Author: Howard Tax Prep LLC

Author Trudy Howard.

Small business owners are usually busy trying to generate revenue & service customers, so they often forego checking their bank statements. In order to have a clear understanding of where your profits are going, and what your expenses are, you must do a reconciliation.

Reconciliations are also referred to as: reconciling the bank statement, bank statement reconciliation, bank reconciliation, or “bank rec.” In simple terms, a bank rec is the process of comparing the business bank statements to the cash account in the general ledger. For example, if your cash account shows a balance of $1,000, and your bank statement shows a balance of $985, you would need to track down the missing $15. Oftentimes, the discrepancy can be caused by bank fees, outstanding checks, and unprocessed credit/debit payments, but more often than not, the discrepancy is caused by double billing, fraud, and unauthorized charges. Now that you know what a bank rec is, let’s look at the easiest way to get it done.

The easiest way to get into the habit of going over your bank statements is to choose a set day and time for your business accounting. I’ve personally found that Sunday nights work best, or Wednesday afternoons. If your bank statements are relatively short, you may want to print the statements and highlight any areas of concern that need to be addressed. Next you want to compare the statement balance to your cash account balance. Once you’ve done the comparison, you need to add 2 things to your figures: deposits in transit, interest earned. After your additions, you’ll need to deduct bank fees, outstanding checks, and journal entry errors.

Although we’ve given you the basics of reconciling an account, this is not an all inclusive article. Should you need bookkeeping services, or assistance with bank reconciliations, please contact us, or call our office at 855-743-5765.

*Tax tip–make sure to do your business accounting in your home office & DOCUMENT the hours & work performed in the home office.
 

Author: Trudy Howard, September 3 2018

Earlier today I ran across a social media post that claimed it was illegal for a store to charge a “credit card fee of .75 cent” and a comment on the post read “only in the hood.” Now, while I’m the 1st person to acknowledge that “the hood” (being defined by me as low income communities heavily populated with minorities) are targeted by unscrupulous business people, I do believe in giving accurate information when making accusations. To start, it is important to note that are differences between debit cards, credit cards, prepaid cards, surcharges, convenience fees, discounts, and minimum transaction amounts.

DISCOUNTS

Merchants are allowed to give discounts to customers that use alternate forms of payments such as cash, debit cards, or checks. For example, if have an item that normally retails for $525, you can discount the cost to $500 for those that choose with pay with cash. (Reasonable fees and rules for payment card  transactions, 2010)

CONVENIENCE FEES 

It is LEGAL for a retailer to charge a convenience fee for accepting a different form of payment not typically used by the merchant. Convenience fees must be a FLAT FEE (not a %), clearly disclosed, and charged when a customer is using an alternate payment channel. For example, if Dan’s lemonade stand usually takes payments in person, and he has a customer that wants to pay over the phone, or online, Dan can charge a convenience fee. For more information, please contact your Visa/Mastercard acquirer.

MINIMUM TRANSACTION

It is LEGAL to charge a minimum transaction amount of up to $10 for CREDIT CARDS ONLY. Debit card users cannot be subjected to a minimum transaction amount. Also, merchants must set the same minimum transaction amount for all processors (so you can’t charge $5 minimum for Visa, and $10 minimum for MasterCard). Merchants should have visible signage indicating that the minimum amount exist, but it is not mandatory.

SURCHARGE

It is ILLEGAL to charge a surcharges on a DEBIT OR PREPAID CARD; However, it is LEGAL to charge a surcharge on CREDIT CARDS. Credit card surcharges must be shown as a separate line item, and although there are varying rules & calculations, a credit card surcharge can never exceed 4%. At the time of this writing 10 states have a ban on credit card surcharges; those states are: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas—and Puerto Rico. (Visa MasterCard Antitrust settlement)

MasterCard Surcharge rules: “Merchants are permitted to apply either a brand-level surcharge or a product-level surcharge to MasterCard credit cards. A brand level surcharge is one where the merchant charges the same percentage on all MasterCard credit cards. A product level surcharge is one where the merchant imposes a surcharge on a particular MasterCard credit product. In both circumstances, the level of the surcharge is subject to a cap.” For more information, please contact your MasterCard acquirer. (Mastercard merchant rules https://www.mastercard.us/en-us/merchants/get-support/merchant-surcharge-rules.html)

Visa Surcharge rules: In the US Region or a US Territory, an Acquirer must ensure that its Merchant notifies Visa and its Acquirer in writing at least 30 calendar days before assessing a US Credit Card Surcharge. The surcharge must be added to the Transaction amount and not collected separately. Surcharges must be clearly disclosed to the Cardholder before the completion of the Transaction, and the Cardholder must be given the opportunity to cancel without penalty after the Surcharge is disclosed. For more information, please contact your Visa acquirer. (Visa merchant rules https://usa.visa.com/support/consumer/visa-rules.html)

DIFFERENCE IN DEBIT CARD, PREPAID CARD, & CREDIT CARD

Although a debit, prepaid, and credit card can often be used like a credit card, and can have the MasterCard & Visa logo, there are distinct differences between the 3.

· Debit card: Linked to a bank account.

· Prepaid card: You’ve put your own money on the card and loaded it in advance.

· Credit Card: You are borrowing money to purchase an item.

Pin based transactions are considered debit based transactions, and swipe and sign transactions are considered credit card charges.

Fact check using sources below.

Discounts & Reasonable fees and rules for payment card transactions 15 U.S. Code § 1693o–2 –  Durbin Amendment https://www.law.cornell.edu/uscode/text/15/1693o-2

Minimum Transaction amount PUBLIC LAW 111–203—JULY 21, 2010 DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT https://www.congress.gov/111/plaws/publ203/PLAW-111publ203.pdf

MasterCard Minimum Maximum Transaction https://www.mastercard.us/content/dam/mccom/ens/documents/Min_Max%20Feb%202015.pdf

MasterCard surcharge rules   https://www.mastercard.us/en-us/merchants/get-support/merchant-surcharge-rules.html

Visa Minimum Maximum Transaction https://usa.visa.com/dam/VCOM/download/merchants/minimum-transactions-credit-card.pdf

Visa Surcharge Rules https://usa.visa.com/dam/VCOM/download/merchants/sample-surcharge-disclosure-signage.pdf

Visa convenience fee, surcharge, minimum maximum https://usa.visa.com/support/consumer/visa-rules.html

Difference between debit, credit, and prepaid cards https://www.consumerfinance.gov/ask-cfpb/what-is-the-difference-between-a-prepaid-card-a-credit-card-and-a-debit-card-en-433/ 

Author Trudy Howard.

TAX QUESTION: “My sister lives with me and she receives social security. Can I claim her? If I do claim her will that mess up her benefits?”

ANSWER: This is a loaded question with many moving parts! I’ll break down the answer into pieces to make it easily understood. 1.) Although your sister lives with you, if she is providing more than 50% of her care she is not your dependent. In order for a qualifying relative to be a dependent they must meet several test. 2.) Assuming that you provide more than 50% of your sister’s care, and that her earned income is less than $4,150, (the new 2018 tax law “TCJA” taxable income threshold for dependents) and that she is truly your dependent, listed below are the qualifications for social security programs. The qualifications for social security programs will help you determine if you can claim a dependent that receives social security, and if their benefits will be affected.

SOCIAL SECURITY RETIREMENT:–IRS considers income under $25,000 nontaxable, so these amounts do not count toward the gross earned income of $4,150. If your sister is at full retirement age she can earn as much as she wants, and have unlimited resources and still receive her benefits. Claiming her as a dependent will not affect her benefits.

SOCIAL SECURITY DISABILITY:–This benefit is based on an inability to work, and work history. While there are limits on what a person can earn while on disability, they can receive help from outside sources and retain their benefits. Claiming her as a dependent will not affect her benefits.

SSI–SOCIAL SECURITY SUPPLEMENTAL INCOME--This benefit pays a small amount to those that are disabled, but don’t qualify for regular social security disability. SSI eligibility is based on a person’s access to money & assistance, (aka means, aka support, income, total household income). Per the SSA “Income is any item an individual receives in cash or in-kind that can be used to meet his or her need for food or shelter.  Income includes, for the purposes of SSI, the receipt of any item which can be applied, either directly or by sale or conversion, to meet basic needs of food or shelter.” Resources are limited to $2,000 for single people, so if a person is receiving free food, housing, etc. their benefits would be affected. Claiming this person on your tax return COULD AFFECT THEIR BENEFITS.

Although we’ve given you the basics, this is not an all inclusive article. Should you have questions, or need tax preparation assistance please contact us online, or call our office at 855-743-5765.

FACT CHECK SOURCE–IRS Notice 2018-70;

ssa.gov/ssi/text-income-ussi.html Understanding Supplemental Security Income (SSI)– SSI Income

ssa.gov social security benefits