QuickBooks and Turbo Tax

Learn about QuickBooks and Turbo Tax here

Optimize your QB data before importing to TT with these ten tips.

If you want to use QB and Turbo Tax, there are some important steps you need to do before filing the tax return. Take care of these steps to ensure that your tax returns are as accurate as possible.

1. Reconcile Accounts. All Balance Sheet accounts in the Chart of Accounts (COA) that can be reconciled should be. Here is a list of some of them:

  • Checking Accounts
  • Savings Accounts
  • Credit Card Accounts
  • Lines of Credit
  • Other Loan Accounts, such as Auto Loans

In order to reconcile them, you will need all statements going back to the last time they were reconciled, or the inception of the account.

Here's help to reconcile statements in QuickBooks?

2. Examine Customer and Vendor Balances. Run aging reports for each of these and see if there are any unapplied credits or payments. Apply them if needed. Follow this path for customers:

Reports > Customers & Receivables > A/R Aging Detail

For Vendors:

Reports > Vendors & Payables > A/P Aging Detail

3. Tax-Line Mapping. QuickBooks and Turbo Tax are a natural combination. This step is what enables you to use the two programs together. Here's how:

  • From the Company menu, select Company Information. Select the appropriate Fiscal Year, Tax Year, and Income Tax Form Used.
  • Go to the COA and enable it so you can view the tax-line mapping for each account. At the bottom of the screen, click the button that says Account. Scroll up and select Customize Columns. There are two sides to this window. You should see Tax Line on the left. Highlight it and click Add. It should now change to the right side. Click Ok.
  • Back at the COA, you can see which accounts have been assigned, and which accounts have not. To assign them, highlight each account, right click, and select Edit Account. Locate the drop-down box labeled Tax-Line Mapping. Choose the correct tax line for this account.

4. Suspense Account Clean Up. Before using QuickBooks and Turbo Tax, the Suspense account must have a zero balance.

Sometimes QB users use an account called, "Suspense." Using an account like this helps people keep their register balances accurate without needing to assign what the transaction was for. This is fine, as long as the transactions get assigned as some point. They need to be assigned before financial data can be imported to Turbo Tax.

This is because there is no corresponding tax line for "Suspense." If transactions remain in a Suspense account, they will get assigned to a tax line during the tax line mapping process. The transactions will be incorrectly reported if this happens. Make sure it doesn't and go through the Suspense account, assigning transactions correctly until it has a zero balance.

5. Create and Review Income Tax reports. These reports give you a good picture of your tax situation. Follow this path to run them:

  • Reports > Accountant & Taxes > Income Tax Preparation
  • Reports > Accountant & Taxes > Income Tax Summary
  • Reports > Accountant & Taxes > Income Tax or Detail

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6. 1099 Preparation. This isn't a QuickBooks and Turbo Tax issue, but still applies since it's for a similiar time of year. Get it set up the right way:

  • From the Edit menu, select Preferences.
  • Select the Tax:1099 preference.
  • Click the Company Preferences tab.
  • Where it says, “Do you file 1099-MISC forms,” select Yes.
  • In the Account column, select the account where the payments were posted for each type of 1099 category.

Since most QuickBooks users will only use Box 7:Nonemployee Compensation, this is probably the only 1099 Category you need to make an entry for.

Run 1099 reports to make sure the data is correct:

Reports > Vendors > 1099 Summary

If you see a column called "Uncategorized," this means that the vendor was marked as a 1099 vendor in the vendor setup screen, but the account his payment posted to is not selected in the Preferences instructions above. Go to the vendor bill, determine which account his payment posted to, and go back to the 1099 preferences and add that account as shown above.

Print your 1099s and give them to your vendors by January 31. Print the 1096 and mail it by February 28.

7. Close the Books. If you don’t close the books on a regular basis, close them once the tax return has been prepared. You will need Admin access to do this. Here’s how:

  • From the Edit menu, select Preferences.
  • Select the Accounting preference.
  • Click the Company Preferences tab.
  • The bottom area says Set Closing Date. Click the Set Date/Password button.
  • In the Date area, select the last day of the tax year for the return you just completed. For most people this will be 12/31 of the prior year.
  • Set a closing date password.

8. Purchase a Turbo Tax desktop version. Be sure to purchase the right version of Turbo Tax.

  • Sole Proprietors & single member LLCs should buy Turbo Tax Home & Business.
  • S Corps, Partnerships, multi-owner LLCs, or C Corps should buy Turbo Tax Business. Here are some S-Corp tips for those of you who are converting from sole-proprietor.
  • QuickBooks cannot be imported into Turbo Tax for Mac or Turbo Tax Online.
  • Older versions of QB cannot be imported.

9. Consider the potential disadvantages of doing your own taxes. It's true that many people can do their own taxes just fine. But many others cannot. Even though QuickBooks and Turbo Tax go together smoothly, I've seen too many incorrect returns in my practice to say, "Everybody can do it!" Be sure you are one of the ones who really can. An honest self-assessment is important!

  • Are you good with numbers? "Numbers" people are naturally better at this type of task.
  • Do you mind research? Sometimes preparing a tax return requires tax research. Some people don't mind this, but others do.
  • Did you have your return professionally prepared in the last two years or so? You can use it as a guide if your tax situation has not changed.

10. Get another set of eyes. If you decide to prepare your own return, consider having a tax professional look it over before you file. The small fee may help you sleep better at night. Click here if you want me to review your income tax return before filing.

I hope you enjoyed this article about QuickBooks and Turbo Tax.

To your success and happiness....

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