Artificial Intelligence and Accounting

Artificial intelligence (AI) is an important concept in today’s world. Through AI, many jobs have been eliminated or at least made more streamlined. And, now, many speculate that accounting will be the next industry to find itself impacted by AI.   

Part of the reason for this speculation is the fact that a German software firm recently acquired $3.5 million in financing for an AI program known as Smacc, which is designed to help businesses automate their accounting.

The software has a lot of features that are getting people excited, such as its ability to review receipts, its math-checking features, and its ability to “learn” and apply what it has learned to future projects and tasks.

Another nice feature of this program is that information can be checked into at any time, allowing businesses to really stay on top of their financial situations.

Of course, despite all of these benefits, AI programs like this one definitely aren’t perfect. And, since such programs are relatively new, it makes sense that it would take some time to work out the “bugs.”

For this reason, businesses and individuals are cautioned not to give up on traditional accountants just yet. In fact, even for those who do decide to give Smacc a try, it’s worthwhile to have an accountant who can check up on the program and make sure all tax matters are being handled correctly.

While it seems some people are ready to take the plunge into the world of AI, it’s smart to tread cautiously and to not give up on real human help just yet.

Accounting Mistakes You Should Never Make

If you handle your business accounting on your own, you probably think you do a pretty good job. In truth, though, accounting is some pretty tricky stuff, and it’s very likely that if you’re not using a professional accountant or at least professional accounting software, you’re making some mistakes along the way.   

And the problem with accounting mistakes, even small ones, is that they can end up costing you big time. Mistakes can result in your company looking unprofessional and disorganized, in legal problems, in fines and fees from the IRS, in an audit, and in many other issues.

Obviously, the best solution is to not make accounting mistakes in the first place, but if you’re going to make errors, there are some that you REALLY want to avoid. Below, you’ll find some of the worst accounting mistakes you can make and, after reading, hopefully you’ll be inspired to double-check your figures and forms for mistakes or maybe even to hire a professional accountant to assist you.

Mistake #1: Overestimating Your Assets

One of the worst things you can do is to make an accounting error, such as adding an extra zero in somewhere, that leads you to believe you have way more assets than you actually do.

If the error is bad enough, it could easily lead to financial ruin, employee loss, and public scrutiny from those who think you’ve been dishonest.

These errors, as mentioned, can come from “bad math” or from just not understanding how to properly analyze and predict where your company will be, financially speaking, within a given timeframe.

Regardless of what caused this type of error, it’s always an indicator that a business needs professional help and fast!

Mistake #2: Not Being Consistent

When people who, to put it bluntly, don’t know what they’re doing are managing (or attempting to manage) the finances, problems often arise with consistency.

Inexperienced people will often do things like put in a different product costs for each order, only keep some receipts but not all of them, and forget to record certain payments or credits.

Obviously, this can lead to gaping errors, confusion, and a lot of disgruntled clients. Consistency is achieved by having standard financial plans and strategies that everybody follows all the time...or by having a financial pro on board who knows exactly what he’s doing!

Mistake #3: Not Taking Advantage of Credits and Deductions

Another common mistake that people make is not taking advantage of available credits and deductions. Sometimes, these get written off as not being that worthwhile or that big of a deal, but, when you consistently skip out on ways to save money, it can end up costing your business big time.

As you can see from these all-too-common mistakes, having a professional accountant on board or at least someone who knows what he’s doing is absolutely indispensable.

Businesses and Quickbooks

If you run a small business, you might think you’ve got your businesses finances perfectly organized and together. After all, when you’re armed with Quickbooks and a good financial advisor, what more could you need?

In truth, however, small businesses often make small mistakes that can affect them big financially. One such mistake, for example, is not fully separating business funds and personal funds. A business credit card should never be used to pay for personal expenses and vice versa. If you’re guilty of that offense, stop it now and talk to an accountant to find ways to fully separate your finances.  

Also, make sure you’re staying on top of invoicing. You need to know how many accounts are unpaid and how much you’re owed, as well as how many accounts are paid and how much you’ve made. Improper record keeping, often a result of putting off record keeping until later, can cause major problems and discrepancies when tax time rolls around.

You really shouldn’t be running a business without a professional accountant. And, if you’re running into these or similar problems, it’s probably because you don’t have the right accountant (or any accountant!) on your side. Remedy that problem, and you should save yourself a world of trouble.

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Make No Mistake

Each year, many people attempt to do their taxes on their own. Unfortunately, mistakes are all too easy to make and can lead to reduced refunds and long waits. For that reason, many of the people who do their taxes on their own live to regret it.

While all kinds of mistakes are common, of the biggest blunders is simple miscalculation. Putting a wrong number in a column or skipping over a figure or two when doing addition will have the IRS sending you a correction form so fast your head will spin.  

Other people make the mistake of not meeting that April 15 deadline, and in case you ever wondered, yes, the IRS is pretty strict on when your tax forms are due. You could face fines and penalties for a late tax return.

It’s been said that to err is human, and while that may be true for average people, it’s not really true for professional accountants. These experts know to check and recheck their work for errors and even have programs to help them do some of that checking. Your tax return is a lot less likely to contain errors if you let a professional handle it, so unless you’re perfect, let someone in the know help you.

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Beyond Quickbooks

Most people think Quickbooks is the only financial technology they need. In reality, though, there are a lot of great programs out there that can be used in conjunction with Quickbooks or on their own.

Peachtree, for example, is a very popular name in the accounting software world. Its features include:

l  Inventory tracking

l  People management

l  Item management

l  Vertical solutions

Another popular option is Freshbooks, which is used online. Users pay a small monthly fee for streamlined processes that make invoicing and sending estimates a whole lot simpler.

No matter what technology you use to help you with your business or personal finances, remember that software can do everything on its own. It needs reliable, educated people- preferably professionals - backing it.

So, instead of just relying on software to do all the hard work for you, also consider hiring a professional to help you get the most out of that software. There are many great accountants who are eager to assist you.

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A Guide to Classifying Workers

One of the most important parts of payroll processing is properly classifying workers. Unfortunately, this can also be one of the trickiest parts. When you know a few simple rules, however, it’s really not all that difficult.

To begin with, it’s important to understand who actually counts as an “employee” for payroll purposes. An employee is someone who continually works with the employer in the workplace he or she has provided and who could be terminated if the employer decides to do so. All workers who meet these criteria must have taxes withheld.   

Other possible classifications include independent contractors and statutory employees. The classification given to each worker really determines how he or she should be treated for payroll purposes.

Figuring out which category each and every person you work with falls into can be difficult though. For that reason, many busy business owners hire an accounting firm to manage their payroll for them. That’s definitely an option worth considering if the whole process has you feeling overwhelmed.

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Don't Miss Out on Deductions

One of the most common complaints amongst recent taxpayers is that they missed out on deductions. Deductions can help any taxpayer to save lots of money on his or her taxes, but unfortunately, finding all of the deductions for which a filer is eligible isn’t as easy as it seems.

Sometimes, for example, new tax laws or amendments to laws can create deduction opportunities that didn’t exist before. And, unfortunately, those who haven’t “heard the news” often miss out.  Others might rely on tax software to help them find deductions, but even the best software will eventually reach a point where it’s out of date. Furthermore, even quality software can often miss the mark when it comes to scoping out all

possible deductions available.

Missing out can become a thing of the past when people work with a Naperville accounting firm, however. An accountant is more reliable than software and can handle each person’s deductions on a case by case basis. Furthermore, it’s an accountant’s job to be up to date on the latest changes to tax laws and the creation of new laws.

To make sure you get all the deductions you’ve got coming, trust Susan S. Lewis, Ltd. to be your Naperville accounting firm. You won’t regret it!

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Keep Track of Your Receivables

Running a small business is no easy feat. There always seems to be so much to do and not nearly enough time in the day. As a result, important things often fall through the cracks. For many small businesses, one of those things that often “falls through the cracks” is receivables tracking.  

An important part of good receivables tracking is always remembering to mark a paid customer as ‘paid” right away. Many people put this task off until later, planning on reconciling it later. “Later” doesn’t always come soon enough, though, and at tax time, you could end up with a confusing receivables report.

Not only is a poorly kept receivables report confusing, it can also lead to higher taxes. Make an effort to stay on top of your receivables. Give it your best shot, and if you still find that there’s not enough time in the day, then it may be time to contact an accounting firm for professional assistance.

How Homeowners Save Money on Taxes

Do you own a home? If so, know that you can “catch a break” in a variety of ways when it comes to your taxes. The best way to learn about all of the different tax breaks available to you and to take full advantage of them is to seek the help of a knowledgeable accounting firm in your area.

When you visit that accounting firm, you will likely learn about several different types of tax breaks, including the much-loved mortgage interest deduction. You can claim this deduction on up to two homes as long as

your mortgage loan is not for more than a million dollars. All you have to do is itemize your return, and you’re good to go!

While the mortgage interest deduction is a popular way for homeowners to save money, it’s certainly not the only way for them to do so! To learn about other ways in which you can save big, contact Susan S. Lewis, Ltd., an accounting firm in Naperville, today.

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Deducting Medical Expenses Just Got Harder

Smart taxpayers know that deducting any expenses possible is an easy way to save on taxes. For many years now, wise taxpayers have made sure to deduct all applicable medical expenses during the tax return preparation process. Unfortunately, however, recent changes to deduction laws have made it more difficult for medical expenses to qualify for deduction.  

While it used to be that the threshold for deducting medical expenses was 7.5% of the taxpayer’s adjusted gross income, the threshold is now at 10%. Fortunately, however, the change does not apply to individuals over the age of sixty-five; they can utilize the old rate for the next three years.

Even if you are no longer able to deduct medical expenses, the right accountant can still handle your tax return preparation in such a way that you get maximum benefits, so contact the friendly accountants at Susan. S. Lewis, Ltd. today.

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Taming Taxes

Small-business owners and independent contractors may be more likely than other taxpayers to benefit from the home-office tax deduction, which has an average value of more than $2,600.¹ But some taxpayers may be hesitant to claim this potential tax benefit on their personal tax returns, fearing that it could trigger an IRS audit.

Their worries are not entirely unfounded. Taxpayers who claim home offices often don’t meet the requirements, or they calculate the deductible amount incorrectly. This checkered past may explain why the government tends to take a closer look at returns that include this deduction.

Even so, business owners who operate out of a home office and are legitimately entitled to claim the deduction should consider taking advantage of this valuable tax break.

Calculating the Benefit

Eligible taxpayers can write off a percentage of home expenses such as depreciation, rent, property taxes, insurance, utilities, maintenance, and repairs. The percentage is based on the square footage of the office space relative to the total size of the home.

Passing the Test

To qualify for a write-off, a home office must be used in a trade or business activity — not to manage personal investments or pursue a hobby. It must also be used regularly and exclusively for business. If part of your home is used to provide day care or to store products, you may not have to meet the exclusivity test. In addition, your office must meet at least one of the following three criteria:

• It is the place where you normally meet with patients, clients, or customers.
• It is your principal place of business, meaning there is no other fixed location where you work on a regular basis.
• It is a separate structure that is used exclusively for trade or business. If the office space is not attached to the dwelling, it does not have to be the principal place of business.

If you take the deduction, make sure to keep good records, including pictures that show how your home office is used. You may want to ask a tax professional to help determine your eligibility and evaluate whether the potential tax savings may be worth the added IRS scrutiny.

1) businessweek.com, February 21, 2012

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek Naperville Tax Services advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. Copyright © 2012 Emerald Connect, Inc.

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