• Unable to get accurate costs
• Don’t know how your money is being spent
• Inaccurate reports
• Difficulties integrating project management and financial software
• Unclear if you are making or losing money

Benefits when it is set right 

When your foundation has been set up properly, managing your business and making decisions will be much easier. You will have confidence in your financials and your reports will be clear, providing you the information on the “financial buckets” that you care about and also giving you the information to spot trends over time. The chart of accounts will provide the right buckets to categorize your transactions so you have a clear understanding and view of your company’s financial health. The cost codes will provide the detailed line items on your estimates, time and other construction costs. Streamlining your financial workflow with additional software integrations and automation will also save you time and headaches. All in all, your financial foundation is the base for your entire workflow and it just won’t work if it is not set up correctly…period!

Where to start?

Now you understand what your financial base consists of and the value of having it set up correctly, how do you make it happen? 24hr Bookkeeper has comprehensive experience with finance and accounting in the construction industry and knows what details you need and care about to operate your construction business. We know how it should work and can help you navigate, organize and put all of the pieces together in a way that makes sense for you — for now and for the future. Although we don’t know what 2021 might hold, we do know that accurate financials are a must for success. Now is the time to act to head into 2021 with a solid financial foundation!

The post Lay Your Financial Foundation appeared first on 24hr Bookkeeper.

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You can read your favorite books on a Kindle, or experience an entirely different part of the world through a VR headset. 

Heck, you can share information and learn about current events as they happen online, with millions of other people all chiming in and sharing their input, for better or worse (otherwise known as Twitter). 

So, while the rise of digital technology has both it’s pros and cons, incorporating online and digital tech into your business is often a very, very good thing. 

The examples are endless, including online project management tools that allow people around the world to collaborate and communicate, allowing for more efficient projects. Or augmented reality technology that gives package designers the opportunity to see how their designs will look like right in front of them, or on the shelf next to competitors. 

Businesses from all industries can utilize digital technology and online tools to streamline their business and to make their company more effective overall. 

Here at 24hr Bookkeeper, we are strong proponents of using online accounting tools (QuickBooks Online in particular) for keeping track of the money going in and out of your business. We work with a lot of construction businesses who love the flexibility that our services provide

Just like those other examples of online and digital technology, online accounting and bookkeeping services provide a lot of benefits for your business — which we’ll discuss in this post. 

Save Yourself Time and Focus On Delivering the Best Service or Product

By using online bookkeeping services, you can save yourself precious time. Imagine the possibilities if you didn’t have to do all that tedious accounting work, and instead dedicate your resources to improve your products or services. 

This is especially beneficial for small businesses, as you’re already a small team and by effectively eliminate a responsibility internally by outsourcing you can make sure you’re not spreading yourself too thin. 

Think about if Steve Jobs had to do his own accounting instead of outsourcing it. Maybe we never get the iPhone (okay that’s an extreme example but you get the point!).

Less Likely to Lose Records That Are Stored Digitally

It’s much easier to misplace physical receipts and records than accounting information that is kept online. We’ve all misplaced important documents or recycled them on accident. You can avoid that issue completely with online accounting. 

And as long as you have access to the online accounting software, you’ll be able to check in on your finances, which will be easily organized and categorized for you. 

You Can Be Confident That Your Accounting Records Are Up-to-Date and Accurate

If you’re outsourcing to a team like 24hr Bookkeeper, you can rest assured that the smart folks on this team are great at what they do. So, if you’re a little inexperienced with accounting, you can take away the burden of not being sure everything is accurate by going with an online bookkeeping service provider. That way, you’ll have the peace of mind that everything is as it should be and you’ll be good to go come tax season. 

Access Your Records From Anywhere

By using online bookkeeping solutions, you can access your records from anywhere as long as you have a connection to the internet. However, if you have a software-based accounting solution, you’re out of luck as you can only access your information from a computer or device that has downloaded the software. 

So, whether you’re on vacation and want to check out how business is going or are working from home for the day, online bookkeeping offers you great flexibility in terms of how and where you can manage your accounting. 

Integration With Other Software in Your Business For Streamlined Operations

Another big benefit of online bookkeeping services is that they can streamline with other key solutions your business uses. For example, here at 24hr Bookkeeper, we integrate QuickBooks with your other key construction software to help keep your business cohesive and streamlined. 

Why 24hr Bookkeeper is the Right Choice For Your Construction Company

At 24hr Bookkeeper, we’ll take care of your accounting needs while still making sure that there is transparency maintained between you and your finances. 

We offer the following services to help streamline your accounting and improve your business: 

Construction Software Integration

As previously mentioned, one of our key services is integrating your construction tools and software with QuickBooks to ensure you have a streamlined workflow. 

Update Financials

We’ll bring your finances up-to-date so you can produce financial reports confidently. 

QuickBooks Training

Learn to use, understand, and confidently navigate QuickBooks Online with one-on-one or group training.

Monthly Bookkeeping

We’ll take care of your financials on both QuickBooks and your construction software, including accounts payable and receivable, payroll, and more. 

Workflow Advisory Services

We produce customized step-by-step financial manuals that identify financial management and workflows, including staff responsibilities and utilization of QuickBooks and construction management software.

To get in touch with us, contact us through our contact form here! 

We look forward to hearing about your construction business and creating a plan to help you succeed!  

The post Online Bookkeeping Services: 6 Ways They Can Benefit Your Small Business appeared first on 24hr Bookkeeper.

While a larger business may be able to overcome the occasional operational or accounting mistake that may lead to lost business or resources, each customer or client for a smaller business is very important to their overall success. 

For example, we work with construction businesses and assist with their accounting efforts with the goal of ensuring that they are confident in their numbers. 

If you’re in the construction industry and need help managing your accounting, then give us a call at 218-885-3100! We’ll provide construction software integration with QuickBooks, update your financials, advise you on your workflow, and train you in QuickBooks. 

We’ll also handle your accounts payable and receivable, payroll, reconciliations, and review for real-time financials and job costing. 

Get started today! 

In the meantime, here are five tips to help improve your accounting. 

Track Every Expense

It’s crucial for your business that you keep track of every expense — whether it’s a big one like the cost for materials or a small one like gas from driving to and from a job site. Not only does doing this help you maintain an extremely accurate accounting book, but you’ll also be able to handle any audits that may come your way during tax season. 

For more information on how to best keep track of your receipts to maintain a good record of your expenses, take a look at this past blog. We break down the best ways to organize your receipts to make your life easier. 

Be Conscious About Spending

Every now and then it’s a good thing to remind yourself to be mindful of your expenses and how much you’re spending on a day-to-day basis. While this tip is more concerned with the financial side of your business as opposed to the record-keeping side of things, there is obviously a direct link between finances and accounting.

Every month you should be going through your monthly expenses to see where you’re spending the most. And, if you notice that those expenses are a bit too high for your liking or are cutting into profits too much, see if you can find any that are expendable. 

For example, if a small business saw that they had a lot of expenses for travel, they may look to cut down on those until sales increase. 

Avoid Mingling Your Personal Finances With Your Business Finances

This is a mistake that many small business owners tend to make. While it may not sound like the worst thing in the world, you may be making yourself more liable to issues that may come up later down the road (read more about the importance of becoming an LLC or corporation here). 

The benefits of keeping these two types of finances separate are expansive and include: 

• Make it easier to accurately track your cash flow
• The ability to maintain accurate records when tax season comes around
• Simplify forecasting long-term financial performance
• Provide sufficient evidence of your business’s success to an investor or lender

Ensure the Accuracy of Your Records

When it comes to maintaining accurate records, you should use a journal, ledger, or some sort of online electronic record-keeping system. The IRS recommends that you record your transactions with one of those three options. Once again, this will help you make better decisions financially, as well as help you out when it’s time to file taxes. 

The IRS also suggests that when it comes to keeping up with your small business’s accounting, you should maintain the following: 

• daily and monthly summary of cash receipts
• depreciation worksheet
• business checkbook
• check disbursements journal
• employee compensation records

Regularly Review Your Records

Auditing your own books every now and then isn’t a bad idea. You can also bring in an outside accountant to look over your accounting information to ensure that everything checks out. 

Many times, accounting errors for small businesses are accidental. But, that doesn’t mean you won’t get penalized for them. So, it’s worth checking and double-checking your books to ensure that they are correct, accurate, and up-to-date. 

Use Software to Automate and Make Your Life Easier

Here at 24hr Bookkeeper, we are huge proponents of using QuickBooks as your software of choice to help you tackle your accounting needs — particularly QuickBooks Online (QBO). 

By choosing QuickBooks Online, you can take advantage of the following features: 

• Bank and credit card transactions downloading nightly
• No need to backup your data, as everything is secure on Intuit servers
• No software or local data to manage
• Better shared access with your information for employees and accountants
• Have multiple windows open at the same time (which seems like a small benefit but can really help with your accounting productivity and efficiency) 

Start Implementing These Accounting Best Practices Today

By taking the time to implement these tips into your small business’s accounting (if you haven’t already) you can better set your company up for success down the road. Again, make sure not to forget about the little things if you want to see continued success. 

And, if you need some help organizing your accounting, don’t hesitate to reach out! 

The post Accounting Best Practices: Accounting Procedures Your Small Business Needs To Have Down Or It Will Cost You appeared first on 24hr Bookkeeper.

That’s why it is strongly suggested you partner with someone who understands what needs to be tracked, and why – like 24hr Bookkeeper. 

1. Medical expenses – To be clear – you are not supposed to write off personal medical bills for the business taxes. But you can deduct medical bills as a personal itemized deduction on Schedule A. After you’ve added up your expenses, you can subtract 10% of your adjusted gross income, and whatever is left, you can deduct. In a few limited cases, the law allows business owners to deduct medical spending from business income. 
2. Noncash charitable giving – Tax Cuts and Jobs Act of 2017 expanded the pre-tax reform standard deduction. The number is now at a maximum of $12,200 and $24,400 for married couples filing jointly. If you used to itemize your deduction and now take the standard deduction – you no longer receive a specific deduction for charitable giving. Wealthier taxpayers often still opt to take an itemized deduction. 
3. Business meals – 50% of business meal and beverage costs can be deducted. The meal has to be “ordinary and necessary” and incurred in the course of business – you or an employee has the be the meal, and it “can’t be lavish or extravagant under the circumstances.”
4. Education – Education benefits – can be up to $5,250 provided for employees per year. A couple of important notes about this write-off: If you give out education assistance, you need to provide a written ‘Educational Assistance Plan’ that clearly states how the plan works. It can’t favor highly paid employees, and it can’t offer more than 5% to shareholders, owners, or their dependents, the educational benefit has to relate to the employer’s business. Also, you have to give reasonable notice to eligible employees, and their needs to be records of transactions. 
5. Taxes and Licenses – You cannot deduct personal taxes. According to the IRS – “You can deduct various federal, state, local and foreign taxes directly attributable to your trade or business as a business expense.” Small businesses also have to have a number of business licenses and permits to operate legally and most are tax-deductible expenses.
6. Business Use of Your Car & Travel Expenses – Whether you track the exact expenses, or track mileage with a ledger or an app like MileIQ – and take the ‘standard mileage rate’ – you can also deduct tolls and parking fees if that were incurred during the course of business. Meals, lodging, and the business portion of any car rental – during business travel are great deductions as well.
7. Business Insurance – According to the IRS, you are allowed to deduct any “ordinary and necessary cost of insurance,” such as commercial property insurance.
8. Home Office – You can take a tax deduction of $5 per square foot if your home office is 300 square feet or less, and that part of your home is used for business. This deduction allows up to a maximum of 1,500 for a 300-square-foot space.
9. Rent Expenses & Moving Expenses – You know you can write-off your office rent, but any time you move your business to a new location, any costs related to the purchase or renting a new location – included moving and transition costs. 
10. Salaries and Benefits – Salaries, wages, commissions, and bonuses – if deemed ‘ordinary and reasonable’ in amount, paid for legitimate services provided, and paid for or incurred in the current year. Health plans, Life insurance coverage, dependent care assistance, cafeteria plans, gifts, and education assistance. 
11. Telephone and Internet Expenses – Phone lines, internet and anything related to conducting the communication side of the business can be deducted. Small business owners can legitimately deduct whatever cell phone usage that is used for business.
12. Advertising and Promotion – You can deduct any promotion or marketing expenses that you expect to gain new business from in the future. 
13. Depreciation – By charting the value decrease over time of tangible or fixed assets a business owns – you decrease the taxable amount of earnings, and can thus reduce the amount of taxes owed. 
14. Legal and Professional Fees – For example, you can deduct the fees paid to Lawyers, Accountants, Quickbooks and Bookkeepers like 24hr Bookkeeper. 
15. Retirement Contributions – Your contributions to a traditional IRA or other retirement plan are deductible (up to $6,000 in 2019) – IRA’s allow you to not pay taxes on the investments themselves or their returns until after you retire. 

In general – you should be diligent on checking on this handy list of tax write-offs every year at the end of the year so that you don’t waste your money or your company’s money. Smart businesses take every reasonable deduction so that they can reinvest that money back into the success of their organization. 

Send us a message, to run your books for you on autopilot, and have confidence in our services – find relief in knowing “it’s taken care of,” and possibly even find money you didn’t know was there!

The post 15 Tax Write-Offs to Take Advantage of Before the End of the Year appeared first on 24hr Bookkeeper.

One particularly trying area that may test your patience — particularly when working your ways towards becoming a construction contractor — is your bookkeeping. 

Unless you have extensive experience in accounting, bookkeeping can seem like a confusing process and it’s hard to even know where to start. 

And it’s essential that you understand best practices for bookkeeping, as failing to make sure that your books are accurate will not only make running your business difficult, but it will also come around to bite you come tax time. That’s because if you run into an audit and your bookkeeping is fuzzy, you may be looking at extensive fines, which can be detrimental to your business’s growth.  

So, to make sure that you are feeling comfortable about your bookkeeping, here are some helpful accounting tips and tricks. 

But first, let’s discuss what makes bookkeeping for construction tough. 

Why Construction Bookkeeping Can Be Tricky

To illustrate just how tricky bookkeeping can be for contractors, let’s compare a typical construction job vs. services provided by a conventional business — like a clothing store. 

With a clothing store, quarterly expenses will be the same for the most part. You’ll have your workforce, which may change occasionally based on seasonality or how your business is doing. Other operational expenses, like your utility bills for the store, will also be similar from quarter to quarter. 

However, for a contractor, each quarter, each week, and each job itself can vary wildly in terms of operational costs and how much you’re getting paid for the service. 

One job may require you to hire multiple subcontractors — for example, if you’re taking on a large remodel. While other jobs you can do on your own. 

In other words, from job to job, your expenses and revenue are much more fluid. 

So, to help you keep your ever-changing job costs from getting in the way of keeping your books nice and tidy, follow these helpful tips. 

Construction Bookkeeping Tips For Contractors

Work With Someone Who Understands the Rules and Regulations 

The most important thing to remember when it comes to your bookkeeping is that you don’t have to go it alone. 

Instead of trying to get everything set up and kick this off on your own, consider working with an accounting expert or even bringing one on full-time. 

An accountant can help you with structuring your business and advise you on how to most effectively manage your money. 

You can also look to work with a bookkeeper — and many contractors do just that by outsourcing. There are some great third-party bookkeepers who can help you manage your books to ensure that they are correct and up to date. 

Let’s talk about some of the benefits of outsourcing your bookkeeping.

Outsourcing — Why You Should Consider It

The important part about outsourcing your bookkeeping as a contractor is that third-party bookkeepers will still make sure that you’re involved in the process and are aware of what’s going on. 

Here at 24hr Bookkeeper, we are always transparent with our construction partners because it’s essential that you understand what your books look like at all times. 

We also understand that no two businesses are alike. Because of this, we’ll take the time to get to know your company, your goals, and find the right solutions to ensure that we streamline, automate, and simplify your financial processes. 

Especially for businesses that don’t have the resources to conduct their accounting internally, outsourcing your financials will allow you to compete with your bigger competitors. 

Starting Off Right: Follow These Steps When Starting Your Business to Get Your Accounting on Track

Incorporate Your Business or Form an LLC

One of the first things you should be doing early on in your business is deciding whether or not you want to incorporate your business or become an LLC. In fact, this should be done before you even start your first job. 

For more information on the old LLC vs. Inc. debate, take a look at this helpful resource to see which is right for your business. 

The good news is that no matter which one you with, you’ll be given liability protection.

Liability protection ensures that professional and personal assets remain separate. In other words, if something were to happen with a client — perhaps a contract dispute or an injury on the job and you are found in the wrong — they couldn’t go after your personal finances. 

So, incorporating your business or forming it as an LLC won’t necessarily save you from losing money from your business, but it will save your funds, which is crucial.

Sometimes errors and accidents happen, and you don’t want to be caught without liability protection if that does happen to you. 

Buy the Right Insurance

For the same reasons that you would want to incorporate your business, you should also make sure that you acquire the right insurance for your business. 

Being a contractor can be a dangerous job. Not just in terms of the physical risks of working on a home, but from a legal perspective, as previously mentioned. 

Take a look at this helpful list form Next Insurance to find out which insurance you should purchase to make sure all your bases are covered. 

It’s important you acquire your insurance early, not only because it will help you avoid a nightmare situation if you’re caught without it in the event of an accident, but you’ll also be able to take into account the monthly or yearly cost of your insurance into your bookkeeping. 

Organize Your Receipts

The earlier you start to carefully and consciously organize your receipts, the earlier you’ll get in the habit of continuing to do this throughout the year. 

You may be asking, why do I need to hang on to my business receipts? All they do is take up space. 

But business receipts are a very important part of your accounting — as they can give you valuable insight into where some of your money is going and what are some areas you maybe should try and limit your spending.

Also, if you’re ever audited by the IRS, receipts will serve as very valuable documentation of sales transactions and business expenses. 

For example, if you’re looking for a tax deduction due to travel expenses, like gas, you’ll need to validate your claims with receipts if you are audited. 

There are many different ways you can organize your receipts, but going paperless might be the most efficient and effective way. 

To learn more about going paperless with your receipt cataloging, take a look at our 5 Foolproof Ways to Organize Your Receipts (Construction Accounting) blog. 

Contact 24hr Bookkeeper Today to Optimize Your Construction Accounting

Interested in working with an experienced and knowledgeable accounting partner for your construction business? 

Then give us a call today at 218-885-3100 to get started! 

Here at 24hr, we offer the following services to help you improve your accounting:

QuickBooks Training

Learn to use, understand and confidently navigate QuickBooks Online with one-on-one or group training.

Monthly Bookkeeping 

We manage your financials in both QuickBooks and your construction software. We’ll handle accounts payable and receivable, payroll, reconciliations and review for real-time financials and job costing.

Update Financials

We bring your financials up-to-date, reflecting accurate and verified financial data. You’ll be able to produce all financial reports confidently.

Construction Software Integration 

We integrate QuickBooks and construction software together for a streamlined workflow from estimating to project management to bookkeeping.

Workflow Advisory Services

We produce customized step-by-step financial manuals that identify financial management and workflows, including staff responsibilities and utilization of QuickBooks and construction management software.

The post Construction Bookkeeping: The Contractor’s Guide appeared first on 24hr Bookkeeper.

The list of different numbers you have to keep track of seems endless at times. There’s payroll, material and inventory, tools and machine costs, and more. 

It can all be a bit overwhelming at times. 

However, keeping good track of your accounting is essential for the success of your construction business. 

Here are some of the issues you can run into if you’re not keeping tabs on your accounting. 

Money May Be Lost

One of the biggest struggles for a small construction business is making sure that they are getting paid for all their jobs. 

By maintaining clean books, you can easily see which jobs you’ve completed and have been fully paid vs. those that have been completed but the client still owes you money. 

If you’re trying to keep track of who and who hasn’t paid you without implementing proper accounting techniques, it can be easy for payments to slip through the cracks. Remember, it’s not up to the homeowner to make sure that they have paid you everything they owe. That responsibility falls on you.

In addition to this, there are some crucial numbers that you should keep tabs on when it comes to tax deductions. For example, you’re probably aware of the tax deductions you can get for driving to a client’s location. 

Well, if you’re not keeping accurate records of travel, then you’re likely won’t see the tax deduction you actually deserve. 

It Will Be Difficult to Grow 

Keeping your finances and accounting in order is a key part of being able to grow and expand your construction business. 

Thinking about trying to move to a bigger office? If your accounting methods are lackadaisical at best, then how are you going to determine how much money you have for the upgrade? It will be extremely hard to figure out if you have the funds necessary to pay for an increase in rent. 

In addition to this, you’re not going to receive any business loans from banks if your financial records are out of order. 

Oh, and good luck bringing in new talent, as people tend to not want to work for a business who aren’t on top of their operations – especially when it comes to the money your business is taking in.

You’ll Have a Field Day With Taxes

Unless you have a CPA savant on retainer, completing your taxes without updated and well-maintained accounting records of the past year will be extremely time-consuming. 

Either you’ll spend a significant amount of time trying to track down all your records over the course of the past year, or you’ll hire a bookkeeper to do it for you — which can be very costly due to a large amount of time and effort they’ll be putting in to clean up your books. 

So, keep up with your accounting, or tax season will become a living hell for you (Okay, maybe not that bad…but it certainly won’t be fun). 

You’ll Be in Trouble if You’re Audited

No one ever thinks they’ll be audited. But, the thing is, it has to happen to someone — and your construction business has just as good of odds as anyone else. 

Having accurate records is a must if you ever get audited. If you’re found to have paid fewer taxes than you should of due to mis-understating your income, for example, you’ll be charged hefty fines to make that up. 

How 24hr Bookkeeper Can Help Keep Your Constriction Accounting Books in Order

Are you having trouble with your construction business’s accounting? Don’t worry, you’re not alone. 

Many business owners struggle to manage their finances and accounting while simultaneously working to produce the best results for their clients. 

That’s why they turn to outsourcing some of their accounting to third-party accounting companies. 

Here at 24hr, we can update your financials, take care of your monthly bookkeeping, and even train you in QuickBooks Online.

Take a look at our full list of services to see all the ways we can help take your accounting to the next level!

The post What Happens if You Don’t Keep Track of Your Construction Accounting Books (Penalties, Fines, and More) appeared first on 24hr Bookkeeper.

If you’re a construction contractor, then you know just how important it is to keep tabs on your accounting and finances.

In addition to ensuring that your books are covered and accurate, you also have an IRS filing requirement to deal with.

As a contractor, you’ll be dealing with an IRS Form 1099.

Today, we’ll discuss just what exactly this form is, the different types of 1099s, what the penalties are for incorrectly filing one, and finally, how to make sure you avoid penalties.

What is an IRS Form 1099

1099 Forms are what you’ll be issuing to each of your contractors who do work with you. While someone earning a salary or wage will report their annual earnings through a W-2 form, a contractor will fill out 1099-MISC.

You should be sending any contractor that you pay at least $600 during the tax year one of these forms.

Other types of 1099 Forms

1099s for interest and dividends – This form is used to report the dividends and other distributions you receive from your stock investments or mutual funds.

1099s for government payments – The government is also responsible for reporting income that it pays to taxpayers. Government agencies use form 1099-G to report state income tax refunds and unemployment compensation.

1099s for withdrawals from retirement – When you take money out of your traditional IRA, you will get what is called a FORM 1099-R. This form also pertains to other types of distributions you receive from pension plans, annuities, and profit-sharing plans.

1099s for debt cancellations – If a creditor ever cancels a portion of your outstanding debt, the IRS, unfortunately, treats that cancelation as income. So, you will need to report that on a Form 1099-C.

Now that you are familiar with what a Form 1099 is, as well as the many different variations, let’s talk about the importance of filing them correctly.

What Happens if You Don’t File it Right

It’s important that you send out 1099s in time, as failure to do so may end up in penalties for you or your contractors.

In addition to making sure that your 1099 is filed on time, you also have to make sure that you don’t have any errors on the form, such as forgetting to include their Employee Identification Number

Currently, here are the fines that are associated with fillings that are past due:

Submission within 30 days from the due date – $30 penalty per form.

Submission after 30 days from the due date but before August 1st – $60 penalty per form.

Submission after August 1st or not filed at all – $100 per form.

The IRS sets the maximum penalty as $500,000 for small businesses, which is characterized as a business that has average annual gross receipts of less than $5 million for the three previous tax years.

Exceptions for Delays

If you are late on your submissions, you may be okay as long as it falls under a “reasonable cause,” as the IRS will not impose penalties in those situations.

Typically, a reasonable cause is something that caused a delay in the submission that was outside of the taxpayer’s control, such as a computer breaking down or a fire in your office.

That being said, you must be able to show that you took reasonable steps to avoid being late, as well as taking action to mitigate the delay.

In addition, the IRS will overlook inconsequential errors or omissions in forms that necessitate correction and re-submission.

Working With Contractors – How to Make Sure You File Yours Correctly

If you want to avoid those costly fines and penalties, here is how to correctly file your 1099 when you employ contractors.

Check, Double Check, and Triple Check Your Work

Making sure that all your information is correct from all your contractors and vendors is your first priority. For vendors, you should already have their name, address, SSN and Employee Identification Number from their W-9s. In addition, the W-9 will also detail their tax filing status and so you’ll be able to see whether or not you need to issue a 1099 for each specific vendor.

To ensure that any contractors you’ve worked with avoid “backup withholding” from the IRS — which is when the IRS withholds a portion of the contractor’s pay because of omitted information or if they don’t have a W9 — you check with each contractor to see if any of their information has changed.

Acquire Your 1099s

Once you’re confident that the information you have is correct, you can then order the 1099 forms by either calling the IRS (1-800-829-3637) or by visiting their website. This is because you cannot download a 1099-MISC.

However, if you don’t want to file these forms the old-fashioned way, you can use financial software like QuickBooks to create, distribute, and file you 1099s all from the ease of your computer. This route is highly recommended, as it will simplify the process a ton.

And, if you’re new to QuickBooks, then you’re in luck. Here at 24hr Bookkeeper, we are well versed in QuickBooks. We offer extensive QuickBooks training, both in individual and group settings.

This is in addition to our construction software integration, financial updating, workflow advisory, and monthly bookkeeping services as well.

So, if you want to get started in implementing QuickBooks into your construction business’s operations, then contact us today! We’ll make sure that you’re confident in using QuickBooks in no time!

Fill Out and Send Out Forms

Filling out the forms is pretty standard, just make sure that you are writing down the proper SSN and EIN, as well as the amount of money paid to each contractor – which should be written in Box 7 under “non-employee compensation.”

Once again, if you use software like QuickBooks for your 1099 process, it will automatically keep tabs on this information, which will reduce the likelihood of error and save you valuable time as well.

Next, you have to send the forms and either mail or hand each 1099 Copy B to your contractors by February 1st.

Failure to meet this deadline can lead to the IRS penalty fees.

It’s important that these forms are mailed to contractors on time because they need them to make tax payments, report their total amount earned, and finally file Form 1099-MISC.

Mail Form to IRS

Make sure that you give yourself ample time to mail Form 1096 — which summarizes the total from your returns — and Copy A of each Form 1099 to the IRS.

If you are reporting nonemployee compensation payments, it needs to be filed on or before January 31st.

For all other reported payments, file Form 1099-MISC by February 28, 2020, if you file on paper, or March 31, 2020, if you file electronically.

Key Takeaways for avoiding penalties with your 1099s:

• Pay attention to deadlines in order to avoid fines
• If you experience a reasonable cause for being late, make sure you still try and submit your 1099s as soon as you can. This will help your case in terms of avoiding a fine.
• Make sure that the information you have for your vendors and contractors is correct
• Using QuickBooks will help ensure accuracy for your 1099s
• Pay attention to mailing dates for when you are sending 1099s to contractors

The post IRS Form 1099: Make Sure that You File Yours Correctly appeared first on 24hr Bookkeeper.

However, some will argue that it is one of the most difficult parts of construction in general!

Today, we’ll talk about what exactly job costing is, why it’s such an important part of your construction operations, and finally, how QuickBooks can make job costing much easier for you.

Job Costing Definition

In its simplest terms, job costing is an accounting method that is used to track the expenses of each unique project, as well as estimate how much money each job will cost.

Job costing is needed because in construction each and every project will be different from the next — and job costing can help the contractor know how much money they made on the project. Accountants use this method to keep tabs on the expenses of each job in order to use that information for analysis and tax needs.

For this methodology, there are three different major cost categories to consider.

Labor

For labor, you’ll start by calculating out how much it costs per day/hr in regards to your direct employees who will work on the job — eventually multiplying that number by how long you expect the project to take.

Next, you’ll need to the same for any subcontractors that you may need for the project.

Material

Next up, you’ll estimate the cost for all the direct materials you’ll be using, as well as equipment. You might also charge a margin on these materials to cover things like delivery and wastage.

Overhead

Your overhead will concern such things as the depreciation of equipment, office rental, admin, etc. Because these costs aren’t exactly related to the job itself, they are more of an approximation than a calculation.

A professional accountant is usually a great resource to help you with how to treat overhead expenses.

Why Job Costing is Important For Your Construction Business

Job costing is extremely important for a construction business because, as we mentioned, no project is the same — whereas if you were creating the same product over and over again (like a laptop, car, or toy), it is easier to account for manufacturing costs because it will be relatively consistent.

By using the job cost method, you can figure out which tasks take more time as well as better understand where you may be losing revenue.

It’s important that you can accurately predict, record, and control the cost of each job. Between materials, labor, subcontractors, and equipment, there is a lot that must be tracked and monitored for each and every job.

Benefits of Job Costing

Overall, job costing allows you to price jobs more accurately. This is because you’ll be working through each of the specific costs for an individual job, giving you more assurance that your estimation is accurate.

By using accounting software, you can get estimates done much faster. While job costing used to take much longer, using software like QuickBooks or a project management software like BuilderTrend or RedTeam Software can help streamline the process.

In fact, by using QuickBooks to help with your job costing, you can find more realistic profit margins, track progress and costs in real-time, and avoid customer conflicts because your estimate upfront will be closer to the actual cost

How We Can Help With Your Construction Business Accounting

We can help out with as much (or as little) of your financial workflow as you’d like.

We aim to bridge the gap between QuickBooks and construction management software and collaborate with you to create a simple and streamlined financial process.

Here is a list of the following services that we provide:

Construction Software Integration
We are experts in integrating QuickBooks and construction software together. This allows for a streamlined workflow — everything from estimating to project management and bookkeeping. If you’re not working with QuickBooks, today is the day to start!

Update Financials
We’ll bring your financials up-to-date so that they are accurate, current, and verified. Be confident in your financial reports.

QuickBooks Training
Learn to use, understand and confidently navigate QuickBooks Online with one-on-one or group training.

Workflow Advisory Services
We create customized step-by-step financial manuals to identify financial management and workflows — this includes the utilization of QuickBooks and construction management software, as well as staff responsibilities.

Monthly Bookkeeping
We manage your financials in both QuickBooks and your construction software. We’ll handle accounts payable and receivable, payroll, reconciliations, and review for real-time financials and job costing.

Give us a call today to get started on streamlining your construction business accounting!

The post Construction Job Costing: What To Know & How It Affects Your Business appeared first on 24hr Bookkeeper.