Going through an IRS Audit can be a big deal if you’re not prepared. But with today’s technology, we’re going to show you an easy way to make sure you have all the documentation you need to prove your business expenses. I’m not saying that all audits are the same, but most of the ones we’ve helped clients through ask for substantiation, or proof, of certain expenses that you’re claiming on your tax return. If you can’t provide adequate records and prove the business purpose, then the IRS could disallow those expenses—and you don’t want that!
We spend lots of time vetting out new technologies to find the ones that work well, and the ones that don’t. Part of this process is actually using the apps, and analyzing a few things: 1. How easy is it to use and 2. Does it work well with a general small business work process? Our favorite app for retaining information is Evernote. If you’ve never heard of Evernote (that would be surprising), we recommend checking them out on the web. We’re going to show how to use Evernote to audit-proof your business.
Introduction to Evernote
Evernote is a like a central hub for all data you want to put into it. For me, I use it like an external hard drive for my brain! The power of Evernote lies within it being accessible on every device you own, easy to get information into it, and easy to find the information later when you need it. For the purpose of this post, we’re going to cover:
- Using your mobile device to scan receipts
- Organizing into Notebooks
- Using tags
- Using other services to connect to Evernote
To audit proof your business you need to track key elements about your expenses.
- Date you purchased
- Who you purchased from
- Business purpose
Most of the time a receipt covers all that quite nicely. The only thing you should add is Business Purpose (which we’re going to show you). You should also keep bank/credit statements, and even cleared checks.
Using Evernote to Achieve Audit Protection Bliss
At the very basic level, Evernote is structured as Notebooks and Notes that live within those Notebooks. You can also use Tags to help you organize and search easier.
Step 1: Create a Notebook called Receipts
Step 2: Use the mobile app to snap scans of your receipts as you make purchases
Notice that the Notebooks is “Receipts” and we’re using a tag called “office supplies” so that we can easily search for office supplies. Also, you’ll notice we put the business purpose as the name of the note. You can do this on your computer, or on your mobile device.
Step 3: Do the same process for every receipt you get. Evernote will become your repository for all your receipts. You can easily search for your receipts by tag if you want to see all of your Office Supply receipts.
Keep Bank Statements
After using Evernote you’re going to find more useful ways to use it in your everyday life. One key feature is being able to keep and store attachments in notes. Now, downloading your bank statements and putting them in Evernote is not that hard, but it’s also not that convenient. Remember we said that one of the key features to apps we use is convenience?
The solution to this is to use an Evernote Marketplace app called File This. File This is simply an app that will automatically retrieve your bank, credit card, utility statements, and put them where you tell it. While it will export directly to popular cloud-based file sharing apps like Google Drive & Dropbox, you can also connect it to Evernote.
Once you have it File This connected to Evernote, your bank statements will automatically appear in the designated Notebook within Evernote. File This is pretty robust and even has a free version for you to get started on.
Scanning your receipts and storing bank statements within Evernote will start you down the path of preparedness if the IRS decides to “knock on your door”. Of course, in order for this system to work you have to be committed and adopt it as a workflow/system you use in your day to day life. We use this system, we have clients using this system, and we can tell you that with a bit of discipline, it works!
Want to learn more about Evernote? I’m an Evernote Certified Consultant so drop us a line and we’ll help you figure which version is best for you, and discuss how you can use it in your business.
Here are some useful links where you can sign up for free trials:
Whenever I mention payroll to business owners I see the telltale signs of them “checking out” mentally, and it’s not surprising! With terms like FICA, Workers Comp, Unemployment and ObamaCare, it’s no wonder small businesses are confused and sometimes just downright disgusted by it. In fact, we often tell clients that if they get one thing right in running their business, make sure you hire a competent payroll service!
We want to help you understand how to make the right choice in choosing a payroll service. So let’s get into it!
Penalties on payroll tax errors are some of the most stringent that the IRS will shell out. So you need to get this right! Payroll companies will work payroll taxes in one of two ways: impounding and you paying the taxes yourself.
Impounding means that the payroll company takes the taxes from your account, holds on to them, and then pays them on time to the IRS and state agencies. Sure, they make money on holding onto your funds, but they also take full responsibility for making the payments on time.
Some providers make it pretty easy to pay the taxes yourself via ACH and electronic payments. However, it’s up to you to press “Submit” and make them on time.
Use payroll services that impound. It’s easier to manage cash flow because the taxes are taken out right when you run payroll and the payroll company assumes the responsibility to make the payments on time.
Direct Deposit and Checks
This may seem like a pretty basic thing but did you know that you can save yourself some time and costs by ONLY offering direct deposit? Direct Deposit is a great way to pay your employees because they get paid right into the accounts. Checks can be used, but they also create a headache when it comes time to reconcile your bank account. Payroll companies also charge to push that paper around. Have employees that don’t have a bank account? Give them a “Pay Card’ that has it’s own routing and account number and you can “load” it with their pay each pay period.
Use a payroll service that focuses on direct deposit and you will most likely save money on monthly service fees, postage and mailing, and time when reconciling your bank account.
Integration with Other Apps
Do you use accounting or online scheduling software like Xero or Deputy? Use a service that ingrates with them to eliminate data entry and make running payroll, easy. If using online scheduling, within a few clicks you can approve timesheets and send them straight to payroll. This alone can save you hours each pay period.
Search out payroll services that are open that integrate with other apps that you use. Who knows, you may even discover an app you can use for your business this way!
Advanced HR Features
Some businesses have 1-5 employees, some have 50. And depending on how many you have, will determine how much help you’ll need managing them.
If you have a large staff to manage, payroll companies like ADP have robust services beyond just running payroll that offers on-site HR reps that can come out “do your dirty work” for you, a.k.a.hire and fire. They can also help you navigate the tricky waters of the ACA (ObamaCare) and provide employee handbooks, amongst other things.
If only a few employees, then a company like Gusto is often a good choice. While they don’t provide robust HR services, they can offer very competitive rates on Workers Comp insurance, and make managing your employees pretty easy.
Make a choice based on your payroll needs and employee size.
Pricing and Cost
This is what it boils down to right? There are two methods that payroll services use to charge their fees: a flat fee per month, or fee per pay period.
Flat fee per month gives you a predictable cost each month. Generally, there is a base cost and then a per-employee-per-month cost. So as long as you know how many employees you’re paying, your fee is pretty predictable. And, these companies don’t charge for anything extra like W-2’s and quarterly reports, as long as you are a subscriber.
Per-pay-period providers charge each time your run a payroll. For most businesses, this is twice per month. They will also charge additional fees for W-2’s and quarterly reports. There are also other charges for mailing checks, etc., so make sure you have the payroll service spell our EVERY thing that is going to cost before you sign up.
Use a service provider that charges a flat fee per month. There is less confusion on fees and it’s generally cheaper each month.
Make it Happen!
As you can see, there’re lots to consider when choosing the right payroll service provider for you. We can help you make that choice and get you in touch with the people to make things happen. Have questions, leave a comment or reach out to us on our Get In Touch page and we’ll be happy to help you make the best decision for you and your business.Read More
Unless you’ve been under a rock the past 5 years, I’m sure you’ve noticed the era of cloud-based apps has far outpaced its desktop counterparts. We like cloud-based apps a lot—for good reasons that are too many to go into here. You can check out this BLOG POST to see a previous post about cloud-based apps. We like them so much that we’ve completely transitioned our business to using cloud apps for us and our clients. We spend lots of time vetting out the ever growing list of cloud-based apps, and have come to rely on 3 core apps. These apps are our top pick to make our “PowerPack” of apps that we set up with each client.
Xero touts itself as “beautiful accounting software”, and we agree. From the first time you log in, you can tell right away that Xero has taken design pretty serious. But that doesn’t mean that it lacks in power and functionality. Features include: invoicing, quotes, purchase orders, A/P (bills), document management, real-time cash flow tools, contact management, powerful reporting, and much more. Perhaps one of it’s best features is the eco-system of software add-on’s that integrate with Xero.
Trust us, we know how daunting it is to manage all the paper for running a business! Hubdoc solves this issue with automation and storage. The idea behind the system is:
- To be a repository for your bank and utility statements by connecting to your online accounts and pulling the statements automatically
- To serve as an easy way to get the information from receipts, into your accounting system. Simply snap a pic of any receipt using the mobile app on your device, and Hubdoc will read the date, amount, and vendor.
By integrating with Xero, Bill.com, and Google Drive, you can have a completely paperless system that allows you to automatically keep bank, utility statements, and store digital copies of your receipts.
Expensify – Expense Reports and Mileage Tracking
Expensify has revolutionized the way you track and submit expenses for reimbursement. From single to a team of several employees, expense reports for mileage, personal expenses, and travel can easily be imported into Xero and even reimbursed via ACH straight from within the app. For most of our single-owner businesses, it works perfectly for keeping track of money you spend on personal accounts. Enabling GPS on their mobile app makes it a breeze to track your auto mileage as well.
Want to know more about these “Power Hitter” apps? Leave a comment or reach out to see how they can benefit your business and even get them for free as part of one of our monthly service plans.Read More