How Will the Health Care Bill Affect Your Taxes?

On March 23, 2010, President Obama signed into law the new health care legislation.  The legislation will affect virtually every individual in one way or another and will significantly impact tax returns in the future.  The following overview of the tax-related provisions of the legislation is based upon the House of Representatives’ version and the one signed by President Obama on March 24, 2010.  At the time this article was prepared, the Senate was taking up the measure, but it is expected to pass without changes since only a simple majority is required.

• Penalty For Not Being Insured – Beginning in 2014, taxpayers will be penalized for failing to maintain the minimum essential coverage.  The penalty will be phased in beginning in 2014 and the fully-implemented penalty in 2016 will be the greater of:

o 2.5% of household income over the threshold amount of income required for income tax filing, or

o $695 (indexed for inflation after 2016) per uninsured adult in the household ($348 if under age 18).

Maximum Penalty – The total household penalty cannot exceed 300% of the per-adult penalty ($2,085) or national annual premium for the “bronze level” health plan offered through the Insurance Exchange that year for the household size.  Penalties are based upon the months that the required insurance is not in force.

Penalty Phase-In – The maximum penalty will not be imposed until 2016.  The phase-in rates are:   
                                             
                                                             2014           2015
Per-adult annual penalty                  $95            $325
% of income penalty                           1%               2%
Family maximum                              $285           $975 

Taxpayers Exempt from the Penalty – Individuals are exempt from the penalty if either their employer’s sponsored coverage or the lowest cost “bronze” coverage exceeds 8% of household income.  Also exempt are individuals residing outside of the U.S., those exempted for religious purposes, and those whose income is below the threshold for having to file a return.

• Low-Income Health Exchange Participation Credits – Beginning in 2014, tax credits will be available for low-income individuals and families with incomes up to 400% of the federal poverty level that are not available for Medicaid, employer-sponsored insurance, or other acceptable coverage.  To qualify for the credits, these individuals and families would have to obtain coverage in the newly-established insurance exchange.  Based upon the current poverty levels, the credit would phase-out at $42,420 for individuals and $88,200 for a family of four.  Additionally, a cost-sharing subsidy will be provided for low-income individuals to help pay for their coverage.

• Large Employer Responsibilities – Beginning in 2014, large employers, generally those with 50 or more full-time employees in the prior calendar year, that:

o Do not offer coverage for all its full-time employees,

o Offer minimum essential coverage that is unaffordable, or

o Offer minimum essential coverage where the plan's share of the total allowed cost of benefits is less than 60%,

Would be required to pay a penalty if any of its full-time employees were certified to the employer as having purchased health insurance through a state exchange and qualified for either tax credits or a cost-sharing subsidy discussed previously.

Penalty – The excise tax penalty for any month would be $167 times the number of full-time employees in excess of 30.

• Free Choice Vouchers – Beginning in 2014, employers who offer minimum essential coverage through an eligible employer-sponsored plan and pay a portion of that coverage will be required to offer an equivalent value voucher, allowing a qualified employee the option of purchasing coverage through the Insurance Exchange.  An employee qualified to make this choice is an individual with a required contribution to the employer plan that exceeds 8%, but does not exceed 9.5% of the household income and has income that does not exceed 400% of the poverty line for the family.

• Tax Credits for Small Employers Offering Health Coverage – For tax years 2010 through 2013, qualified small employers, generally those with no more than 25 full-time employees with an average annual full-time equivalent wage of no more than $50,000, will be eligible for a tax credit of up to 35% of the cost of non-elective contributions to purchase health insurance for its employees.  The maximum credit is available to employers with no more than 10 full-time equivalent employees with an annual full-time equivalent wage from the employer of less than $25,000.

2014 and Later - In 2014 and later, eligible small employers who purchase coverage through the Insurance Exchange would be eligible for a tax credit for two years of up to 50% of their contribution.

• Dependent Coverage – Effective March 23, 2010, the exclusion for reimbursements for medical care expenses under an employer-provided accident or health plan to any child of an employee is extended to children who have not attained age 27 as of the end of the tax year, provided the child also is eligible to be claimed as a dependent for tax purposes.

• Excise Tax on High-Cost Employer-Sponsored Health Coverage – Beginning in tax year 2018, there will be a 40% non-deductible excise tax on insurance companies and plan administrators for any health coverage plan where the premiums exceed the following amounts:

Single Coverage:                                                                                             $10,200
Single Coverage, high-risk employment or retired age 55 and older:  $11,850 
Family Coverage:                                                                                             $27,500
Family Coverage, high-risk employment or retired age 55 and older:  $30,950

The tax would apply to self-insured plans and plans sold in the group market, but not to plans sold in the individual market (except for coverage eligible for the deduction for self-employed individuals).  Stand-alone dental and vision plans would be disregarded in applying the tax.  The dollar amount thresholds may be later adjusted for inflation.

• Employer W-2 Reporting Responsibilities – Beginning in tax year 2011, employers will be required to disclose the value of the benefit provided by them for each employee's health insurance coverage on the employee's annual Form W-2.

• Taxpayers Earning Over $200,000 – Beginning in 2013, higher-income taxpayers will be subject to the following additional taxes:

o Additional Hospital Insurance Tax - The Hospital Insurance (HI) tax rate (currently at 1.45%) would be increased by 0.9 percentage points on an individual taxpayer earning over $200,000 ($250,000 for married couples filing jointly).

o Surtax on Unearned Income – A 3.8% surtax, called the Unearned Income Medicare Contribution, would be placed on the net investment income of a taxpayer earning over $200,000 ($250,000 for a joint return).  Net investment income includes interest, dividends, royalties, rents, gross income from a trade or business involving passive activities, and net gain from disposition of property (other than property held in a trade or business).  “Net” investment income is investment income reduced by allowable investment expenses. Distributions from qualified retirement plans and IRAs will not be subject to the surtax.

• Employer Flexible Health Spending Plan Contributions Limited – Beginning in 2013, the maximum that can be contributed to an employer’s health flexible spending accounts (FSAs) would be limited to $2,500 per year.  The amount will be indexed for inflation after 2013.

• Over-the-Counter Medication Restriction for Employer-Provided Plans – Beginning in 2011, over-the-counter medications, except for doctor prescribed over-the-counter medication and insulin will no longer qualify for reimbursement.  This restriction applies to health reimbursement accounts (HRAs), health flexible savings accounts (FSAs), health savings accounts (HSAs), and Archer medical savings accounts (MSAs).

• Increased Tax on Nonqualifying HSA or Archer MSA Distributions – Beginning in 2011, the additional tax for HSA withdrawals for other than qualified medical expenses before age 65 are increased from 10% to 20%, and the additional tax for Archer MSA withdrawals for other than qualified medical expenses is increased from 15% to 20%.

• Medical Itemized Deductions Limited – Beginning in 2013, the itemized deduction for medical expenses will be limited in the following manner:

o AGI Threshold - The AGI threshold for claiming medical expenses on a taxpayer’s Schedule A is increased from 7.5% to 10%, which is the same as the current alternative minimum tax (AMT) rate.  Individuals (and their spouses) age 65 and older will continue to use the 7.5% rate through 2016.

o Deduction for Employer Part D would be Eliminated - The deduction for the subsidy for employers who maintain prescription drug plans for their Medicare Part D eligible retirees is eliminated.

• Expansion of Information Return Reporting – Currently a business paying more than $600 per year to a noncorporate service provider who isn’t an employee is required to file an information return (Form 1099-MISC). The new law expands the return filing requirement to include both corporate and noncorporate providers of property and services, beginning with tax years beginning in 2011.

• Adoption Credit Limit Raised, Made Refundable and Extended – One of the non-health care related items included in the new law is an increase in the dollar limitation for the adoption credit to $13,170 (adjusted for inflation after 2010) and an extension of the credit through 2011. The credit also is changed from being nonrefundable to a refundable credit.

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Tips for Taxpayers Making a Move

If your home or business address has changed, you will want to remember these tips to ensure that you receive any refunds or correspondence from the IRS.

1. You can change your address on file with the IRS in several ways:

• Correct the address legibly on the mailing label that comes with your tax package.

• Write the new address in the appropriate boxes on your tax return.

• Use Form 8822, Change of Address, to submit an address or name change any time during the year.

• Give the IRS written notification of your new address by writing to the IRS center where you file your return.  Include your full name, old and new addresses, Social Security Number or Employer Identification Number and signature.  If you filed a joint return, be sure to include the information for both you and your spouse.  If you filed a joint return and have since established separate residences, you should both notify the IRS of your new addresses.

• Should an IRS employee contact you about your account, you may be able to verbally provide a change of address.

2. Be sure to also notify your employer of your new address to ensure receiving your W-2 forms on time.

3. If you change your address after you have filed your return, don’t forget to notify the post office at your old address so that your mail can be forwarded.

4. Taxpayers who make estimated payments throughout the year should mail a completed Form 8822, Change of Address, or write the IRS center where the return is filed.  You may continue to use your old preprinted payment vouchers until the IRS sends you new ones with your new address.  However, do not correct the address on the old voucher.

5. The IRS does use the Postal Service’s change of address files to update taxpayer addresses, but it is still a good idea to notify the IRS directly.

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New Employee Hiring Incentives

The “Hiring Incentives to Restore Employment Act of 2010,” more commonly referred to as the HIRE Act, was passed by Congress and recently signed into law by the President.  The Act provides employers with incentives to hire unemployed individuals.  The provisions of this new legislation apply to workers hired after Feb. 3, 2010, but only for wages paid after March 18 (the date the legislation was signed into law).

• Payroll Tax Holiday - The law exempts any private-sector employer that hires a worker who had been unemployed for at least 60 days from having to pay the employer's 6.2% share of the Social Security payroll tax on that employee’s wages for the remainder of 2010.  Thus, if the newly-hired and previously-unemployed worker earns $106,800 after March 18, 2010 and before the end of the year, the company could save a maximum of $6,621.  This provides the employer with an immediate benefit by reducing the amount the employer must pay in employment taxes.

• Retention Credit - As an additional incentive, for any qualifying employee hired under this initiative that the employer keeps on payroll for a continuous 52 weeks, the employer is eligible for an additional non-refundable tax credit equal to the lesser of $1,000 or 6.2% of the wages.  Since the 52-week requirement cannot be met until the subsequent year, the credit will be taken on the employer’s 2011 tax return. In order to be eligible, the employee's pay in the second 26-week period must be at least 80% of the pay in the first 26-week period.  This credit is not available for domestic workers.

New Employee Qualifications - Although there is no minimum number of hours that a new employee needs to work in order to qualify for either benefit, an employer cannot claim the new tax breaks for hiring family members.  A worker who replaces another employee who performed the same job for the employer isn't eligible for the benefit, unless the prior employee left the job voluntarily or for cause.  The payroll tax holiday can be claimed for rehiring old workers as long as that worker was terminated due to facts and circumstances, such as a factory closure due to lack of demand for the product.

Employee Documentation – To validate the new hire for the benefits, an employer must have the employee sign an affidavit, under penalties of perjury, stating that he or she has not been employed for more than 40 hours during the 60-day period ending on the date the employment begins.

Interaction with the Work Opportunity Credit (WOTC) – An employer must choose, on an employee-by-employee basis, whether to claim the HIRE benefits or the WOTC; double dipping is not allowed.  The WOTC is in many cases more valuable than the payroll tax holiday, especially for low-wage employees, because it is generally 40% of “qualified first-year wages” of up to $6,000, for a maximum credit of $2,400 per worker.

The payroll tax holiday is equal to 6.2% of wages, and applies only to wages paid through Dec. 31, 2010.  However, the WOTC is harder to qualify for, because the employee must be certified by an agency as belonging to a targeted group.  The main qualification for a payroll tax holiday is that the employee has been unemployed for 60 days, and the employee's affidavit is sufficient for this purpose.

For more information on this topic and other business-related issues, please give this office a call.

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Expensing Limits Boosted For 2010

Generally, taxpayers can elect under Sec. 179 to expense the cost of business machinery and equipment placed in service during the tax year, instead of depreciating it over a number of years.  As part of the stimulus legislation, these amounts had been temporarily increased for 2008 and 2009 and were scheduled to return to normal levels in 2010.

The HIRE Act of 2010 has extended the higher amounts for one additional year (through 2010).  Thus, for tax years beginning in 2008 through 2010, the maximum amount that can be expensed each year is $250,000.  The maximum deductible expense is reduced (i.e., phased out, but not below zero) by the amount by which the cost of property placed in service during the tax year exceeds $800,000.

Qualifying property for purposes of the expensing election is depreciable, tangible personal property purchased for use in the active conduct of a trade or business, including “off-the-shelf” computer software placed in service in tax years beginning before 2011.

Barring any additional legislation, the maximum amount will drop approximately to $134,000 in 2011.

If you have questions related to expensing purchases and the tax benefit of business acquisitions during 2010, please give this office a call.

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Are You a "Cash Only" Business?

Cash is the most commonly accepted and reliable form of payment for a business.  Many small businesses operate as "cash only" merchants.  Years ago, this wouldn't have been uncommon, but with advances in technology, business owners must ask themselves if they are hurting their bottom line by limiting payment options.

If your business currently only accepts cash payments, and you are thinking about starting a “cash only” business or expanding your current payment options, here are some pros and cons to consider.

Pros: 
o Cash payments ensure that businesses receive funds immediately without the worry of waiting periods or not getting paid at all.
o Cash is the simplest form of payment and therefore involves less bookkeeping.
o Except for counterfeit money, there is limited risk of fraud when accepting cash only. 
o There are no third-party fees associated with other payment options.

Cons: 
o Customers who do not have enough cash on them will have to walk away from a purchase they would otherwise make. 
o Your business may lose customers by only accepting cash.  As card payments become increasingly popular, many consumers expect this to be an option when making purchases.
o Keeping large sums of cash on your business's premises creates an increased security risk.
o The IRS requires that you file a Form 8300 if your business receives more than $10,000 in cash from one buyer as a result of a single transaction or two or more related transactions.  The same rule applies to cash equivalents, such as traveler's checks, bank drafts, cashier's checks, and money orders.  The form requires the name, address, and social security number of the buyer.

Accepting Card Payments - Credit and debit cards are popular, convenient, flexible, and have become increasingly important in business commerce.  So, if you are a “cash only” business, you may wish to review the pros and cons of accepting card payments.

Pros: 
o Card payments are evolving into the most common method of customer payment.
o The convenience of using credit cards generally increases the likelihood of consumer “impulse purchases,” which ultimately contributes to an increase in a business's average sale.  Customers are more likely to make these purchases if they have access to credit or their available bank account funds.

Cons: 
o Card payments come with an increased risk of fraud and are inherently more susceptible to foul play than cash. 
o Businesses that accept card payments encounter small processing fees for purchase transactions.  These fees seem insignificant but they can certainly add up, especially if your business accepts a lot of small purchases on credit cards which increases the discount rate.
o Setting up the necessary equipment to accept cards also carries additional costs.
o Card transactions add another layer of detail to your business's bookkeeping practices, along with the additional time and resources it takes to maintain these books.

The Bottom Line - Accepting card payments will, at least initially, cost your business money and add extra processes in your daily operations.  Many small business owners look at this as a necessary operating expense.  As card payments become more popular, customers will likely begin to expect a plastic option as a rule, rather than a courtesy.

On the other hand, the nature of some small businesses may make it smarter to stay cash only.  Flea markets, street vendors, and lawn service providers are just a few examples of common “cash only” small businesses.  At the end of the day, you will have to decide which payment options will create the most success for your business.

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Last Minute Payments and Filing Tips

If you are up against the April deadline and still need some information to complete your tax return, you can obtain a six-month automatic extension of time to file your 1040.

The filing extension will give you extra time to get the paperwork together, but it does not extend the time to pay any tax due.  You have to make an accurate estimate of any tax due and pay at least 90 percent when requesting an extension.  Interest will be owed on any amounts not paid by the April deadline.

If your return is completed but you are unable to pay the tax due, do not request an extension.  File your return on time and pay as much as you can.  The IRS will send you a bill or notice for the balance due and will charge interest and penalties only on the unpaid balance.

If you cannot pay the full amount due with your return, you can ask to make monthly installment payments for the full or partial amount by requesting an installment agreement.

The foregoing is only an overview of the options available to you and discusses the problems that may arise if you don’t file and pay your tax by the April 15 due date.  If you are unable to file or pay on time, it is important to call this office prior to April 15 so you can take the appropriate steps to mitigate penalties and interest.

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April 15 Tax Deadline Rapidly Approaching

Just a reminder to those who have not yet filed their 2009 tax return that April 15, 2010 is the due date to either file your return, pay any taxes owed, or file for the automatic six-month extension.

In addition, the April 15, 2010 deadline also applies to the following:

• Tax year 2009 balance-due payments – Taxpayers that are filing extensions are cautioned that the filing extension is an extension to file, NOT an extension to pay a balance due.  Late payment penalties and interest will be assessed on any balance due, even for returns on extension.  Taxpayers anticipating a balance due will need to estimate this amount and include their payment with the extension request.

• Tax year 2009 contributions to a Roth or traditional IRA – April 15 is the last day contributions can be made to either a Roth or traditional IRA, even if an extension is filed.

• Individual estimated tax payments for the first quarter of 2010 – Taxpayers, especially those who have filed for an extension, are cautioned that the first installment of the 2010 estimated taxes are due on April 15, 2010.  If you are on extension and anticipate a refund, all or a portion of the refund can be allocated to this quarter’s payment on the final return when it is filed at a later date.  Please call our office for any questions.

• Individual refund claims for tax year 2006 – The regular three-year statute of limitations expires on April 15 for the 2006 tax return.  Thus, April 15, 2010 is the last day a refund will be granted for any return or amended return for 2006.  Caution: The statute does not apply to balances due for unfiled 2006 returns.

If your returns have not been completed due to missing information, you are urged to forward that information as quickly as possible in order to meet the April 15 deadline.  Keep in mind that the last week of tax season is very hectic and your returns may not be completed if you wait until the last minute.  If it is apparent that the information will not be available in time for the April 15 deadline, then let this office know right away so that an extension request may be prepared, along with estimate tax vouchers if needed.

If you have not made an appointment yet, please call this office right away to make one and/or file an extension if necessary.

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Husband and Wife Businesses

One of the advantages of operating your own business is hiring family members.  However, the employment tax requirements for family employees may vary from those that apply to other employees.  Below are some issues to consider when operating a husband and wife business.

How spouses earn Social Security benefits - A spouse is considered an employee if there is an employer/employee type of relationship, i.e., the first spouse substantially controls the business in terms of management decisions and the second spouse is under the direction and control of the first spouse.  If such a relationship exists, then the second spouse is an employee subject to income tax and FICA (Social Security and Medicare) withholding.  However, if the second spouse has an equal say in the affairs of the business, provides substantially equal services to the business, and contributes capital to the business, then a partnership type of relationship exists and the business's income should be reported as a partnership on IRS Form 1065 or as a qualified joint venture (see below).

Both spouses carrying on the trade or business - A provision of the tax code generally permits a qualified joint venture whose only members are a husband and wife filing a joint return not to be treated as a partnership for Federal tax purposes.  A qualified joint venture is a joint venture involving the conduct of a trade or business, if: (1) the only members of the joint venture are a husband and wife, (2) both spouses materially participate in the trade or business, and (3) both spouses elect to have the provision apply.

Under the provision, a qualified joint venture conducted by a husband and wife who file a joint return is not treated as a partnership for Federal tax purposes.  All items of income, gain, loss, deduction and credit are divided between the spouses in accordance with their respective interests in the venture.  Each spouse takes into account his or her respective share of these items as a sole proprietor.  Thus, it is anticipated that each spouse would account for his or her respective share on the appropriate form, such as Schedule C.  For purposes of determining net earnings from self-employment, each spouse’s share of income or loss from a qualified joint venture is taken into account just as it is for Federal income tax purposes under the provision (i.e., in accordance with their respective interests in the venture).

This generally does not increase the total tax on the return, but it does give each spouse credit for social security earnings on which retirement benefits are based.  However, this may not be true if either spouse exceeds the social security tax limitation.

One spouse employed by another - If your spouse is your employee, not your partner, you must pay Social Security and Medicare taxes for him or her.  The wages for the services of an individual who works for his or her spouse in a trade or business are subject to income tax withholding and Social Security and Medicare taxes, but not to FUTA tax.

If you have questions related to the tax treatment of your specific husband and wife business, please give this office a call.

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Hitting the Restart Button on RMDs in 2010

For 2009, Congress suspended Required Minimum Distributions (RMDs) from IRAs and other qualified retirements accounts for taxpayers age 70½ and older, giving their retirement accounts a chance to recover from the market crash of 2008.  This suspension was for 2009 only, and taxpayers must once again begin taking RMDs for 2010.

The purpose of RMDs is to prevent taxpayers from avoiding taxation on the retirement funds indefinitely.  Generally, distribution begins in the year the IRA owner attains the age of 70½.  To enforce the RMD withdrawals, the government imposes a penalty of 50% on any amount of under-distribution for a year.

Distributions for 2010 can be taken anytime before the close of the year.  However, individuals who turned 70½ during 2010 can delay taking their 2010 distribution until 2011, provided their withdrawal is made no later than April 1, 2011.  Delaying the distribution until 2011 will double-up the income in 2011 since the 2011 distribution will be required as well.

In some cases, distributions from a qualified retirement plan (but not an IRA) may be delayed until April 1 of the year following the year the employee retires from the employer maintaining the plan, even if the employee is already age 70½.

The minimum amount that must be withdrawn in a particular year is the fair market value of the IRA account divided by the number of years the IRA owner is expected to live (also known as the distribution period).

FAIR MARKET VALUE        =         MINIMUM
DISTRIBUTION PERIOD          DISTRIBUTION     
           
The value is based on the value of the owner’s account at the end of the business day on December 31st of the prior year.  The life expectancy is determined from one of two IRS tables, the “Uniform Lifetime Table” or, in certain circumstances, the “Joint Life and Last Survivor Expectancy Table.”

For purposes of determining the minimum distribution, the RMD for each Traditional IRA account owned by an individual must be figured separately and the minimum amounts totaled.  Then, the total can be taken from any combination of the accounts.  If the owner chooses not to take the minimum distribution from each account, it is not uncommon for IRA trustees to require written certification that the owner took the minimum distribution from other accounts.

In addition to IRAs, qualified retirement plans, such as employer-provided defined contribution plans and individual retirement annuities, are subject to the RMD rules.  Be aware that distributions must be determined separately for each type of account.  Thus, for example, distributions from a tax-sheltered annuity do not satisfy the distribution requirements from IRAs.

Advance planning can, in many cases, minimize or even avoid taxes on Traditional IRA distributions.  Often, situations will arise where a taxpayer’s income is abnormally low due to losses, extraordinary deductions, etc., where taking more than the minimum in a year might be beneficial. This is true even for those who may not be required to file a tax return but can increase their distributions and still avoid any tax.

If you need guidance with your planning needs, please call this office for assistance.

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The Post-Tax Blues: How to Accelerate Receivables

Well, the taxes are paid (hopefully) for the 2009 tax year, and you’re almost a third of the way into 2010. How’s your cash flow doing this year?

If tax payments caught you short, you may be scrambling to build a cash reserve that protects your bottom line. There are many ways to do that, some less desirable—and possible—than others. Raise your prices. Apply for a loan. Freeze employee raises and minimize benefits (or, in the extreme, lay off a worker). Put off investments in new technology.

But there’s another option: Accelerate your receivables. It’s likely that in this economy at least some of your customers are slow to pay off invoices. Here are some suggestions to help improve your bottom line starting today.

Evaluate your Current Invoicing Methods

Are you sending invoices immediately, while the purchase is still fresh in the customer’s mind? Old invoices feel stale, and your timeliness in dispatching them says something to the customer about your need for the funds and your business efficiency.

Enter a strong message on your invoices, creating a new one if the boilerplate examples provided aren’t emphatic enough. To change the message, open an invoice by going to the Customer Center and clicking New Transactions | Invoices.

The Customer Message box is in the lower left. Click on the arrow there, and then , and the window shown in Figure 1 opens.

 

Figure 1: To help encourage your customers to pay promptly, customize the Customer Message on your invoices.

Enter your new message and click OK. It will now be available as an option whenever you send an invoice.

Consider Finance Charges

In your message(s), remind your customers of any applicable finance charges. If you haven’t yet incorporated finance charges because you think you’re too small or you think it’s too hard, reconsider that stance. To explore this feature, click Edit | Preferences | Finance Charge | Company Preferences, as shown in Figure 2.

 

Figure 2: If you have customers who are chronically late paying invoices, you may want to consider applying finance charges to tardy payments. Consult your accountant for help on this.

As you can see, you have several decisions to make here that are best made with the help of your accountant.

When it comes time to bill finance charges, click Customers | Assess Finance Charges. The window in Figure 3 opens, displaying customers in arrears and the extra amount they owe.

Figure 3: You can select and unselect customers who should be assessed finance charges by clicking the check marks next to their names.

The income you receive from finance charges may not be significant, but their psychological impact on customers may bring in invoices closer to the due date. Customers like knowing they’re saving some money, and no one wants to be a deadbeat.

Make it Easier for Customers to Pay You

This is a no-brainer. The simpler it is for customers to pay and for you to receive payments, the faster you’re likely to turn around receivables.

If you don’t yet have a merchant account, which lets you receive credit and debit card payments, you should. Intuit can help. QuickBooks already contains all the tools you need for the Intuit Merchant Service ($59.95 one-time setup fee; $19.95/monthly plus some minor additional fees).

Using the service, you can accept payments online, by phone, fax, or email. It also accommodates recurring charges, as shown in Figure 4.

 

Intuit Merchant Service integrates seamlessly into your QuickBooks operations. It lets you receive payments by phone, fax, or email (fees apply).

Tip: If you deal with a lot of checks, consider Intuit Check Solution for QuickBooks, which lets you scan checks and deposit them without a trip to the bank. Subscription and scanner required.

Ask the Expert

There are other small steps you can take to accelerate the speed of your receivables. These include:

• Use QuickBooks’ built-in tools to create engaging invoices and other forms. Professional-looking documents contribute to your customers’ overall impression of you, and may prompt them to act quicker. Open a form and click the arrow next to Customize.
  
  
• Stay on top of outstanding receivables. Check reports frequently and/or make use of QuickBooks’ Company Snapshot, which displays the most critical company financial information on one page, including Customers Who Owe Money (not available in Simple Start).
  
  
• Track receivables in multiple currencies (not available in Simple Start).
  
  
• Use discounts as an incentive for early payments. Use QuickBooks’ help files to learn about this easy process.

Finally, remember that we run a business, too, and must battle our own receivables. If slow receivables have really become a problem, give this office a call for assistance.

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Business Standard Mileage Has Dropped for 2010

For 2010, the optional mileage allowance for owned or leased autos (including vans, pickups, or panel trucks) is 50¢ per mile for business travel, down 5¢ from the 2009 allowance of 55¢ per mile. The depreciation component of the mileage rate is 23¢ per mile (up from 21¢ per mile for 2009).

Employers who require employees to supply their own autos (whether owned or leased) may reimburse them at a rate that doesn’t exceed 50¢ per mile for employment-connected business mileage during 2010. The reimbursement is treated as a tax-free accountable-plan reimbursement if the employee substantiates the time, place, business purpose, and mileage of each trip. Additionally, an employee’s personal use of lower-priced company autos during 2010 may be valued at 50¢ per mile if the qualifying requirements are met.

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