Episode 27
Tis the Season – (Tax Season)
I know it’s February, but I am writing this and recording this episode in December of 2023. As I have mentioned, the bookkeepers’ tax season starts ramping up right after October 15th, which is the final deadline for extensions filed on April 15th. I’m ‘wondering how I’ll Survive the next few months’, Paul Rosenblum.
During tax season and leading up to tax season, I have always received a lot of referrals from accountants and CPAs from new clients of theirs who either need a set of books to be cleaned up and made accurate, or business clients who don’t yet have a set of books. This starts in November or December prior to the official start of tax season.
In this episode, I will speak about how I go about assessing the books (or the non-book situation) after I make a commitment to take on a new client, among other things about the start and middle of tax season for me. I will also speak about some of my daily routines during tax season.
If the client has always handed bank statements to the accountant or CPA and let them do anything they need to do internally, I always explain that they will take every shortcut in the world to get it done. The “books” will serve more as ‘work papers’ than a set of books that you can show to a bank or a lender, or a potential investor, if needed.
So, once I talk to the client about the importance of good, accurate books, and explain my price structure and the software that I would suggest (QuickBooks desktop or the Online version), I will explain that to set up the books for data entry will be around 1.5 hours, and then I’ll start the books. The first month of my bookkeeping will be the toughest for the client as well. I will have more questions for the client as I get to know the vendors who they buy from and what specifically they are purchasing, so that I can enter all the transactions in the right category. I will explain to the new client that for the first month or two, I will need their help and I need them involved in the process as I get to know their company and how they do business. When each month is entered, I send a spreadsheet exported from the bookkeeping software with all of the transactions that I have questions about. I then create a column in the spreadsheet for the client to type in their answers as specifically as they can. When they send that spreadsheet back to me, then I reclassify the transactions and if I’m using the online version of QuickBooks, I will set up rules, so that the next time that vendor comes up, the software will know what category we want to use (with some exceptions of course). Within 2 months, more than 80% of the transactions have rules or with the desktop edition, the software remembers automatically without setting up rules. So, once that’s done, there will be less questions for the client.
If the client has a set of books already, and the accountant tells me that the books are so inaccurate that they can’t be used for tax purposes, then my process is obviously different. I will tell the client that I will ‘audit’ their current books by running a standard balance sheet and a standard profit and loss report, exporting them to PDF files, and then ‘marking it up’, by typing my comments and questions within the categories (chart of accounts).
I then go into every category on the balance sheet and profit and loss reports and write an email to the client with bullet points for each of the questions that I have about each line of data in each category. If the client wants to discuss online or on the phone what I have commented about, we can do that.
I do that process for two reasons when an accountant refers me to their client:
- The client doesn’t know me, and I want to show the client that I care about their books and what my knowledge is compared to other bookkeepers.
- I want to show the client how I work and what the process is to get their books in good shape.
- I also let the client know that I don’t charge the half hour or 45 minutes that is takes me to go through to ‘audit’ their existing books.
- When the client and I speak about their bookkeeping, then I can assess how much time it would take me to put together their books per month and I can give them an estimate of how much it’ll cost on a monthly basis.
Since I started this pod, I was always wondering if the same pattern would happen here as it does getting referrals from accountants and tax preparers. And it has. I am proud to say that I recently started working with a listener of this podcast who, after listening to some episodes, thought that his bookkeeper and accountant were not doing a complete job for him. We have spoken on the phone and eventually we will have an online meeting so that I can put a face to the voice, but I can tell already (now in December) that he will be a pleasure to work with. And I’ll be starting to do his bookkeeping on Jan. 2nd. So, by the time you hear this episode, Jan. will be done and finalized. And he isn’t the only client who I now do bookkeeping for who emailed me after listening to this pod. It still surprises me to this day that these episodes un-intentionally have served as another way to help clients with their bookkeeping. I am very happy that this is the case.
Everything ramps up during tax season for us bookkeepers, about 2 months before it ramps up for accountants and CPAs. The bookkeeping increases with new clients, all the other clients who I’m behind with now need the data entry to be done with deadlines approaching for getting 1099’s out by the end of January. I wish I could control it, but my adrenaline automatically starts flowing every other day after Thanksgiving which allows me to work faster, think faster, type faster, all the while being very accurate, and I find myself with even more focus on my work. The flow of adrenaline isn’t consistent until about December 10th, when I find that every day I’m focused, and more productive than I am, let’s say, in the summer. I wish I could control it! There’s something in bookkeepers and tax preparers makeup, that kicks in when we know we have deadlines coming up, even in two months!
As things ramp up, I had a client who was audited in the middle of December, so we had some extra work getting ready for that, and pushing the client to get us information that’s needed, more new clients getting referred to me, the hours at the office increase, the last quarterly sales tax payments due by December 20th have to be prepared, and many more client face to face or online meetings discussing the last estimate that is due on Jan. 15th of the next year, or just looking at the latest profit and loss for their business and discussing cash flow and collection issues, or planning for expansion of the business, among many other things. I have to make sure that there are no transactions in the ‘Ask the client’ category, which is what I use for the monthly questions for clients. Everything has to be categorized, and I hate to wait until the last minute for those, and I hate to see a ‘miscellaneous’ category on tax returns, although it is allowed. Not on my watch!
Once in a while, (like yesterday), one of my assistants was in the office working. I had an audit that I was preparing for, 2 meetings scheduled online with clients, and email to catch up on. By 3pm, I had 2 billable hours in my pocket, and I got to the office at 7:45 that morning. Some days are just like that. My policy is that I don’t charge for meetings that are under 15 minutes outside of the official ‘tax season’ (Jan. – April 15th). However, a meeting that’s over a half hour, I do. I don’t charge to answer questions or respond to emails from clients. So, some days are frustrating leading up to tax season where the phone rings, texts come in on the cell phone, emails come in (even in December, 40 or 50 emails a day), and of course, running this podcast and answering emails from listeners. Yesterday, I left the office at 6:25, after getting in at 7:45am. And yes, I had lunch yesterday! (yay) Flash Forward to :
The Next Day:
Who knows what today will hold? Maybe I’ll get some solid bookkeeping and billable time done and I can be home in time to see a good movie with my other half.
I have, already on my desk printed out material that is waiting for me to input. Before I leave the office, I almost always print out what I need to take care of the next day, so I get to the office, sit down, have a few sips of my cup of tea, and start work.
It's now close to the end of the day, and Today I reconciled and fixed a whole year of a small company that used to be on QuickBooks online, but we converted to the desktop, since he’s closing his company, since he’s getting out of the business, and starting another company. No need to pay the monthly service charges for QuickBooks online, so we converted the data back to the desktop version. I had to fix up some transactions, that were converted, but they had some weird characters in them (probably ‘noise’ in the download that created funny characters) and had to reconcile several months of data in 2023. I also found that the payments to the credit card were not downloaded for several months, so I had to input them in order to reconcile the bank account and the CC account. (And by the way, when you convert from QBO to desktop, the reconciliation and the reports associated with them are lost.
So, I had to do a mass reconciliation from 2018 through 2022 in one shot. It wasn’t 100% smooth but was able to fix the problem that I ran into so that the bank account and the credit card were reconciled perfectly going into 2023. Then I reconciled month by month as usual through the end of November 2023. (It was only December 20th).
After that project was finished I Then went on to reconcile 12 bank statements and 12 credit card statements for another company where the bookkeeping was done by its owner. I always dread reconciliations where the bookkeeping was done by anyone other than myself. I started with the bank account, and for some reason, there was no history of any bank reconciliations in the system. I looked at the register and found the “C” mark on all transactions in 2020 and 2021. They were ‘cleared’ but not actually reconciled. I remembered that sometime in 2022, the bank account changed, because the bank merged with another bank. So, I had to figure out what ending balance I should use to do another ‘mass reconciliation’ for prior years to get to the balance that I should have. I tried 11/30/2023 to see if it would work. I was able to reconcile to the bank account balance with about $16K difference in transactions that were sitting in the books unable to be reconciled. I sent an email to the owner and we will sit down on Tuesday, December 26th over zoom to try and figure out what these transactions are, if they are not double entries (which they don’t seem to be)
All of this happened when I also needed to get a few clients up to date that I fell behind with. I had a client ask me to send her up to date books, and I wrote back to her saying that the last bank statement she sent me (since I don’t have access to her bank account) was in June. I don’t do bookkeeping without at least the statements in hand. I’ve asked for access to the bank account and credit card accounts for months. Her response was “I’m too busy – I’ll get you the statements after Xmas”.
In the middle of the day, I got a call from an accountant that just got back from an audit of one of my clients. They caught the client doing things that ended up costing him a lot of money, mostly because he didn’t listen to his bookkeeper to keep things compliant and organized. He didn’t keep a receipt from a restaurant, or train or bus tickets, or any other paperwork that he should have for a multi-million-dollar company. I will probably be walking away from him once the audit is closed and signed off.
More stress. It’s starting to add up. Then I worked on a U.S. corporation – an artist who spends much time in other countries and out of the United States. Her local accountant last year asked her to hire an international accountant because of all the possible issues, and I told her that I don’t really know how to do the bookkeeping since most of her meals at restaurants on the business accounts were out of the US. Are they business meals or are they ‘travel meals’? I hadn’t heard all year from the client. Her books are done (I treated the bookkeeping as a US company and made her meals outside the US as ‘meals, travel’. It will be up to the accountant to figure out what to do with the tax return.
Today is the Saturday before Xmas, and I’ll be in the office in the afternoon. Maybe recording this episode, starting to work on more online presence for this pod, getting one more company up to date, preparing for 1099’s, running reports and sending them to clients for missing W9’s, and correcting double entries in payroll that a client set up themselves… incorrectly.
And I need to order some office supplies (ink, paper, binder clips, rubber bands, etc) with tax season officially coming up soon. Oh, the trials and tribulations of running your own business. I will have to make my annual backups of my computers in the office for archive purposes, run scans to make sure the computers are in good shape, clean the office, organize, make sure everything is filed and put away, because the next few months a hurricane will visit my office. I have year end meetings, books to finish, new clients to evaluate and 100 other things that I can’t even think of at the present moment.
But enough about me. I hope you enjoyed the holiday season. Bookkeepers get stressed and work hard. But it’s all worth it to me. I help people manage their businesses and money from their businesses so that they can celebrate the holidays by taking a vacation, buying gifts, seeing family and sleeping well at night knowing that their business books are in good shape. That’s my place in the world. And I’m (mostly) comfortable with it.
Camille: Still want to be an accountant? (Just kidding) And thank you so much for the review on Apple! And Captain Jack as well! It’s very much appreciated!
Ok. Time to go -- you all know what I’m doing -- getting back to someone’s books -- My books? I’m 6 months behind in entering my credit card statements. However, I’m up to date with my business bank account. You know the saying, ‘The shoemaker doesn’t have any shoes.’
I declare 2024 and all years going forward -- “Be Good to you Bookkeeper Year” BGTYBY
Drop me a voicemail on the website or an email with any suggestions for future episodes. Do you have a situation that you need some help in (accounting of course)! Share it with all of us -- let’s talk about it here (I’ll do an episode on specific issues that come to me in an email from you). That’s it for now--- Happy Tax Season! And Happy 2024! Watch out for the Venmo and PayPal transactions (listen to the 1099 update episode) and be good to your bookkeeper! I’m Paul Rosenblum