Exemption Certificate Errors

We figure with it being tax season, we can never talk too much about taxes and all the rules and regulations that go along with them. So, without further ado, we bring you another tax blog. Today’s topic: exemption certificates.

What is an exemption certificate and why do I need to know this?
Sales tax applies to most items of tangible property – something you can usually touch or see –unless there is an exemption under the law, or an exemption certificate. Exemption certificates usually are presented by a customer to a seller. If the exemption certificate is properly completed, the seller will not be required to collect sales tax.

Can all types of sales be exempt?
Generally speaking, there are three different reasons a sale can be exempt from sales tax. These are considered the type of exemption.

  1. Use Based – These exemptions come from the idea of where and how the product will be used after the sale. Items that are intended for resale are a common example of a use based exemption.
  2. Product Based – This exemption has to deal with – you guessed it – what type of product is being sold. Exemption laws vary from state to state. For example, shoes are taxable in ND and exempt in MN.
  3. Buyer Based – Exemptions that are buyer based focus on the type of buyer who is making the purchase. Examples could include government, hospitals or some not for profit entities.

What’s on an exemption certificate?
As mentioned before (and like anything tax related), the rules and specifications of exemption certificates vary based on state. However, there are some general points that are almost always included on an exemption certificate, no matter which state you are in.

They include:

  • Type of exemption
  • Name and address of both the buyer and the seller
  • Explanation of what is being purchased
  • Tax registration number or other unique identifiers such as a SSN or FEIN.
  • Signature

Sounds good. Anything else I should know?
We’re glad you asked. When state sales tax auditors do their work, they review invoices, types of payment and the information on the certificate for exempt sales. Lately, we are seeing issues where the exemption certificates are not valid because pieces don’t match up.  We will give you some examples.

Example one: A tractor was sold exempt from sales tax with a completed exemption certificate on file. The invoice lists Johnson Farms as the as the buyer. However, the financial paperwork indicates Johnson Auto Parts, and the exemption certificate is from Johnson Farms, claiming a farm exemption. Rather than this transaction looking like a farm use sale, it now looks like it was a non-farm use sale at the auto parts store.

Example two: A riding lawnmower was sold exempt from sales tax with a completed exemption certificate on file. The invoice and exemption certificates list Wee-Town Schools as the buyer. The payment for the sale comes in the form of a check from Mike Johnson. Because the schools name is not on the exemption certificate, it appears the lawnmower is not paid for by the school, and is instead an employee trying to buy an item for his own personal use exempt from sales tax.

Example three: An engine is being sold. The invoice lists Ace Anderson Auto Sales, and is paid for in cash. The exemption certificate, however, comes from Alex Anderson for resale. Alex has gone by Ace his entire life, but only uses the name Alex for official business. Although this is the same person, the auditors do not see it that way. Because the names do not match up, there is a problem with this sale.

The moral of the story…
For an exemption certificate to work properly, the name on it must match up with the invoice/payment. We get it, all this sales and use tax stuff can be pretty tricky (although this blog is pretty helpful). Luckily, our trained professionals are here to give you guidance when you need it.

Employer Provided Vehicles: What You Need to Know

Welcome to tax season. When it comes to taxes, there are many factors and considerations to keep in mind (go figure!). One you might not be thinking of is properly accounting for business versus personal use of vehicles. Trust us, it’s important.

Why do I need to know about this?

First and foremost, the IRS and state taxing authorities will almost ALWAYS ask about this during an exam. If the IRS wants to know about it, you should know about it too. Personal use of a company owned vehicle is considered a taxable benefit and should be included as taxable wages/salary to the employee, unless he or she reimburses the business for personal use. Also, the amount of business versus personal mileage will determine the amount of deductions (i.e.-depreciation) that can be taken in regard to the vehicle.

What do I need to do in order to be in compliance?

Each employee who drives a company owned vehicle should keep records, such as a mileage log, to track business and personal miles. These records should be submitted regularly to the business accounting department so they can properly account for the personal usage. Undocumented mileage may be considered personal miles upon exam. Commuting miles, driving from home to the office, are also considered personal miles.

Do I really need to go through the hassle?

Yes – but there is help! There are apps available to help log business and personal miles. You can also adopt a company policy restricting personal use of company vehicles.

An example of this would be disallowing personal use. When no personal use is allowed, this usually means the vehicle is stored on the employer’s premises. The only exception would be de minimus personal use, such as a stop for lunch between two business locations (food is important, people).

However, frequency is a factor of consideration to the de minimus exception. Another policy would be to allow personal use only for commuting from home to the office. The commuting miles would still be a taxable benefit to the employee, but the mileage log would no longer be required.

The moral of the story…

Keeping records on employer vehicles is good. Keeping accurate records so the IRS can’t bug you (too much) is great! If you need help down the road (see what we did there?), let us know. From figuring out what counts as business or personal use, to drafting an appropriate personal use policy or even teaching the basics of this, we’ve got you covered. We’re happy to jump in the driver’s seat (okay we’re done with the awful puns now) to help.

PCI Compliance

By: Calvin Weeks, Eide Bailly LLP

By now, you’ve probably heard of some big name credit card data breaches. They’re becoming more and more common, and hackers are finding more creative and sneaky ways to steal the information. In fact, since 2005, more than 900 million records have been breached. These information thefts can happen anywhere in the process of using a card – from PoS devices, to mobile devices and even wireless hotspots. Hackers are everywhere trying to gain access to this information.

To combat these nasty attacks, the Payment Card Industry (PCI) Security Standards Council developed the PCI Data Security Standard (PCI DSS). The standard was created to ensure businesses are doing their part in protecting cardholder data. The standards put in place apply to all businesses that process, store, and transmit cardholder data. In other words, if you’re a business who processes transactions with credit and debit cards, listen up!

To begin with, there are important steps that operate in an ongoing cycle that can help you stay compliant. You will need to:

  • Assess – Analyze your processing methods and IT to see if there are any problems that could lead to a leak in data.
  • Repair – If problems are found, you will need to take the necessary steps to fix them.
  • Report – You will need to document any details about the repair process and what you have found, and submit compliance reports.

There are six main goals of the PCI DSS, which each have certain requirements within that act as a guide to make sure you are compliant. They are as follows.

  1. Build and Maintain a Secure Network and Systems – Because many payments and transactions are facilitated on devices and computers that are connected to different networks, there is a need for security. Network security systems can help prevent criminals from virtually accessing these records. Building a trusty firewall and staying away from default passwords can help keep criminals at bay.
  2. Protect Cardholder Data – Businesses who process card payments need to protect the data stored on the cards – after all, these are your customers and you care about them! Some ways to do this include limiting data storage time, encrypting data messages and never sending data across networks that are unprotected.
  3. Maintain a Vulnerability Management Program – When you maintain a vulnerability management program, you are regularly finding any issues in your payment card system. To do this, you should regularly update all anti-virus programs and develop and maintain secure systems and applications.
  4. Implement Strong Access Control Measures – Not everyone in your business needs to access data. This includes both physical data, as well as records stored on the network. Access should be restricted to only those who need to the information as it pertains to their job.
  5. Regularly Monitor and Test Networks – This one goes without saying – make sure everything is in tip top shape! Tracking and monitoring access to resources and data makes it easier to detect where something went wrong if something were to happen to your data. You should also continue to test all security systems to make sure there are no holes or changes that make it easier for hackers to get in.
  6. Maintain an Information Security Policy –Having a good security policy in place ensures all employees know and understand what is expected of them when it comes to cardholder data and keeping it secure.

The PCI Security Standards Council sets this general standard, but it is also important to remember that each card brand, such as Visa or MasterCard, have some of their own standards to follow as well.

Compliance with the PCI DSS is verified by reports which are usually completed by an outside assessor. The reports contain a summary of findings, information about your business, card payment structure and information about important external relationships.

Your customers are one of your best assets – without them, where would your business be? Keeping their payment card data safe is important for them, and the reputation of your business. Following and complying with the PCI DSS will keep your customers happy and safe, and your business looking great.

*The PCI Security Standards Council website was used in creating this blog. It contains even more in depth and specific information. Check it out here.

It’s Lonely at the Top

You’ve started a business. Things are running smoothly, you’re drawing in customers and your employees are happy. Things are going great! Or are they? While everyone around you may be thriving, you find yourself stuck in a hole. You feel stressed, pressured and alone – even though you have all these great people around you. So, what’s going on?

Sometimes, it can be lonely at the top. You may have never thought being an entrepreneur would lead to these feelings. As an entrepreneur, you had a dream to start a business, and you followed that dream until it became a reality. You believed in and trusted yourself. When there were successes, you had your team there to share in them with you. But when there were failures and setbacks, there weren’t as many people around to take them on.

These feelings of loneliness can come from a variety of sources. Maybe you feel lonely because you sit in your office all day working on the core of the business, while everyone else is interacting and working together. Maybe you know the nitty gritty details of your business, but realize you can’t share these details with your employees because they just won’t understand. In other words, you know your vision and goals for the business, but you just aren’t able to share with everyone.

This loneliness might impact other areas of your life as well. Maybe you’re spending too much time traveling for work, so you’re missing valuable time with your kids or family. Your social life could be suffering, and your friends might think you’ve fallen off the face of the Earth. The loneliness you are feeling can even have a negative impact on your health.

Although this loneliness may seem impossible to deal with, there are some ways to combat and manage these feelings.

  • Collaborate – Finding a way to collaborate with your employees, even if it’s just one day a week, can be extremely beneficial. Find ways to engage your employees in what it is you’re doing, so that they can get a better understanding. Having your employees working with you, rather than just for you, creates a new relationship that doesn’t leave you feeling isolated.
  • Self-Care – At the end of the day, you will always have yourself – so it’s important to remember to take care of yourself. Whether it be allowing yourself to relax in front of the TV at night, hitting the gym or volunteering, finding ways to take care of your mind and body outside of work can help you feel better all-around and push off those negative feelings of loneliness.
  • Consider Co-working – If you live and work in a town that has co-working space available, take advantage of it. Often times, other business owners, entrepreneurs and CEOs will be doing the same thing – and this can provide a place for you to work around like-minded people. You might meet people who are going through the same struggles as you, and you might be able to form a relationship that is beneficial to both of you. Working around others can help you find a support system that can help you through the struggles of loneliness.
  • Find an Advisor – Looking to a trusted business advisor may be one of the best ways to beat the woes of entrepreneurial loneliness. It’s likely that your business advisor has dealt with feelings similar to what you are feeling – so they can really truly understand what you’re dealing with and how to help you. Having a trusted advisor also takes some of the burden of decision making off your shoulders.
  • Peer Groups – You can seek out advice and mentorship from other people besides a business advisor. Consider joining a peer networking group that interests you and matches with your situation. This will give you access to a network of people who can be there for you during life’s struggles, but are also ready to celebrate life’s triumphs. Being a part of a peer group gives you access to people who won’t let you feel alone.

While being lonely at the top might be a struggle, it’s important to remember your business depends on you. With the right amount support and guidance, as well as remembering to take care of yourself, it’s possible to overcome the loneliness of being at the top.

The Best of Class

The cloud has revolutionized the way we look at software selection for accounting software (got to love those numbers). Not so long ago, companies sourced out a system that was all-in-one (a suite). One software, trying to meet all the demands of your company.

With the help of the cloud (because integrations in the cloud are much easier), we have entered into the best of class world; “There’s an app for that!” has taken on a whole new meaning. The cloud has given us freedom to add-on functionality and automation. And most of these add-ons aren’t trying to do it all. Rather, they do one thing very well, hence the term “best of class.”

Best of class refers to being able to choose an accounting package that best fits each part of your business. Let’s say you’re using QuickBooks Online – it’s pretty basic when it comes to inventory tracking, time tracking and reporting. Plus, it’s light on customer relationship management (CRM). That’s where best of class comes in play. Within QuickBooks, you are able to go integrate an app that best fits your needs to add that functionality. You could choose Salesforce for your CRM, Unify for your inventory, T-Sheets for time tracking and/or Fathom for reporting. Each of these applications focuses on their specific uses and tries to be the best in class.

*Note: We are not promoting any of these programs, this is simply an example of options available.

But, there is some resistance to this change, so let’s try to clear the air.

But my old software makes life easier…

Yes, the all in one programs are handy. They give you all of your information, in one central location. And if you’ve been using the program for a while, you’re probably pretty acquainted with using it. You know what to enter, where to enter it and what kind of output you will get. What you may not realize is being in the cloud could make life even easier. Sure there will be a learning curve, but if the cloud makes your life even easier, this new way of doing things might not be so bad.

But these new options don’t have everything all in one…

When you opt to move into the new world of accounting software, you’re often faced with choices for each function, rather than all being included in one program. This can seem annoying and unnecessary when you’re used to everything being ready and available all in one place. But the truth is, you’re opening your business up to options that fit each function perfectly, rather than trying to make a one-size-fits-all program fit your business. Your business is unique, and the programs you have in place to run it should be too.

So, I can tailor my selections to match my business?

Yes! When you step away from the all in one system and start seeking out new programs and applications that are available, you are able to find solutions to fit the exact needs of your business. For example, your old software may have had everything all in one place (think accounts receivable, accounts payable, inventory, time tracking, payroll, human resources, etc.). However, maybe it’s not great from a time tracking perspective or an inventory tracking perspective. That’s where these best of class applications come in. You are able to choose a specific app to fit your needs whether it be inventory, time and employees, storing documents, and more.

How do I make it all come together?

These cloud based systems can be integrated in the virtual ecosystem and can be managed and accessed virtually anywhere. When you choose programs that best fit each part of your business function, rather than using a cookie cutter approach, you can integrate the pieces together to make sure your business is running as smoothly as possible; not to mention automation so you are able to work on your business.

At the end of the day…

We’re not trying to persuade you one way or the other. We are, however, letting you know there are more options available for your business than meets the eye. You want what’s best for your business, and finding the right mix of accounting software and applications can help keep your business in tip top shape.

Important Items When Hiring

Have you ever thought about hiring staff? You know, bringing in employees to work beside you in your business to keep it awesome and running smoothly? As a business owner, it’s likely the thought has at least crossed your mind. What you might not have thought about is the legalities that come along with hiring staff.

Before you hire staff, the Small Business Administration says you need to take care of some very important to-do items.

  1. Employer Identification Number (EIN) — To hire employees, you will need to get an Employer Identification Number (EIN) from the IRS by filing an application. This can be done on the IRS website. An EIN is the unique code the IRS uses to identify your company – similar to how your social security number identifies you.
  2. Forms W-2 and W-4 — Having employees means you will have to file taxes on their wages. You will need your employees to fill out W-4 forms when they are hired. You will also need to submit W-2 forms for employees to Social Security. Getting these records set up right away will make for smooth(er) sailing during tax season.
  3. Form I-9 — You also need to make sure the employees you’re hiring are legal to work in the United States. To do this, you as the employer will need to complete Form I-9 within three days of hiring someone. You may need to do an online verification during this step as well. This will depend on what state you are in and whether you are a Federal contractor or sub-contractor.
  4. Two Words: Worker’s Compensation — In the somewhat unlikely – but still very serious – event someone gets injured on the job, you typically need to pay worker’s compensation. Your business will need to have specific insurance to cover this, and this insurance needs to be in place as soon as you have employees. It’s better to be safe than sorry.
  5. Form 941 — More on taxes. Employers who pay wages are usually subject to other taxes, such as social security. Because of this, employers have to file Form 941, or the Employer’s Quarterly Federal Tax Return.
  6. New Hire Reporting — You will need to register with your state’s New Hire Reporting Program, which is essentially just a large directory of all employees. Employers must report newly hired or rehired workers within 20 days. What must be reported? Federal and state laws in North Dakota, for example, require you report the employee’s name, address, social security number, date of hire and whether or not health insurance is offered. These criteria can vary from state to state.
  7. Workplace Posters — Employers are required by law to display certain posters in the workplace. Such posters usually inform employees of their rights under labor laws. Some examples include the Equal Employment Opportunity poster, the Fair Labor Standards Act poster and the Family and Medical Leave Act poster. Most of these posters can be found online through the US Department of Labor’s website.

Hiring employees can be an exciting step for your business. Not only can they help your business succeed, but they may be a sign that business is good and you need more help to serve your customers.

If you have any questions about the hiring process, our HR consultants are here to help you take this step!


Reasons to Love Outsourcing

With Valentine’s Day being tomorrow, we hope you have all your flowers and chocolates ready to go. While we don’t have any candy hearts to hand out, cupid dropped by and gave us three reasons to love outsourcing. Because we’re so sweet (see what we did there?), we thought we would share them with you.

More time where it matters

 Let’s face it: accounting and bookkeeping can be time consuming. If you’re doing this in-house, rather than outsourcing it, you’re likely not spending much time in other parts of your business. You might also be spending precious time and resources on finding, recruiting and hiring in-house workers. The time it takes to train these people – or yourself – can take up a good chunk of your day, leaving little time to work on other important facets of your business.

When you leave accounting and bookkeeping to someone else (outsourcing), you free up more time to focus on why you got into business in the first place.

Save some money

Believe it or not, outsourcing your accounting functions can actually save your business some money. You might be wondering how this is possible, since you still have to pay for these services. However, the savings come in the form of benefits, or the lack thereof. When you outsource accounting, you only pay for the actual accounting services, nothing else.

What do we mean? When you bring in someone else, rather than hiring a full or part-time employee, you eliminate the need to pay benefits, such as insurance, PTO, holiday pay, etc. Saving money on these benefits can save your business up to 40% in monthly costs, according to this cost benefit analysis. Some firms even estimate that it could cost anywhere from $60,000 to $100,000 a year, plus bonuses and benefits, to hire a full-time CFO. Along with the cost of benefits, you might also consider the costs of providing a computer, office spaces, supplies, etc. There could also be costs for licenses and technology that you need to do the job yourself. When being profitable is your goal, finding ways to save money in your business can help you reach your goal much quicker.

Expert knowledge

When you choose to outsource your accounting and finance functions, you get what you pay for: expertise. The people you hire to do these jobs for you live and breathe accounting and finance, and really know their stuff. And if there is stuff they don’t know, they can rely on other professionals in their firm to get you the help you need, from people who specialize in that area. Essentially, you’re getting a whole network of talent through one point of contact. Rather than hiring and training someone to do the job, you can rest assured your outsourced professionals have the knowledge and qualifications to do the job correctly. By outsourcing, you put your business in capable hands who will keep your business in good shape and give it the attention it deserves.

Sound pretty great? We think so too. Our experienced professionals are ready to help you fall in love with outsourcing and treat your business with the love it deserves.