Category Archives: General

12.29 2020

Form 1099-MISC

What is Form 1099-MISC?

Form 1099-MISC is to report payments made in course of a trade or business to non-employee. Although the 1099MISC is still in use, contractor payments made in 2020 and beyond will be reported on the new form 1099-NEC.

Form 1099-Misc and Instructions

 

 

 

  • Rents (Box 1)

Enter amounts of $600 or more for all types of rents

 

  • Other Income (Box 3)

Enter other income of $600 or more required to be reported on Form 1099-MISC that is not reportable in one of the other boxes on the for

 

  • Gross Proceeds Paid to an Attorney (Box 10)

Enter gross proceeds of $600 or more paid to an attorney in connection with legal services (regardless of whether the services are performed for the payer)

 

  • Fishing Boat Proceeds (Box 5)

Enter the individual’s share of all proceeds from the sale of a catch or the FMV of a distribution in kind to each crew member of fishing boats with normally fewer than 10 crew members. A fishing boat has normally fewer than 10 crew members if the average size of the operating crew was fewer than 10

 

  • Medical Payments (Box 6)

Enter payments of $600 or more made in the course of your trade or business to each physician or other vendor or provider of medical or health care services. Include payments made by medical and health care insurers under health, accident, and sickness insurance programs. If payment is made to a corporation, list the corporation as the recipient rather than the individual providing the services. Payments to persons providing health care services often include charges for injections, drugs, dentures, and similar items. In these cases, the entire payment is subject to information reporting. You are not required to report payments to pharmacies for prescription drugs

 

  • Direct Sales (Box 7)

Enter an “X” in the checkbox for sales by you of $5,000 or more of consumer products to a person on a buy-sell, deposit-commission, or other commission basis for resale (by the buyer or any other person) anywhere other than in a permanent retail establishment. Do not enter a dollar amount in this box. The report you must give to the recipient for these direct sales need not be made on the official form. It may be in the form of a letter showing this information along with commissions, prizes, awards, etc.

 

  • Substitute Payments in lieu of dividends or interest (Box 8)

Enter aggregate payments of at least $10 of substitute payments received by a broker for a customer in lieu of dividends or tax-exempt interest as a result of a loan of a customer’s securities. Substitute payment means a payment in lieu of (a) a dividend, or (b) tax-exempt interest to the extent that interest (including original issue discount) has accrued while the securities were on loan. For this purpose, a customer includes an individual, trust, estate, partnership, association, company, or corporation.

 

  • Crop Insurance Proceeds (Box 9)

Enter crop insurance proceeds of $600 or more paid to farmers by insurance companies unless the farmer has informed the insurance company that expenses have been capitalized under section 278, 263A, or 447 of Instructions for Forms 1099-MISC and 1099-NEC.

 

  • Excess Golden Parachute (Box 13)

Enter any excess golden parachute payments. An excess parachute payment is the amount over the base amount (the average annual compensation for services includible in the individual’s gross income over the most recent 5 tax years). Find additional detail on page 11 of the Instructions for Forms 1099-MISC and 1099-NEC.

 

  • Federal tax withheld (Box 4)

Enter backup withholding. For example, persons who have not furnished their TINs to you are subject to withholding on payments required to be reported in box 1. For more information on backup withholding, including the rate, see Instructions for Forms 1099-MISC and 1099-NEC

 

12.28 2020

Bank Reconciliation

First, what is a bank reconciliation?

When you reconcile your bank account or statement, you compare your internal financial records such as bookkeeping records against the records provided by financial institutions.  A monthly reconciliation helps your business to detect discrepancies and errors as well as identify any unusual transactions that might be caused by fraud actions. In other word, this practice can help your business inefficiencies in accounting procedures.

 

         How often to reconcile bank statements?

Many business performs monthly bank reconciliation for identifying problems. It is the best to have a regular schedule and save bank statement or other related document for avoiding time-consuming task.  Some businesses with a lot of transactions, reconcile on a daily basis.  If something does not match with your record against bank statement, it might be due to timing differences that items or checks have not yet cleared. However, bookkeepers and accountants should be able to explain those differences.

 

Once you have figured out the reasons why bank statement and records do not match up, you need to record them by making adjusting journal entries.

 

Best Bank Reconciliation Practice and Tips

To reconcile bank accounts, you need to compare your internal record of transactions, balances, and descriptions to your monthly bank statement. Make sure matching the amounts and stating any memo or note for differences that requires more investigation and detail.

 

12.18 2020

Fill out your PPP Forgiveness Application Form


SBA released the official form to fill out for applying forgiveness on PPP Loan. Now that lenders are opening up for forgiveness applications. It is time to start prepare the documents need to qualify for full foreignness.

There are some documents and information requirements are universal to prove if you used the PPP Loan to cover any of following.

– Payroll costs

To prove payroll costs, you need to prepare:

  • Payroll service reports documenting wages and salaries paid to employees
  • Federal payroll tax filing (IRS Form 941 / 943)
  • State quarterly Payroll, Income, and Unemployment insurance reports
  • Receipts* for employee contributions to employee benefits
  • Receipts* for any retirement plan contributions

– Owner compensation

To prove owner compensation payments, you need t prepare:

  • 2019 Schedule C (or January to February 2020) for Sole Proprietorships
  • 2019 Form 1099-MISC (or January to February 2020) for Independent Contractors
  • 2019 Schedule K-1 (or January to February 2020) for Partnerships
  • Receipts for compensation payment

If there is more than one individual included, provide a separate document that lists the names and payments to each owner.

– Mortgage interest payments

        To prove mortgage interest payments, you need to prepare:

  • Mortgage amortization schedule or mortgage account statements
  • Receipts or cleared checks 

– Rent/ Lease payments

        To provide rent/ lease payments, you need to prepare:

  • Current Lease agreement and receipts or cleared checks 
  • Lender monthly account statements

– Utilities payments

        To prove utilities payments, you need to prepare:

  • Monthly utilities statements or involves
  • Receipts, cleared checks, or account statements

*Payment receipts, cleared checks, or account statements documenting the amount that the Borrower included in the forgiveness

What is next?

Once you have prepared all documentations, it is time to fill out the application form and upload supplemental documents into your portal.

 

Accounting Tips: Educate Your Employees

Why is it important to have strong internal control within an organization?

        A control environment is made up of a compilation of an entity’s organizational structures, policies, standards, and processes that maintain control across the organization. Having effective control environments with adequate internal control is essential for businesses to reduce the risk of asset loss and ensure reasonable assurance for stakeholders and businesses. Moreover, implementing a strong internal control, businesses establish solid protocols and procedures for their employees and partners. It allows businesses to prevent fraud and theft by separation of duties and organization of financial and management information.

Here are some best practices that should mitigate issues from happening in your business.

  • Segregation of Duties
  • Physical Controls
  • IT Controls
  • Accounting Standards and Policies 
  • Ethical Learnings

We strongly recommend to educate and train your employees for prevention of fraud as well as errors and mistakes.

Holiday Office Hours

 

The team at EJK Accounting & Tax Service wishes you peace, joy and prosperity throughout the coming year. Thank you for you continued support and partnership. We look forward to working with you in the years to come.

Reminder of Holiday Office Hours

As a reminder for all of our clients and teams, EJK Accounting & Tax Service will be closed from Thursday, December 24 to Saturday, January 3 for the holidays. We will open and back regular hours from 9 am to 5 pm on Monday,January 4. If you need to contact our team on the holidays, please reach out us by emailing [email protected] We appreciate your support and wish you the happiest of holiday!