Quarterly Taxes

If you pay estimated taxes on a quarterly basis (Form 1040-ES), you may owe less on your annual tax returns or even get money back. In order to receive more money back, more money has to be paid in every quarter. If no tax payments are made during the tax year, all taxes are due on the return due date of the subsequent year, please see the Internal Revenue Service (IRS) website for due dates specific to your entity.

The quarterly tax payment form is called a tax voucher, which is due about 15 days after every quarter end.  Tax vouchers may be mailed to various states, or paid directly on the IRS website. On the 1040-ES, there is also a schedule to help you estimate the taxes owed, but any payment amount is accepted.  Be sure to keep a copy of each voucher for your records and show it to your Tax Accountant when you file your annual return.  1040-ES forms should be filed by subcontract workers or the self-employed, see the IRS website for more forms.

If you happen to be behind on your taxes, a payment plan can be set up, but related penalties and interest rates still apply to the balances owed.  Also, you must notify the Internal Revenue Service (IRS) if you want to go on a payment plan to pay off your outstanding taxes; otherwise, they will automatically seize your bank accounts to get their money.  See penalties and payment plans on the IRS website.

Besides state and federal taxes, there may be city and county taxes that are owed for doing business there.  City taxes are based on gross earnings and county taxes are based on business property.  These taxes are usually due on a quarterly or annual basis and they are based on their general estimate.  Always save your property appraisals and tax records, in case there is a discrepancy.  Also, be sure to respond to them immediately, because they are legally allowed to charge you their estimate if you do not respond in time.

Tax rates go up and down depending on the outcome of events during the year.  For this reason, official tax rates are not available until the year is over.  In addition, the actual tax rates you pay every year depend on which tax bracket you are in, which is based on your taxable income (Gross income- adjustments- deductions- exemptions).

Tax accountants follow IRS regulations.  Every year certain tax rates change and others stay the same.  Search the IRS website for any tax items.

For self-employed individuals who hire subcontractors, be sure the subcontractors complete form W-9 before working. This form provides the information necessary to complete form 1099-MISC, which totals up their services for the year. Form W-9 should be kept in a locked environment since it contains confidential data such as social security numbers or employer identification numbers (EIN). Issuing a form 1099-MISC ensures a deductible expense, because the same amount will be taxable to the subcontractor. It is recommended to send form 1099‑MISC as soon as the year is closed, because it allows time for subcontractors to request a change in the amount reported if figures do not match.

For employers with employees, be sure to file Form 941 regarding your federal taxes every quarter, see tax due dates on the IRS website. Employers who hire subcontractors must also send forms 1099-MISC annually.

For an individual, the taxing process starts with how many allowances are being claimed on form W-4. Every employee should be required to complete this form before working, as this provides the information necessary for payroll processing. Be sure to keep these forms in a locked environment, since these forms contain confidential information, such as social security numbers.

The concept of allowances and tax refunds goes as follows: The more allowances you claim on form W-4, the less taxes are removed from your paycheck and the more taxes will be due on your tax return.

Technically, you can claim “two” for yourself if no one else can claim you and you are working. However, you may find that you actually owe at the end of the year. If you claim only “one” a tax refund usually occurs. Some people even claim “zero” to ensure a large tax refund is received annually. For more on the form W-4 allowance worksheet, please see the details below:

Reduce Fraud Risk

In the accounting world, reducing fraud risk occurs with segregation of duties: Custody of assets, transaction approval & recordkeeping.  No one person in your business should have access to all three areas of inflow or outflow of cash or other assets.  As a sole proprietor, you have no interest to cheat yourself.  Once your business grows and you start to hire employees, be sure to separate these three duties, because you might find yourself in a situation where someone is stealing money from you or providing you with false reports to cover their tracks.

Be sure to designate the following three duties to three separate employees in your business regarding assets:

  1. Custody of assets
    1. Ask yourself- Who has access to your petty cash box? Who is able to pull out money from your business account?  Who has access to your on-line accounts or credit cards to make purchases for the business?
    1. Set controls to make sure that only the appropriate employees have access to your most important business assets (cash, securities, building access codes/ keys, etc.)
  2. Transaction approval
    1. Ask yourself- Who signs off on the business checks? How many accounts and signers do you have?  Who signs off on orders for company supplies? What limits have you set with these approvers to make sure they do not sign off on just anything?
    1. Properly train your signers and approvers by providing lists of what is acceptable and what is not.  Create limits on the amounts allowed for each request.  Promote researching cheaper options before approving just any purchase and create a paper trail for reasons why a pricier option is better for the company.
  3. Recordkeeping
    1. Ask yourself- Who has access to your financial statements and their support?  How many employees have access to confidential information, such as human resource records?  Once a document is filed, are there appropriate controls to be sure it is in your accounting system?  Are you reviewing balances every month on customers or vendors?
    1. Having limited access to financials and confidential documents will prevent the possibility of your business information from getting into the wrong hands and your data from being misinterpreted.  When in doubt about an account, confirm outstanding balances with third parties to provide more reliable data than just an inside document.

Should you ever be audited, an auditor will first look at your internal controls, such as separation of duties.  With good internal controls, your financial figures become more reliable.  All employees are generally trustworthy, but sometimes sudden circumstances make them act otherwise.  You want to create procedures that will catch mistakes before they get out of control.  By separating the three duties of custody of assets, transaction approval and recordkeeping, you can greatly reduce the chance of fraud in your business.

For more information on internal controls and fraud proofing, see Generally Accepted Accounting Standards (GAAS) published by the American Institute of Certified Public Accountants (AICPA).

Computer Health

A computer is like a person- it crashes, if it is overloaded or unhealthy.

Although there are other computer types, this summary is focused on “IBM compatible” computers, which are commonly referred to as PCs (Personal computers). The two main operating systems for PCs are Windows and Linux. The following instructions outline how to manually take care of a PC using Windows 10, and the research came from various on-line searches and computer expert inquiries. Since technology is always changing, please use the “On‑line Search Tips” below to find updated steps, and consider hiring a computer expert to clarify your computer specifics.

All computer types need to be physically cleaned, backed up and updated often, but PCs also require a “defrag” step, due to the way its operating system is built. However, it may be said that newer operating systems are already performing this step in the background, for which a manual defrag is required less frequently.

  • On-line Search Tip: Do I need to defrag my computer?

Safety Points:

  • To reduce the amount of viruses that your computer comes across, practice not opening any social media links or e-mails that you do not recognize, because it could be a virus or a link to hack into your computer.
  • Always renew your annual software subscriptions for anti-virus or internet security, as they help capture and remove viruses early. Internet security usually includes anti-virus and other anti-malware.
  • The 10 step computer maintenance process, outlined below, should be performed

Maintaining your computer health is a process that needs to be done in a specific order to prevent data loss.  Before beginning, be sure all files are saved and all programs are closed.  Note: Each step may take a few hours

  1. Backup your computer files
    1. Purchase external/portable hard drives to use as a backup sources, or use cloud storage accounts
      1. There are different opinions about whether or not to leave external hard drives connected to computers all the time, please research for yourself and decide accordingly
        1. On-line Search Tip: Leave external hard drive plugged in?
      1. It is recommended to always “safely remove” external hard drives from PCs.
        1. Select the upward arrow “^” on the task bar to show hidden icons, and select the icon that says “safely remove hardware and eject media.” After about a minute or so, a pop-up message to say whether it is safe or not to remove. When it is unsafe to remove, it is usually because a computer program is using a file on the external hard drive. Close all programs and repeat the process.
        1. If you do not do this step before unplugging the external hard drive from the computer, any files that are running during an “unsafe ejection” could become corrupt and may no longer be available to open from this external hard drive
          1. On-line Search Tip: Safely removing an external hard drive
    1. Open two “File Explorer” windows: One for the external hard drive and one for computer hard drive (C). Copy and paste important files from the computer hard drive to the external hard drive.
      1. In general, music and pictures require more data storage than most files. Depending on the type of files being backed up, a larger external hard drive may be required.
        1. 1 terabyte (TB)= 1,000 gigabytes (GB), and 1 GB= 1,000 megabytes (MB)
          1. On-line Search Tip: External hard drive sizes and purpose
  2. Backup your accounting software company files (if applicable)
    1. For accounting software that is updated daily or periodically, it is recommended to backup these company files at the end of every day or period as a safeguard. If a computer crash occurs, these backups can be used to reinstall all data from inception, and only the days not backed up will have to be reinput into the accounting software.
      1. Additionally, it is recommended to practice saving a copy of the “general ledger detail” at the end of every reporting period, or at least annually for potential audit purposes
  3. Empty Recycle Bin
    1. This icon is usually located on the actual desktop, and is not easily accessed through the “File Explorer” window for most updated computers
    1. As items are deleted from your computer, they are moved to the recycling bin
      1. If an item is accidently deleted, it can be retrieved from the recycling bin by right-clicking the appropriate file and selecting “restore”
        1. Once restored, this file will reappear in the file path from which it was deleted
    1. The act of emptying a recycling bin, removes the ability to “restore” files that have been deleted
      1. Right click the recycle bin icon on the desktop > select “empty recycle bin”
  4. Run Updates
    1. If an update is run without first backing up the computer, important files may be lost
    1. For updates, it is best to close all programs before running.  If a pop-up to update an application is received, and there is not enough time to properly backup before updating, come back to it later in the Windows Settings. 
      1. Start Menu > Settings > Update and Security > Check for updates > Restart PC
        1. On-line Search Tip: Check for updates
  5. Run a System Backup
    1. This process is usually done by a computer expert, because it involves backing up computer programs and related data, such as a company’s database
      1. On-line Search Tip: Backup your programs system settings
    1. If the average person were to do it, the concept would go as follows:
      1. Keep all software CD-Roms with the “Installation key” numbers in one area, including a list of websites for software/applications that have been downloaded from the internet
        1. In the case of a computer crash, software can be reinstalled on the computer using CD-Roms or downloads from the internet
      1. Figure out the best frequency of time to backup/export related software data, so that files are as current as possible when it is used to import after a computer crash
  6. Run Disk Cleanup
    1. This process deletes temporary files and other items.  When running a disk clean up, the computer suggests unnecessary items, such as downloads that have already been saved to another location. These items can be researched on-line and reviewed for removal.
      1. Start Menu > File Explorer > Right click “C” drive > Properties > General Tab > Disk cleanup
        1. The “General” tab of the properties window, shows how much used and free space is on the computer hard drive
          1. On-line Search Tip: Run disk cleanup
  7. Run Scan Disk (commonly referred to as Chkdsk)
    1. This process includes checking the hard drive performance for file system errors or bad sectors (soft or hard).  If a computer expert is not available, research on-line the items that show up after running “Chkdsk” and resolve accordingly.
      1. Start Menu > File Explorer > Right click “C” drive > Properties > Tools Tab > Check (under section: Error Checking) > Run updates > Restart PC
        1. On-line Search Tip: Check drive for errors
  8. Defrag computer
    1. This process clears out duplicate bytes that occur when we do simple tasks, such as resaving a file
      1. Start menu > File Explorer > Right click “C” drive > Properties > Tools Tab > Optimize (under section: Optimize and defragment drive) > Analyze > Optimize > Restart PC
        1. The analyze button takes time to identify what percentage of the “C” drive is fragmented
        1. The optimize button takes time to defrag the fragmented items identified
          1. On-line Search Tip: Defragment
  9. Remove Unknown Programs
    1. This process involves reviewing a list of installed programs, and researching unknown programs on-line to determine if they are no longer needed or if they were unintentionally installed
      1. Start Menu > Settings > System > Apps and Features > Select unknown programs > Uninstall > Empty recycle bin > Restart PC > Run disk clean up again
        1. On-line Search Tip: Uninstall program
    1. In the “uninstall program” window, there are two important columns: Size and Installed on
      1. Begin researching the programs that are larger in “size”
        1. If a program works with another necessary program, then it should not be uninstalled
      1. Review the “installed on” date for each program to see if it agrees with dates you recall installing programs
        1. If on-line research indicates that an unknown program is not needed, then it probably was involuntarily installed and needs to be removed
        1. If unsure, make a list of unknown programs and consult with a computer expert, before deleting
  10. Clean PC components (physically)
    1. Tower: Unplug entirely, wipe exterior and blow out interior with a can of compressed air “outside” to prevent dust from resettling. Do not use a vacuum as it could fry important items in the tower.
    1. Monitor: Power offer and wipe gently with a dry microfiber cloth
    1. Keyboard: Unplug and blow out using a can of compressed air “outside” to prevent dust from resettling. Then wipe keys with a cloth/Q-tip and rubbing alcohol.
    1. Mouse: Unplug and wipe with cloth and rubbing alcohol
    1. Scanner: Wipe scanner screen with a dry microfiber cloth, then clean with a glass cleaner
      1. On-line Search Tip: How to physically clean your computer?