Gold and Silver Investing

According to the IRS, gold, silver, platinum, and palladium are “collectibles” when held in the form of coins or bullion. A collectible includes items such as stamps, coins, fine wines, precious metals and gems, antiques, and fine art. As a result, the tax treatment of capital gains and losses from the sale of precious metals is different from that of investments in stocks and mutual funds.

First, let’s define what a capital gain is. A capital gain is the difference between what you paid for an investment and what you received when you sold that investment. If you made a profit on the investment, you have a capital gain. If you lost money on the investment, you have a capital loss.

Now, let’s look at the tax rates. For 2010 tax returns, short-term capital gains (assets held one year or less) on the sale of precious metals are taxed at your ordinary income tax rate -- 10, 15, 25, 28, 33, or 35 percent. This is similar to the way short-term gains are taxed on stocks and mutual funds. However, long-term capital gains (assets held longer than 1 year) are taxed at a flat 28%.

Which is better – long-term or short-term? Well, it really depends on your individual tax situation. If you are in a tax bracket that is higher than 28%, then long-term gains may be better. If you are in a lower tax bracket, then the opposite may be true.
Where do I report my gains or losses? You use first in, first out method of calculating short or long term gain. Your report what you bought, month/year you bought it, how much you paid for it, and then the same for the sale side of the transaction on Form 1040, Schedule D. You can use Quicken to remember your investment purchase details or keep the paperwork handy. Gains and losses are reported for each transaction and once all of them are figured, you will either have a net loss or net gain from all of your trades.

What happens if I sell my precious metals at a loss? That's difficult these days, but if your overall capital losses are more than your capital gains, you can claim a capital loss deduction. You can use your total net loss to reduce your income dollar for dollar, up to $3,000 -- or you can carry over any unused parts and treat it as if you had incurred it in the following year. If part of the loss is still unused after that, you can carry it over to later years until it is completely used up. This is a compelling reason to use the same tax preparer every year.

How do I protect my business? Remember that taxes are just one element of investing in precious metals. Private dealers require cash. Even online dealers charge a premium for you to use credit cards. If the IRS audits your business and the following is true:

1. you didn't use business checking or business credit cards to buy precious metals,
2. you're not taking write-offs from the private checking account or credit card you used to buy precious metals so those accounts don't appear in your QuickBooks file.
3. and you didn't write off your safety deposit box fee (or other investment expenses) as business deductions.

then you've shielded yourself from the IRS looking into your personal finances in case of an otherwise routine audit. You aren't required to separate business and investment finances, you just have to have accurate accounting records, but business protection may be a compelling reason to move in that direction.

Also, be sure you get advice from your financial advisor and/or tax advisor, as the information discussed in this article just scratches the surface on the topic. There is often new tax legislation on the table and rates change from year to year.

What do you think?

What would you do with more profit?

As I watched clients use my accounting help to improve profitability, I assumed they would use their new-found money to expand the business. (Probably due to reading too many business journals.) Imagine my surprise when it turned out that most clients wanted to take more vacations! This makes perfect sense since every small business is a triad of the customers, the business itself, and your private life.

New Audiobook

The audiobook version of "Radically Simple Accounting" is finally published. Like every creative project, it took twice as long as expected and cost more than budgeted. My motto is, "anything worth doing is worth doing twice." People are saying nice things about the audio quality. Here are some of the retailers who are selling it now:

 Amazon.com

 CD Baby

Learn Out Loud 


If you love the audiobook, I would really appreciate your 5-star review.

New database for New Year?

It's Oct, and time to think about if you're going to want a new database for the new year?

There are many advantages to a new database for the new year, including:

• Faster data retrieval. A huge database can become unbearably slow. One client has a database hit the wall in August. Trust me, you don't want to start a new database midyear if you run payroll or pay taxes by the calendar year.
• The ability to start fresh. A new database gives you the opportunity to clean up your chart of accounts, customer, vendor, and other lists, and especially payroll problems. Only lists transfer; no transactions
• Modify that last one. You can purchase software that I know how to use to transfer transactions. You'll have to keep your lists the same prior to moving data. Once data is moved, you can delete any list item that's not included in one of the transactions. 
• The security of having only a single year in a single database; electronic information can become corrupted over time.
• The convenience of giving your CPA last year's database while continuing to run your day-to-day business without interruption.
• The year, the IRS purchased QuickBooks. If you get audited, having a single year in a single database enables you to provide the IRS with just the information they demand, and nothing more.

While there are many advantages to creating a new database for the new year, there are a few disadvantages.

• You'll need to hire help to setup a new database. 
• You'll either have to buy software to move over data, or some data needs to be entered twice,, such as uncleared checks and unpaid invoices.
• If you're using Enterprise edition will you be able to print out reports cross databases for comparison. Otherwise, you'll have to do that with print-outs, Excel, and Intuit Statement Writer. 

Ultimately, the decision to create a new database for the new year depends on what's best for your business?

Typically we can get you ready for the new database in less than 4 hours, which leaves time to discuss year-end closing or any other business concerns.

You'll want to do this in Dec., so you'll be ready to enter Jan transactions on day one of Jan.

QuickBooks for the Mac

QuickBooks for the Mac is excellent. If someone cannot produce financial reports for your business, "they" are the problem, not the software.  

There are some features in QuickBooks for the PC not available on the Mac version. Intuit is catching up fast on Mac features, so it's worthwhile to keep updating your Mac software. (Not true on the PC). 

Features not in QuickBooks for Mac that are in QuickBooks for Windows:

• Business planning, expert analysis, and business optimization tools.
• Price levels.
• Integration with third-party applications, including Microsoft Word and ACT! - works with Entourage and a few other apps for certain functionality (like sending emails)
• Merchant account services.
• Multiple estimates per job (QuickBooks for Mac supports a single estimate per job).
• Sales order and back order tracking.
• Assembly items will be converted into non-inventory part items.
• Budgets created without an associated account.
• Transaction type “transfer” (will convert as journal entry).
• Transaction type “EFP payroll” (will convert as payroll liability check).
• Workers Comp Items.
• Fixed Asset Items.
• Multiple “ship to” addresses, preferred send method and payment information for Customers:Jobs.
• Custom Fields in lists (Customers, Vendors, Employees).
• Accountant's Copy.
• Bill Payment Stubs.
• Undo Last Reconciliation.
• Multicurrency
•  

Reports not in QuickBooks for Mac that are in QuickBooks for Windows:

The following preset reports are currently not supported by QuickBooks 2009 for Mac. You can, however, create many of these reports using the customization and filtering in QuickBooks for Mac.

• Profit & Loss Unclassified.
• Job Progress Invoices vs. Estimates.
• Open Purchase Orders By Job
• Sales Tax Revenue Summary.
• Pending Builds.
• Income Tax Preparation.
• Profit & Loss Budget Performance.

The Shoemaker's Daughter has no Shoes?

My accounting is perfectly up to date all the time. Accounting is required in business and if done well, becomes a profit center. What a simple way to make more profit!

It's New Year's, and time to roll over your paperwork!

File by year. Put transactional receipts for the past year into archive boxes. Keep the boxes out so you can file remainder paperwork as it comes in, and have access to receipts for product returns.

Have only current year files in the filing cabinet by your desk. After you clear out last year's paperwork, you'll have a place to file the current year's paperwork that is crossing your desk now. This is a huge time-saver. And if you're successful enough in business to last many years, having yearly archives will be a huge time and space-saver as well.

Fixed Assets, such as your vehicle, plus licenses, warranties, credit card legalese, debit card pin numbers, and other paperwork that is current for the business stays in the filing cabinet.

This is a good time to add printed labels. Besides creating a more attractive filing system, printed labels are easier to read, so less paper is misfiled. Toss excess paperwork. Filing is faster if the folders have wiggle room. My filing cabinet is a beauty to behold and it only takes this once a year update to keep it that way.

The last thing I did as I was archiving last years paperwork was to note my income vouchers and say a blessing prayer for all the clients/readers who who gave me money last year. I am unabashedly practicing gratitude as a spiritual practice. May you prosper in future years!

Why QuickBooks Online Edition is Slower than QuickBooks Desktop (All Versions)

Sometimes a business has a compelling reason to use QuickBooks Online. The most compelling reason is remote access. If you have internet access, you have QuickBooks. 

But for most businesses, QuickBooks Desktop is the better choice, because it's much faster for anyone entering data, especially a power user like myself. Plus, it's cheaper, and has a richer feature set. 

"Desktop" QuickBooks includes all other versions: QuickBooks Pro, QuickBooks Premier, QuickBooks Accountant, QuickBooks Enterprise, QuickBooks Mac, and all special Editions like contractor's edition, manufacturing edition, retail edition, non-profit edition, etc.

Here are some specific examples of differences in speed.

Function: Add a New Account

o). In online edition, you have to select what account type you want to add, such as Expense Account, and then a secondary type of expense account, for example General & Administrative Expense. Sub accounts must match this secondary level type. Why bother? It's a useless designation. So for ease-of-use, chose one secondary type of expense account, and make them all the same.

d). In desktop edition, you can just add a new account with account type, such as Expense.

Function: Delete an Account

o). In online edition, you can delete accounts with balances in them. Before you delete an account you have to check and make sure it doesn't contain any transactions. The Quick Report comes up with "this month", so you have to select "all" to see if there are any transactions from the past.

d). In desktop edition, you can just say delete, and QB will protect you from deleting an account with a transaction.

Function: Select an Account to post the transaction to:

o). Online edition shows you EVERY account in the chart of accounts, with it's parent account. It's a long list so it's very time consuming to find the exact account you want. Usually you want an expense account, which is at the bottom of the list.

d). Desktop version shows you just the expense accounts, so you're looking at a much shorter list of accounts. And you can set Preferences to select, "see the lower account".

Function: Accept a Transactions

o). Online Edition makes you find the "okay" button to save a transaction.

d). Desktop version saves automatically.

Function: Editing a List

o). Online edition you have to find the "edit" or "new" button. Type ahead does work but not very well.

d). Desktop editions let you use keyboard shortcuts, like “ctrl-E” for "edit" or “ctrl-N” for "new". I can edit a list lightening fast with two hands. Type ahead works perfectly.





Function: Salestax

This isn't a speed issue, it's a feature issue. You can only have one salestax rate in Online Edition. Desktop allows unlimited salestax rates.

Other differences? What do you think?