How AI Is Changing Accounting

Artificial intelligence (AI) has arrived in the accounting profession in a big way. The good news is it’s streamlining accounting tasks, finding patterns in data you can take action on, and generally making things better. Here are just a few places we’re seeing AI and machine learning impact accounting.

Transaction Coding

Most systems have incorporated some form of machine learning into transaction coding. When bank feeds are imported, each transaction needs to be coded to add the account code in the chart of accounts.  Class, tracking codes, and other custom data may need to be added as well. Rules can be set so that the accounting application can pre-code the transactions; in this case the accountant simply approves or corrects the entry.

Invoice Fetching

It starts with a picture of a receipt. Invoice fetching applications can turn pixels into data using sophisticated OCR (optical character recognition). The data is then turned into a business transaction that can be imported into an accounting system.


The books of many government agencies, nonprofits, and large businesses need to be audited on a regular basis. Auditing is an expensive process. Smart programs can review a company’s data and assess where the risks and anomalies are so that the audit program can be modified to focus on the more important parts. This reduces risk and cost for everyone involved. 

Accounts Payable

Artificial intelligence can help to speed up the matching of purchase orders, packing slips, and invoices so that accounts payable tasks are streamlined.  It can also automate approvals and look for duplicate invoices to avoid overpayments. 

Accounting Tasks That Are Clerical

Robotic Process Automation (RPA) is a platform that allows users to create automation without involving the IT department. Think Excel macros or Zapier on steroids. Any workflow with a mind-numbing set of clerical steps is a candidate for RPA. 

AI allows accountants to spend less time on routine tasks and more time on higher-level analysis work. As AI becomes more affordable for small businesses, everyone will benefit from this long-term trend.

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Identity Theft and the IRS

Identity theft happens when someone uses your personal information without your permission. While this can include credit cards, banking information, and passwords, it’s your Social Security number that’s the biggest IRS-related identity theft problem. 

An estimated 4 to 5 million taxpayers are currently affected by identity theft with the IRS. When their Social Security numbers are stolen by an identity thief, the thief files for a tax refund early in the season. When you go to file your taxes, you receive a notice that you have already filed.

Here are some tips to prevent it from happening to you:

  • Do not answer any emails from the IRS. The IRS does not send emails or text messages. If you receive suspicious IRS emails, report them to the IRS at
  • Do not carry your Social Security number with you. Keep it in a secure location.
  • Protect your computers with firewalls and anti-spam software.
  • Change passwords for internet accounts.
  • Do not give personal information on the phone or through email unless you are absolutely sure who you are giving it to.
  • Shred all documents containing personal information.
  • Check your credit report annually.

If you do happen to become a victim of this crime, here’s what you should do:

  • If the IRS sends you a notice, respond immediately. Follow the instructions on the notice.
  • File an Identity Theft Affidavit (IRS Form 14039).
  • Call the IRS Identity Theft Specialized Unit at 1-800-908-4490.
  • Request an Identity Protection PIN from the IRS if you’ve received a letter inviting you to opt-in to the program.  An IP PIN is a 6-digit number assigned to a taxpayer to help prevent the misuse of the Social Security number on fraudulent tax returns. 
  • If your purse or wallet containing personal information is stolen, contact all credit cards to cancel.
  • Report the theft to the police department.
  • Contact the credit bureaus about a fraud alert at the following numbers:
    • Equifax: 1-800-525-6285
    • Experian: 1-888-397-3742
    • Trans Union: 1-800-680-7289
  • If your Social Security number has been stolen, notify the Social Security office of Inspector General at 1-800-269-0271.
  • The Federal Trade Commission has a toll-free Identification Theft helpline at 1-877-438-4338 or visit their website:  

We certainly hope it doesn’t happen to any of our clients, but if it does, this handy checklist will help you through it.

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Your New Hire Checklist

Hiring a new employee is a big accomplishment in any small business, and there are a lot of steps involved, too. Here’s a handy checklist to help you stay organized when you bring that new hire on board. 

First things first, the legal and accounting items:

  • Signed employment agreement, typically an offer letter. There may also be a supplemental agreement outlining employee policies.
  • Payroll documents include:
    • IRS form W-4
    • Form I-9
    • Copy of employee’s government-issued ID
  • Most states require a new hire report to be filed; sometimes your payroll system vendor will automatically file this for you.
  • Notify your workers comp insurance carrier.

Next, it’s time for employee benefits enrollment:

  • Health insurance
  • 401K
  • Any other benefits you provide
  • Provide the employee with the holiday schedule
  • Explain their PTO and vacation if not already explained in the offer letter

Set your new employee up for success with the right equipment:

  • Desk, chair, lamp, other furniture
  • Uniform
  • Tools
  • Coffee mug, refrigerator shelf
  • Phone
  • Truck, keys
  • Computer, monitor, mouse, keyboard, power strip, floor mat
  • Office keys, card entry, gate remote, parking assignment
  • Filing cabinet, keys
  • Tablet
  • Forms
  • Office supplies
  • Cooler, other supplies

Your new employee may need access to your computer software systems:

  • Employee email address
  • Any new user IDs and password for all the systems they will need to access
  • Document access

How will your new employee learn the ropes?

  • Set up training
  • Assign a buddy

Hopefully, this list will give you a start toward making your employee onboarding process a little smoother.

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Disasters and Taxes

While some may say that tax season in and of itself should be classified as a “federally declared disaster,” the phrase holds more weight this upcoming year as thousands of families have been devastated by the California wildfires and East Coast hurricanes.

Beginning in 2018, the personal casualty and theft loss deduction is limited to casualty losses incurred in a federally declared disaster area. The casualty and theft deduction is only available to those who itemize their deductions, not to those who take the standard deduction.

In the instructions for the 2018 Form 4684 (Casualties and Theft Loss Deductions), the IRS defines a disaster loss as “a loss that occurred in an area determined by the President of the United States to warrant federal disaster assistance and that is attributable to a federally declared disaster. It includes a major disaster or emergency declaration.” A list of federally declared disasters can be found at

There are two limitations to qualify for the deduction:

  1. A loss must exceed $100 per casualty
  2. Net total loss must exceed 10 percent of your AGI (adjusted gross income)

You can still elect to deduct the casualty loss in the tax year immediately preceding the tax year in which you incurred the disaster loss. IRS Publication 976 provides information about personal casualty losses resulting from disasters that occurred in 2016 and certain 2017 disasters, including Hurricane Harvey, Tropical Storm Harvey, Hurricane Irma, Hurricane Maria, and the California wildfires.

An exception to the rule above limiting the personal casualty and theft loss deduction to losses incurred in a federally declared disaster area applies if you have personal casualty gains for the tax year. In this case, you will reduce your personal casualty gains by any casualty losses not attributable to a federally declared disaster. Any federal disaster losses that remain are subject to the 10% AGI limitation.

In a recent publication clarifying some of the new tax reform laws (Publication 5307), the IRS touched on how some of the recent laws enacted in 2018 make it easier for retirement plan participants to access their retirement plan funds. This may allow affected taxpayers to:

  • waive the 10% additional tax on early distributions and
  • include a qualified hurricane distribution in income over a 3-year period
  • repay their distributions to the plan
  • have expanded loan availability
  • extend the loan repayment period

We certainly hope you weren’t affected by a disaster last year, but if you were, we have you covered tax-wise. 

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5 Ways to Speed Up Your Cash Flow

One of the biggest challenges for small businesses is managing cash flow. There never seems to be enough cash to meet all of the obligations, so it makes sense to speed up cash flow when you can. Here are five tips you can use to get your cash faster or slow down the outflow.

1. Stay on top of cash account balances.

If you’re collecting money in more than one account, be sure to move your money on a regular basis when your balances get high. One example is your PayPal account.  If money is coming in faster than you’re spending it, transfer the money to your main operating account so the money is not just sitting there. 

2. Invoice faster or more frequently.

The best way to smooth cash flow is to make sure outflows are in sync with inflows. If you make payroll weekly but only invoice monthly, your cash flow is likely to dip more often than it rises. When possible, invoice more frequently or stagger your invoice due dates to smooth your cash balances. 

Take a look at how long it takes you to invoice for your work after it’s been completed.  If it’s longer than a few weeks, consider changing your invoicing process by shortening the time it takes to send out invoices. That way, you’ll get paid sooner.  

3. Collect faster.  

Got clients who drag their heels when it comes to paying you? Try to get a credit card on file or an ACH authorization so you’re in control of their payment.

Put a process in place the day the invoice becomes late. Perhaps the client has a question or misplaced the bill. Be aggressive about following up when the bill is 45, 60, and 90 days past due. Turn it over to collections quickly; the older the bill is, the less likely it is to get paid. 

4. Pay off debt.

As your cash flow gets healthier, make a plan to pay off any business loans or credit cards that you have. The sooner you can do this, the less interest expense you’ll incur and the more profit you’ll have. 

Interest expense can really add up. If you have loans at higher interest rates, you might try to get them refinanced at a lower rate, so you won’t have to pay as much interest expense.    

5. Reduce spending.

You don’t always have to give up things to reduce spending. Look at your expenses from last year and ask yourself:

  • What did you spend that was a really great investment for your business?
  • What did you spend that was a colossal mistake?
  • What do you take for granted that you can cut?
  • Where could you re-negotiate contracts to save a little?
  • Where could you tighten up if you need to?

Managing cash flow is always a challenge, and these tips will help give you a little cushion to make it easier. 

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How to Speak “Tax”

This time of year and into April, we begin to hear a different vocabulary come to life: “Credit.”  “Exemption.”  “Adjusted Gross Income.”  It can seem as if your accountant speaks a different language from you.

While we’ll do our best to explain the tax terms we use during your appointment, we’ve compiled a list of them for those of you who’d like to be more “in the know.” Not only will this better equip you to keep up at your next social gathering, but it will allow you to ask the right questions when you meet with your tax professional.

TY = Tax Year

If you file your taxes on time, the tax year is always one year behind the year we’re in. In 2019, you will be filing your TY 2018 tax return.

FY = Fiscal Year

Fiscal year is a one-year period for accounting purposes. Most businesses make their fiscal year the same as the calendar year: January 1st through December 31st. Others run their business with start and stop dates different from the calendar year. A common fiscal year is July 1st to June 30th.

EIN = Employer Identification Number

This is a unique identification number assigned to a business by the IRS.

Form 8879 = IRS e-file Signature Authorization

This form must be signed for your return to be efiled, and it can be digitally signed.

Form 1040 = U.S. Individual Income Tax Return

This is the main form used when reporting individual income. It includes the taxpayer’s basic information, dependents, and tax calculations. If the taxpayer is a sole proprietor or a single-member LLC, their business activity is reported on their personal tax return.

Form 1120 = U.S. Corporation Income Tax Return

When reporting C corporation income, this form is used. S corporations are reported on Form 1120S. 

AGI = Adjusted Gross Income

AGI is equal to your total income subject to income tax minus specific deductions you may be eligible to take. AGI is calculated before applying the standard or itemized deduction. Many credits are subject to AGI limitations, meaning that if your AGI is above a certain amount, you may be disqualified from certain deductions and credits.

MFJ = Married Filing Jointly

This is one of five possible filing status categories.

MFS = Married Filing Separate

This is another one of five possible filing status categories. You may see these acronyms frequently in tax articles explaining how new laws affect the different types of taxpayers.

TCJA = Tax Cuts and Jobs Act

The name bestowed upon the largest tax law changes approved by Congress, many of which went into effect for TY 2018.

SSTB = Specified Service Trade or Business

This term specifically relates to Section 199A, which is a new tax law that allows for up to a 20% deduction on “qualified business income” (“QBI”) for any “qualified trade or business” (“QTB”) other than a “specified trade or business” (“SSTB”). This deduction is available to sole proprietors and passthrough entities.

This list will get you started, and if you run across another tax term, feel free to reach out and ask us what it means.

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Money and Marriage

One of the biggest things that can cause fights in a marriage is money. No matter where you are in a relationship, it’s a good idea to discuss these major money topics so you’ll know where you stand. 

Show me the money:  Combine or keep separate or both

One of the best ways to avoid conflict is to put your money into three separate piles: yours, your spouse’s, and a joint set of accounts. In this arrangement, each of you has control over some money that is all your own. The household spending will then come out of the joint account, and you both will make contributions to it on a regular basis. 

As a couple, you’ll need to discuss who will pay for what as well as what your regular contribution will be to the joint account. This is no small discussion. The more thorough you are, the less conflict you’ll have over money.

One spouse or partner will normally handle the joint finances, and it’s typically the person with the most accounting knowledge. However, you both should have access to this account in case of emergency. 

Savings and future purchase goals

Do you have goals about upcoming large purchases?  These might include:

  • A home purchase or improvement
  • Children’s education
  • Health care needs
  • Saving for retirement
  • A car purchase
  • A second home purchase
  • A vacation
  • Another item such as a boat, furniture, technology gadgets, a plane, or something else
  • A nest egg or cushion

If so, calculate how much you need and make a plan to set aside the money you need in the time frame you agree on. 


Do you like to spend more than your spouse? Or is it the other way around? When money is flowing, there is usually no problem. When money is tight, that’s when the problems come in. 

When there are conflicts in the area of spending, the best course is to focus on priorities. If you can agree on your priorities and goals, it can often shift spending habits.  


You may want to set a budget to stick as close as possible to expected spending limits. Start by recording current spending in these areas, and then agree on the amounts you want to spend in the future. 

  • Rent or mortgage payment
  • Utilities, including electric, gas, water, garbage, phone, internet, cable
  • Food and supplies, including grocery, kitchen items, liquor, and eating out
  • Entertainment, including travel, vacations, local events, holiday decorations, Netflix subscriptions, tech gadgets, books, etc.
  • House maintenance including repairs, cleaning, lawn care, appliances, and decorating
  • Automobile, including gas, insurance, licenses, and maintenance
  • Clothing and accessories, including dry cleaning
  • Health care, including pharmacy, doctor’s visit, and HSA contributions
  • Personal care, such as haircuts, nail care, etc.
  • Tuition and/or education expenses
  • Contribution to retirement and savings accounts
  • Charitable contributions
  • Taxes, including federal, state, local, school, and property
  • Paying down credit card or student loan debt


What does retirement look like to both of you? Having this conversation will be enlightening. Know that dreams and goals can change over time as retirement approaches.

You’ll want to have an idea about what you’d like to spend during your final years so that you can make plans to start accumulating that wealth now. The sooner you start, the more years you have to build up your retirement assets. 

Monitoring your progress

Keep an eye on your account balances to make sure everything is as it should be. Review bank and brokerage account statements and/or your budget once a month or at least once a quarter so there are no surprises or trends that sneak up on you.  

When you reach your goals, reward yourself. Managing money is hard work, and you deserve to pat yourself on the back when a goal is achieved. If there is anything we can do to help you make your financial dreams come true, please reach out any time.  

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Moonlighting in the Gig Economy and Taxes

Are you one of the thousands of people who are working gig-type jobs for Uber, Lyft, DoorDash, Grubhub, or companies like them? Whether you’re full time or just moonlighting a few hours a week, the paperwork for this part of your taxes will be a little different. Here’s what to expect. 

What Documents Will You Receive?

Both Uber and Lyft provide two different tax forms:

  • 1099-K, which reports the grand total of fares for rides that you provided
  • 1099-MISC, which lists the amount you’ve earned from incentives and referrals.  If you’ve earned less than $600 in incentives and referrals, a 1099-MISC will not be issued.  Check your tax summary to see whether you have income to report in addition to the income listed on the 1099-K

To calculate the gross income amount, add the amount listed in box 1a on the 1099-K form and the amount listed in box 7 of the 1099-MISC form.

What Expenses Should You Keep Track Of?

You can deduct certain items you spend on your job as long as you keep good records and receipts. Here are a few items you might have been charged for:

  • Commissions and fees taken by the ridesharing service
  • Tolls and parking fees
  • Convenience items for passengers, such as water or gum
  • Bookkeeping fees and bank charges
  • Vehicle costs (lease payments, gas, maintenance and repairs, car registration, insurance)
  • Mileage (listed in your driver summary as “on trip mileage”)
  • Cell phone expenses (business use percentage)

How Your Income Is Calculated

We will use the information you provide to calculate your net profit—that’s why it’s crucial that you keep detailed records and accurately capture your expenses.  We’ll enter your gross income and subtract expenses, leaving you with net profit.  You pay two types of taxes on your net profit:

  1. Your regular tax rate (based on your income level) and
  2. Self-employment taxes.  Since you are self-employed, you are responsible for paying the employer’s share of taxes, which is currently 15.3 percent of your income.  This is over and above the amount of tax you pay based on your tax bracket.

Be prepared this tax season by keeping your expense receipts and records and being ready for your tax bill.

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How to Save More in 2019

Many people in their retirement years have regrets about not saving more during their earning years, but you don’t have to be one of them. All you need to do is be realistic and proactive about saving. It’s all about paying your future self.    

Circumstances can arise that can erode savings you hoped would be there for retirement. Some of those events include not being able to work due to poor health or a bad job market, unanticipated hospital bills, a divorce, overestimating Social Security benefits, bad investments, procrastination, and simply not realizing how much you need to live on. 

The good news is you can prevent future regrets by making a strong savings plan now. As a small business owner, you may not have a retirement plan, so it’s essential that you create one for yourself. You earn an income today. Put some of that income toward paying your future self, and pay that “bill” first each month or each paycheck. 

To be proactive and build as much savings as possible, take these steps:

  1. Increase your financial skills by learning how to fund your retirement, including all that traveling you’d like to do.
  2. Take care to manage your investment risk and be realistic about investment returns. In good markets, purchase rather than rent or lease so you are building an asset.
  3. Put as much aside as you can, and try living just below your means.
  4. If you do have periods where you are out of work, try living frugally until your income is back to normal.
  5. Optimize your business profits and apply some of them to your savings plan.
  6. Minimize taxes where possible so you can keep more of what you make.
  7. Make everything work twice as hard for you:
    1. Get credit cards with loyalty programs.
    2. Sign up for frequent customer programs to earn points.
    3. Make sure your bank is giving you the best deal on interest.
  8. Sell unused belongings on eBay and put the money in savings.
  9. Cancel used subscriptions and memberships for both your personal and business needs and move the saved money to savings.
  10. Periodically reach out to vendors to get a better deal on the expenses you incur. This could be for phone plans, utilities, and any other routine expense. Put the difference saved in savings.
  11. Select cars and trucks with good gas mileage and also high resale value. Consider that using Lyft or Uber may be cheaper than maintaining a car, depending on how much you drive.  Put the difference in savings.

There are hundreds more ways to save more, and these will get you started in the right direction for 2019.

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Sales Tax Checkup

Collecting sales tax is one of those things that most businesses need to do on a regular basis.  It’s also a chore that is somewhat done by machines and administrative personnel. If the rules change and the procedures go out of date, business owners who are not watching for these changes could be taking risks they don’t realize they have. 

In 2018, the world of sales tax was turned upside down by one court case: South Dakota vs. Wayfair, Inc. Wayfair is a mid-sized furniture retailer based in Boston, MA that the State of South Dakota sued to collect sales tax from. Wayfair has no physical store or presence in South Dakota but was selling to residents in South Dakota.  The Supreme Court held that Wayfair needed to collect tax from the South Dakota residents they were selling goods to. 

From Physical Nexus to Economic Nexus

The court case, which was decided June 21, 2018, changed the rules of online interstate sales. Previously, most states required businesses to collect sales tax if they had a physical presence or nexus in the state, meaning they had an office, building, warehouse, or even employees in the state.

Now, many states are rewriting their rules to follow economic nexus, which is when a company has (enough) customers in a state. Alabama, Arkansas, Colorado, Connecticut, Georgia, Hawaii, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Nebraska, New Jersey, Nevada, North Carolina, North Dakota, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Washington, Wisconsin, and Wyoming all have economic nexus laws that are effective now or will become effective on January 1, 2019. And this list is ever-changing.

Many of the states have a threshold of $100,000 of sales in one year in the state before a business needs to collect and file sales tax. 

Changes in What’s Taxable

Businesses also need to review changes in items that have become taxable that were not previously taxable. Retail goods that are physical are pretty straightforward, but services are not. All states tax services differently, and states change what’s taxable over time.

This means you should periodically review all of the products and services you sell to determine if you are collecting tax on the proper sales. Better yet, have a professional do it so you don’t have to wade through legal laws.

Rate Changes

Periodically, sales tax rates will change.  This is the easiest change to keep up with as your sales tax authority will usually notify you of these changes. 

Deadlines for Paying and Reporting

The frequency with which you pay and report sales tax will vary based on the volume of sales and tax you collect. When a limit is reached, you may need to pay more often. 

Sales Tax Apps to Make Your Job Easier

There are many great sales tax software add-ons that can help you collect and report the correct sales tax amounts. At the large firm level, there is Vertex and Avalara. At the small firm level, TaxJar is popular. We can help you integrate these apps with your accounting software.

Your 5-Item Checklist

The five items above are the things you should be monitoring with regard to sales tax liability, reporting, automation, and risk. States have strong penalties but also have amnesty programs on a regular basis.

If you plan to sell your business, the owner will most likely conduct a sales tax audit. If it’s determined that you owe sales tax, it will greatly reduce the value of your business. 

If you need help from us to measure your exposure in this area, please feel free to reach out. We can either handle the engagement ourselves or refer you to a sales tax expert.

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