Tax season is just around the corner, and that means getting your business’ financials together for tax filing. If you’re using QuickBooks Online, a lot of this functionality is built right into the software. But you’ll need to understand how to use it in order to take full advantage of it.
When it comes to tax reporting, one common area of confusion for small business owners is the preparation and filing of 1099-MISC forms. What exactly is a 1099? Does your business need to file one? If so, how can QuickBooks Online expedite the process?
In this week’s installment in our QuickBooks Online tutorial series, we’ll answer all of these questions and more.
Disclaimer: This article is for general informational purposes, and is not intended as a substitute for personalized and/or professional legal, tax, investment, financial, or other business advice. If you have tax-related questions, it’s important to speak to a professional who can assess your particular situation and offer personalized assistance.
What Is a 1099-MISC?
The series of 1099 forms available via the IRS website are classified by the IRS as a so-called “information return.”
Generally speaking, 1099 forms are used to classify various types of income which are not paid as part of a salary or wages. While there are a number of different kind of 1099 forms out there, including 1099s for dividends, government payments, retirement account withdrawals, and debt cancellations, people often use “1099” as a shorthand for referring to the 1099-MISC.
When someone is an employee and receives either a salary or wages, this information is reported on IRS Form W-2. Increasingly, though, businesses are opting to hire independent contractors rather than taking on full-time employees. When a business pays a contractor, those funds are reported on IRS Form 1099-MISC.
According to the IRS website, a 1099-MISC form must be filed for each person to whom your business paid more than $600 in exchange for services.
How do I reconcile in QuickBooks Online?
Reconciling in QuickBooks Online is fairly straightforward.
First, sign into your QBO account and select Accounting from the navigation bar. Next, click on the Reconcile tab.
You’ll be presented with the option to choose which account you want to reconcile. It’s important to make sure that you go through each and every account individually, rather than only reconciling one of your accounts. (If you only have one account — for example, a checking account — then you’ll only need to worry about reconciling that account.)
Below the account selection drop down menu, enter the ending balance from the bank statement you’re referencing as well as the ending date associated with the statement.
Now, it’s time to start reconciling. Go through all of your expenditures listed under the Checks and Payments heading in QuickBooks. Match each of these transactions to the corresponding transaction on your bank statement. If the two are identical, click the checkbox next to the transaction in QuickBooks.
When you’re done, the Difference heading at the bottom of the Reconcile screen in QuickBooks Online should read $0.00.
If there’s a balance remaining, don’t panic. A number of common scenarios might be to blame. These include service charges from your bank, checks that still need to clear the bank (but which have already been entered into QuickBooks), and bank transactions which have failed to sync with QuickBooks. Look through your statement for these anomalies and account for them as needed.
Collecting Payment on Outstanding Invoices
The act of reconciling your accounts can sometimes highlight a major issue for your business: cash flow. After going through and checking off each transaction in your QuickBooks Online account, you may have noticed just how many invoices are still outstanding and unpaid.
You may be tempted to send out email reminders to customers with upcoming or overdue invoices. Email invoice reminders can be extremely effective when it comes to collecting outstanding payments. Unfortunately, though, doing this in QuickBooks is extremely time consuming. You’ll need to navigate to individual invoices and send reminders by hand, a process that’s both time consuming and imprecise.
We have good news, though. There’s a better solution for getting paid on time: Biller Genie.
With Biller Genie, you can configure automated invoice notifications, including payment due and past due email invoice reminders. You can even set up automatic late fees to encourage your customers to pay on time. Plus, your invoices are fully customizable to match your company’s brand and color scheme: no more generic QuickBooks invoices.
Biller Genie also makes reconciling even easier. When Biller Genie processes a customer payment, the corresponding QuickBooks invoice is closed automatically. We take care of the reconciliation for you — and that means one less thing on your to-do list.
Best of all, Biller Genie is free!
Ready to get those invoices paid? Click here to sign up for your free Biller Genie account.