Let’s face it, not all entrepreneurs are good at accounting. While they may be great at inventing new products and services, their books can be a mess.
Take our client, Anna. She has a successful franchise and is doing great business, but had never closed her books. Ever … and she’s been in business for more than five years. Once we began working with her, it turned out that she was $3.6 million off in her sales. While the error was in her favor — she made $3.6 million more than she thought she did — the IRS wanted their share.
To move forward, she needed clean books. Rather than sifting through years and years of QuickBooks files, we tied her books out to her tax return. Here’s a quick FAQ to explain what I mean:
What is a tie out to a tax return?
We take what was submitted to the IRS on the last tax return and make sure the general ledger ties to the numbers submitted on the return, regardless of the differences in the numbers.
Why do it?
A tax tie out provides clients with good beginning balances. A clean slate if you will, to start off the next fiscal year’s books.
Who needs it?
Many clients benefit from a tax tie out:
- Clients like Anna, who had a big discrepancy between her books and her tax returns, and needed to start clean.
- Clients who need to adjust their general ledger based on their tax preparer’s advice. Each year, after filing your taxes, your accountant should give you adjustments to make. For example, capitalizing equipment and making depreciation adjustments should be tracked in the general ledger to ensure you are compliant, and reduce your liabilities, in years to come. If your accountant hasn’t given you adjustment, we can review your tax return and make adjustments.
- Employees have posted transactions into a closed time period.
- You have not regularly closed your books at months end.
How does it work?
After contracting Fourlane to do the work, our consultants will ask for a copy of your most recent tax return and backup of the QuickBooks file. We will then export financials to Excel and compare them to the tax return. In the final step, we’ll create a journal entry with the results of the comparison and post the entry in your QuickBooks file.
Contact us today if you have more questions about our tie out to tax return services!