Bookkeeper vs CPA: Here's How to Tell Which One You Need

A bookkeeper keeps your day to day financial records accurate: entering transactions, reconciling accounts, and making sure your books are ready when tax season hits. A CPA is licensed to prepare and sign tax returns, represent you before the IRS, and advise on tax strategy and bigger financial decisions, work a bookkeeper legally cannot do. Most Idaho Falls business owners need CPA guidance the moment taxes, growth, or an IRS letter enter the picture, with bookkeeping running underneath as the ongoing support that keeps that guidance accurate. Plenty of businesses use both, handled by the same firm.

If you have ever typed "bookkeeper vs cpa" into Google at 11pm while staring at a shoebox of receipts, you are not alone. The two roles get lumped together constantly, and the confusion is expensive: hire a CPA to do data entry and you are paying $200 an hour for work a bookkeeper handles for a fraction of that. Skip the CPA when you actually need one and you risk a missed deduction, a penalty, or an IRS notice you do not know how to answer.

What Does a Bookkeeper Actually Do?

A bookkeeper is the person keeping your financial data clean on an ongoing basis. That typically includes:

• Recording daily sales, expenses, and payments
• Reconciling bank and credit card statements
• Tracking accounts payable and receivable
• Running payroll
• Producing monthly financial reports for your own use

Bookkeepers are not required to hold a license. Many pursue voluntary credentials like the Certified Bookkeeper designation through the American Institute of Professional Bookkeepers, but there is no state licensing board involved, and no legal requirement to hold one to practice.

What Does a CPA Actually Do?

A Certified Public Accountant holds a state issued license. In Idaho, the Idaho State Board of Accountancy requires 150 semester hours of college education, passing the Uniform CPA Exam, and supervised experience under another licensed CPA before the license is granted. CPAs also complete continuing education every year to keep it active. This is really an accountant vs cpa distinction at its core: a CPA is a specific, licensed type of accountant, while plenty of people who call themselves accountants have never taken the exam.

That license unlocks work a bookkeeper legally cannot do:

• Representing you before the IRS in an audit, appeal, or collections matter under IRS Circular 230 (bookkeepers have very limited representation rights, and only for returns they personally prepared)
• Preparing reviewed or audited financial statements for a bank or investor
• Strategic tax planning, not just tax filing
• Advising on business structure, major purchases, or growth decisions with real tax consequences

A CPA can also do everything a bookkeeper does. In practice, most CPAs delegate the daily data entry to a bookkeeper and focus their time on the higher stakes work their license is actually for.

The Questions That Actually Tell You Which One You Need

Skip the personality quiz version of this decision. Ask yourself these instead:

• Have you gotten a letter from the IRS? That is a CPA conversation immediately. A bookkeeper cannot negotiate with the IRS on your behalf.
• Are you just trying to stay organized, or are you trying to reduce what you owe? Staying organized is bookkeeping. Reducing your tax bill through timing, structure, or planning is CPA territory.
• Is your business structure getting more complicated? A single member LLC with a handful of transactions a month often runs fine with lighter bookkeeping support. An S-corp, multiple revenue streams, or employees usually benefits from CPA involvement.
• Do you need financial statements a bank or investor will actually trust? Bookkeepers generally cannot prepare reviewed or audited statements. That requires a CPA.
• Are your books currently a mess? That is not a reason to shop for a separate discount bookkeeper. A CPA firm that also handles bookkeeping can clean up months of uncategorized transactions under the same roof that will eventually prepare your return, which avoids paying twice to hand records off between two vendors.

What It Costs: Bookkeeper vs CPA

Bookkeeping services commonly run in the range of $250 to $700 a month depending on transaction volume, or $40 to $80 an hour for freelance bookkeepers. CPA rates typically run $150 to $400 an hour, with monthly retainers for ongoing CPA services often landing between $600 and $2,000 or more depending on the complexity of the work.

The costlier mistake is usually the quiet one: staying with bookkeeping alone once a business has outgrown it. A missed deduction, the wrong entity structure, or an unanswered IRS notice runs well past the difference between a bookkeeper's rate and a CPA's. Paying CPA rates for routine data entry is inefficient too, which is exactly why a firm that offers both can fold bookkeeping into the relationship instead of billing every task at CPA rates.

You Do Not Have to Choose One Firm for Bookkeeping and Another for CPA Work

Poston Denney & Killpack, in business in Idaho Falls since 1984, offers both under one roof, which is the piece most comparison guides leave out entirely: they assume you are shopping two separate vendors. A lot of Idaho Falls business owners start with QuickBooks setup and bookkeeping support and add CPA level tax planning and IRS representation as the business grows, without switching firms or re-explaining their history to someone new. You can see the full range of business accounting services PDK provides, from day to day bookkeeping through audit and advisory work.

When You Need Both

Most growing businesses eventually use a bookkeeper and a CPA together, not instead of each other. The bookkeeper keeps the data clean all year. The CPA uses that clean data to file accurately, plan ahead, and step in if the IRS ever comes calling. Trying to skip the bookkeeping layer usually means your CPA spends billable hours cleaning up records instead of doing the strategic work you are actually paying for.

Frequently Asked Questions

Can a bookkeeper prepare my tax return?

A bookkeeper can prepare a tax return if they hold a Preparer Tax Identification Number, but they cannot represent you before the IRS in an audit or dispute, and they typically do not provide tax planning or strategy. For anything beyond a straightforward filing, a CPA is the safer choice.

Is an accountant the same as a CPA?

No. "Accountant" is a general title anyone can use, while "CPA" refers specifically to someone who passed the Uniform CPA Exam and holds a state license. All CPAs are accountants, but not all accountants are CPAs.

How do I know if my books are too messy for a bookkeeper to fix?

They are not. Cleaning up disorganized or out of date books is exactly what a bookkeeper does, regardless of how far behind things have gotten. The more overdue the cleanup, the more it costs to wait.

Do I need a CPA if I only have a small side business?

Filing taxes accurately, even for a small side business, is CPA territory the moment self-employment tax, quarterly estimates, or real deductions get involved. Day to day bookkeeping needs are usually lighter at that stage, but most owners find it easier to have both handled by the same firm from the start rather than outgrowing a standalone bookkeeper later and having to switch.

What happens if I use a bookkeeper and then get audited?

A bookkeeper has very limited representation rights and generally cannot negotiate with the IRS on your behalf. You would need to bring in a CPA, enrolled agent, or attorney at that point, which is why many businesses prefer having a CPA relationship in place before an audit happens.

Can I switch from a bookkeeper to a CPA later without starting over?

Yes, and it is common. The cleaner your books are when you make the switch, the faster a CPA can pick up where the bookkeeper left off. Working with a firm that offers both makes that transition simpler since your history and records stay in one place.

Ready to Figure Out Which One You Need?

Poston Denney & Killpack has been sorting out exactly this question for Idaho Falls business owners since 1984. Call (208) 522-0886 and talk through your specific situation with someone who can tell you straight whether you need a bookkeeper, a CPA, or both.

S-Corp Vs. LLC In Idaho: Which One Actually Saves You More In Taxes?

Short answer: if your business nets more than about $40,000 to $50,000 a year after paying yourself a fair salary, electing S corp tax status on your LLC will likely save you money on self employment tax. Below that, the LLC's simplicity usually wins. In Idaho specifically, the math tilts slightly further in the LLC's favor at the low end, since Idaho's flat 5.3% income tax and $100 formation fee already keep costs low no matter which way you go.

"Should I be an LLC or an S corp?" is the wrong question. Here is the real one: should your LLC elect to be taxed as an S corp? An LLC is a legal structure. An S corp is a tax election. You can have both at once, and most small business owners in Idaho Falls who benefit from S corp taxation do exactly that.

Here is how the numbers actually break down, what it costs to make the switch, and where Idaho's tax rules change the calculation. If you would rather have someone run your actual numbers than estimate from an article, our business tax planning services cover exactly this kind of entity and election decision.

What Is An LLC, And How Does The IRS Tax It By Default?

A limited liability company protects your personal assets from business debts and lawsuits. That protection is a legal matter, separate from taxes.

By default, the IRS treats a single-member LLC as a disregarded entity. You report income and expenses on Schedule C of your personal return. Multi-member LLCs file as partnerships. Either way, every dollar of net profit is subject to self employment tax, which covers Social Security and Medicare.

For 2026, self employment tax is 15.3%: 12.4% for Social Security, on the first $184,500 of net earnings according to the Social Security Administration's 2026 contribution and benefit base, and 2.9% for Medicare, which has no cap. The tax applies to 92.35% of your net profit, not the full amount, which accounts for the fact that half of self employment tax is deductible.

So if your Idaho Falls business nets $100,000 in profit as a default LLC, your self employment tax works out to roughly $14,130, on top of regular income tax.

What Does It Mean To Elect S Corp Tax Status?

An S corp is not a business entity. It is a tax classification under Subchapter S of the Internal Revenue Code. An LLC can elect S corp taxation by filing Form 2553 with the IRS. Your legal structure, registered agent, and operating agreement stay exactly the same. Only the tax treatment changes.

The election splits your income into 2 buckets: salary and distributions. You must pay yourself a reasonable salary for the work you do, and that salary is subject to payroll taxes. Distributions taken above that salary are not subject to self employment or payroll tax. That is the entire reason this election exists for small business owners.

The Real Math: What S Corp Election Actually Saves

Take a business netting $110,000 a year, a fairly typical profile for an established Idaho Falls service business or consulting practice.

As a default LLC: Self employment tax base is 92.35% of $110,000, or $101,585. At 15.3%, that comes to about $15,543 in self employment tax.

As an LLC electing S corp taxation, with a $58,000 reasonable salary: Payroll tax on the $58,000 salary runs 15.3%, or about $8,874. The remaining $52,000 taken as a distribution owes no payroll tax. Total employment tax: roughly $8,874.

That is a gross savings of about $6,669 a year. Subtract the added cost of running payroll and filing a separate corporate return, typically $2,000 to $3,000 a year for a business this size, and the net savings still lands around $3,700 to $4,700 annually. Over 5 years, that is close to $20,000 staying in the business owner's pocket instead of going to FICA.

The number that matters is not your revenue. It is net profit after expenses, and the salary has to hold up as genuinely reasonable for your role. More on that below.

Does Idaho's Flat Tax Change The Math?

Idaho taxes personal income at a flat 5.3% rate, according to the Tax Foundation's 2026 state tax data, regardless of entity structure. Both an LLC and an S corp election pass income through to your personal return, so Idaho's state income tax hit is identical either way. State income tax is not where the savings or the cost lives here. Self employment tax is a federal tax, and that is where the real difference plays out.

Where Idaho does help: forming an LLC here is inexpensive. The Idaho Secretary of State charges $100 for an online Certificate of Organization, there is no franchise tax, and the annual report is free. That keeps the baseline cost of operating as an LLC low, which matters when you are weighing whether the added S corp compliance cost is worth it at your specific profit level.

When Does The S Corp Election Actually Make Sense?

• Under $40,000 in net profit: The election rarely pays off. Payroll setup, quarterly filings, and a separate tax return typically cost more than the self employment tax you would save.
• $40,000 to $60,000: This is the judgment zone. It depends on your specific salary requirement, whether you are comfortable running payroll, and your growth trajectory.
• Above $60,000: The election usually saves real money, and the savings grow as profit grows.

These are general guidelines, not a formula. The right answer depends on what a reasonable salary looks like for your specific role and industry, which is exactly the kind of number that needs an actual accountant running your actual figures rather than a rule of thumb from an article.

What The S Corp Election Costs You

The savings are real, but so are the added obligations:

• Running payroll and issuing yourself a W-2, which usually means a payroll service
• Filing Form 1120-S for the business, separate from your personal return
• Issuing a Schedule K-1 to each shareholder
• Documenting that your salary is genuinely reasonable, since the IRS can reclassify distributions as wages, with back taxes and penalties, if it is not

Clean books matter more once you're splitting salary from distributions instead of just tracking one pass-through number. If your bookkeeping isn't already set up to separate the two clearly, our QuickBooks services can get that structured correctly before your first payroll run.

There is also a quieter cost: the Qualified Business Income deduction. Under Section 199A, up to 20% of qualified business income can be deducted, but S corp salary does not count toward that deduction, only distributions do. A higher salary means a smaller QBI deduction. In most cases the self employment tax savings still outweigh the lost deduction, but it needs to be modeled alongside the payroll tax math, not ignored.

3 Mistakes Idaho Business Owners Make With This Decision

1. Setting salary too low. Paying yourself $25,000 and taking $85,000 in distributions to dodge payroll tax is exactly the pattern the IRS looks for. "Reasonable" gets measured against what someone in your role and industry would actually earn.
2. Ignoring the compliance cost. Plenty of online calculators show the gross tax savings and stop there. The real question is net savings after payroll and filing costs, not the headline number.
3. Electing too early. Making the S corp election before your business has stable, predictable profit makes it hard to set an appropriate salary and can cost more than it saves in a slow year. Getting your bookkeeping set up correctly from the start makes that profit picture a lot easier to see clearly.

Frequently Asked Questions

Can an LLC elect S corp taxation without changing its legal structure?
Yes. Filing Form 2553 with the IRS changes how the business is taxed, not its legal status. You remain an LLC under Idaho law, with the same operating agreement and registered agent requirements.

Is an S corp always cheaper than an LLC for taxes?
No. Below roughly $40,000 in net profit, payroll and filing costs for an S corp typically outweigh the self employment tax savings. The LLC's default taxation is usually the better fit at that level.

Does Idaho's state income tax change based on my entity's tax status?
No. Idaho's flat 5.3% rate applies to pass-through income the same way whether you are a default LLC or an LLC taxed as an S corp. The difference between the two shows up in federal self employment and payroll tax, not state income tax.

What counts as a "reasonable salary" for an S corp owner?
There is no fixed IRS percentage or formula. It depends on your role, industry, experience, and what a comparable employee would earn for the same work. This is one of the areas where working with a CPA who knows your specific business matters most.

When is the deadline to elect S corp status for the current tax year?
Generally March 15 for calendar-year businesses, though late election relief is available in some circumstances. Missing the deadline usually means waiting until the following tax year.

Do I need payroll if my LLC elects S corp taxation?
Yes, without exception. Shareholder-employees must receive W-2 wages through a proper payroll system. There is no workaround for this requirement.

Get the Actual Numbers For Your Business

Rules of thumb are a starting point, not an answer. Whether the S corp election makes sense for you depends on your specific profit, your reasonable salary, and your tolerance for the added paperwork. Poston Denney & Killpack has been running these numbers for Idaho Falls business owners since 1984. Call (208) 881-8107 or visit our business services page to talk through your situation and find out what the switch would actually mean for your bottom line.

How To Catch Up On Late Business Taxes Without Losing Your Mind

If your business is behind on business taxes, the fastest way to limit the damage is to stop avoiding the problem and file the missing returns first, even if you cannot pay the full amount yet. The IRS charges separate penalties for filing late and paying late, so filing quickly is what actually saves you money. From there, payment plans, penalty relief, and professional help can get your business fully caught up without losing everything you have built.

Why Idaho Falls Business Owners Fall Behind On Business Taxes

Falling behind on business taxes rarely happens because someone is trying to dodge the IRS. It usually happens because cash got tight one quarter and payroll tax withholdings covered payroll instead of getting sent in. It happens because quarterly estimated payments got missed during a busy season, or bookkeeping fell 3 or 4 months behind and nobody noticed until the deadline had already passed. None of that makes the problem less serious, but it does mean you are not the first Idaho Falls business owner to be in this spot, and it is fixable.

Step 1: Open The Mail And Stop Avoiding The IRS

The IRS does not shut down a business the moment a return is late. Before any serious collection action, the agency typically sends several written notices over a period of months, each one giving you a chance to respond. Ignoring those notices is the single most common way a manageable problem turns into a serious one. If you have unopened IRS mail sitting in a drawer right now, that is the first thing to deal with, not the payment amount.

Step 2: Gather What You Need To File

Before you or your accountant can file a late return, you need the paperwork behind it. Pull together:

• Prior year business bank and credit card statements
• Payroll records and any W-2s or 1099s issued
• QuickBooks or bookkeeping records for the periods in question
• Copies of any prior filed returns
• Your EIN and any IRS notices already received

If records are missing or your bookkeeping fell behind, an IRS wage and income transcript can help reconstruct what was already reported to the agency, which is often the fastest way to rebuild an accurate picture.

Step 3: File The Late Returns First, Even If You Cannot Pay In Full

A lot of business owners assume there is no point filing a return until they can pay the full balance. That is not accurate, and it is the mistake that costs the most money. The failure-to-file penalty runs about 5 percent of the unpaid tax for each month a return is late, up to a 25 percent cap. The failure-to-pay penalty is a separate, much smaller 0.5 percent per month. Filing the return as close to on time as you can manage, and paying later, is almost always cheaper than waiting to file until you have the money.

Step 4: Deal With What You Actually Owe

Once the returns are filed, you have real options for the balance itself.

According to the IRS, businesses that owe less than $25,000 in combined tax, penalties, and interest from the current and prior tax year can apply online for a long-term payment plan and make monthly payments for up to 24 months. Balances between $10,000 and $25,000 are required to use direct debit. If your business owes more than $25,000, you will need to work directly with the IRS, or with a CPA who can negotiate on your behalf, to set up a different type of arrangement.

If this is the first time your business has fallen behind, ask about first-time penalty abatement. The IRS will often waive failure-to-file and failure-to-pay penalties for a first-time offense if your filing history is otherwise clean.

For businesses that genuinely cannot pay the full balance even with more time, an offer in compromise allows you to settle the debt for less than what you owe, based on your income, assets, and ability to pay. These are not quick or easy to get approved, which is exactly where a CPA who has done this before earns their fee.

Common Mistakes That Make A Bad Tax Situation Worse

• Waiting to file until you can pay in full, which lets the larger failure-to-file penalty keep growing
• Ignoring IRS notices instead of opening and responding to them
• Trying to negotiate a payment plan without knowing what your business actually qualifies for
• Focusing only on old debt while falling further behind on the current year's taxes

You do not have to sort this out alone, and you do not need all the answers before you call. Bruce Denney, CPA and CVA, and Kevin Killpack, CPA, have helped Idaho Falls businesses work through IRS problems since 1984, from unfiled returns to payment plan negotiations. Call Poston Denney & Killpack at (208) 522-0886 to talk through where things stand, or take a look at our business accounting services to see how we help outside of tax season too.

Frequently Asked Questions

What happens if my business does not file taxes on time?

If your business misses a filing deadline, the IRS applies a failure-to-file penalty of about 5 percent of the unpaid tax for every month the return is late, up to a maximum of 25 percent. A separate failure-to-pay penalty of 0.5 percent per month also applies to any unpaid balance, and interest accrues on top of both. Filing the return as soon as possible, even without payment, stops the larger of the 2 penalties from continuing to grow.

Can the IRS shut down my business for unpaid taxes?

In serious, long-ignored cases, yes. The IRS can file a lien against business assets or levy a business bank account, which can make it impossible to make payroll or pay vendors. In practice, this happens after a business has ignored multiple written notices over months, not as an immediate first step, which is why responding early matters.

Will I go to jail for owing business taxes?

No, simply owing back taxes or falling behind on filing is not a criminal matter, and most businesses that work with the IRS resolve it through payment plans or settlements. Jail time is reserved for willful tax evasion or fraud, such as deliberately hiding income, not for honest cash flow problems or missed deadlines.

How do I set up an IRS payment plan for my business?

Businesses that owe less than $25,000 in combined tax, penalties, and interest from the current and prior tax year can apply for a long-term payment plan online through the IRS Online Payment Agreement tool, with up to 24 months to pay. Balances between $10,000 and $25,000 require automatic direct debit payments. Businesses owing more than $25,000 need to contact the IRS directly or work with a CPA to arrange a different type of agreement.

What is an IRS offer in compromise?

An offer in compromise is an agreement that lets a business settle its tax debt for less than the full amount owed, based on the IRS's assessment of income, assets, and ability to pay. It is intended for businesses that genuinely cannot pay their full balance even with a payment plan, and applications are frequently denied when they are not carefully prepared, which is why most businesses pursue this option with a CPA's help.

Should I hire a CPA if I am behind on business taxes?

Yes, especially once more than one tax period is involved or the IRS has already sent a notice. A CPA can help you file accurately, figure out which payment option your business actually qualifies for, and, in serious cases, communicate with the IRS directly so you are not doing it alone. The earlier you bring someone in, the more options are usually still on the table.

How to Know If Your QuickBooks Books Are Actually Accurate (And What to Do If They're Not)

If your QuickBooks reports look fine but something still feels off, trust that feeling. Accurate books mean every transaction is recorded, categorized correctly, and reconciled against your actual bank and credit card statements, not just entered and left alone. You can check this yourself in about 10 minutes using 4 reports inside QuickBooks. If the numbers don't hold up, the fix depends on how far behind things are, and in some cases it's a quick correction rather than a full cleanup project.

Why "It Looks Fine" Doesn't Mean It's Accurate

A lot of business owners assume that if QuickBooks isn't throwing errors and the Profit and Loss report generates without a hitch, the books are accurate. That's not true.

QuickBooks will happily generate a clean-looking report from bad data. It doesn't know that a $4,000 deposit was recorded twice, that a loan payment got logged entirely as an expense instead of split between principal and interest, or that 3 months of transactions are sitting in "Uncategorized Expense" waiting to be sorted. The software isn't checking your work. It's just doing math on whatever you gave it.

That's the gap between "the report ran" and "the report is right."

The 10-Minute Accuracy Check You Can Run Right Now

Before you assume anything, pull up these 4 reports and look for the specific red flags below.

1. Reconciliation status. Go to Settings and check whether your bank and credit card accounts are marked as reconciled through last month. If reconciliation hasn't happened in 60 days or more, nothing downstream can be trusted, because reconciliation is the step that confirms QuickBooks matches your actual bank statement.

2. Balance sheet. Pull up your balance sheet and look at 3 accounts specifically: Undeposited Funds, Accounts Receivable, and any loan balance. If Undeposited Funds has a growing balance instead of clearing out regularly, deposits aren't being matched to the invoices or sales that created them. If a loan balance on the sheet doesn't match your most recent loan statement, principal and interest are probably being recorded incorrectly.

3. Accounts Receivable and Accounts Payable aging reports. Run both. If you see invoices marked unpaid that customers actually paid months ago, or vendor bills sitting open that you know are settled, your aging reports are inflating what you're owed and what you owe.

4. Uncategorized Income and Uncategorized Expense. Search your Chart of Accounts for these 2 categories. Any balance here means transactions were recorded but never assigned to a real account. Even $500 sitting in Uncategorized Expense means your P&L is incomplete for that period.

If all 4 come back clean, your books are in good shape. If even one doesn't, keep reading.

The Signs Your Books Have a Real Problem

Beyond the 10-minute check, watch for these patterns over time:

• Your bank balance and QuickBooks balance are frequently different by more than a small timing gap
• The same vendor or customer shows up twice with slightly different spellings
• Negative balances appear in accounts that should never go negative, like inventory or a bank account
• Your bookkeeper, or you, only trust the P&L after manually adjusting it each month
• Payroll or sales tax entries don't match what was actually filed and paid
• You've gone more than one full quarter without a completed bank reconciliation

Any one of these on its own might be a quick fix. Several at once usually means the books have drifted further than a single afternoon can correct.

What Happens If You Ignore It

Here's the part most guides skip: balance sheet errors don't stay contained. They carry forward. A miscoded deposit from March is still sitting in the wrong account in November, and every report you pull in between is built on top of that error.

That matters most at 2 points. First, when you're making a real business decision, like whether you can afford to hire, based on a cash position that isn't real. Second, and more urgent for a CPA firm to flag: when it's time to file. A tax return prepared from books with miscoded income, missing expenses, or an inaccurate sales tax payable account will contain errors that follow you into the filing itself. Accurate books aren't just good practice, they're what the IRS expects small businesses to maintain in the first place. Cleaning up the books after the return is filed is a much harder conversation than cleaning them up before.

DIY Cleanup vs. When to Call a CPA

Not every messy file needs a professional. Here's a straightforward way to sort it:

Handle it yourself if:

• You're behind less than 60 days
• The issue is limited to categorization, not reconciliation
• You have access to all your bank and credit card statements for the period in question
• No payroll, sales tax, or loan accounts are involved

If you handle it yourself, PDK also offers QuickBooks setup and QuickBooks training for Idaho Falls business owners who want a professional to double-check the file structure without a full cleanup engagement.

Call a CPA if:

• Reconciliation has been skipped for more than a quarter
• Balance sheet accounts (loans, equity, Undeposited Funds) look wrong and you're not sure why
• Payroll or sales tax entries don't match filings
• You're approaching a tax deadline and don't trust the numbers feeding into it
• Multiple people have had access to the file and changes can't be traced

The second list is exactly where a project-based cleanup, done once, done right, and reconciled against real statements, saves more time than it costs.

What Cleanup Looks Like at Poston Denney & Killpack

Most QuickBooks cleanup services stop at handing back a reconciled file. Poston Denney & Killpack has been an Idaho Falls CPA firm since 1984, and the same team that cleans up your books is the team that will use them to prepare your tax return, so the cleanup is done with that end result in mind, not just a tidy-looking report.

Bruce Denney, CPA and CVA, has over 20 years of public accounting and tax experience, and Kevin Killpack brings accounting and management consulting experience across small and large businesses. That means a cleanup isn't handed off to someone unfamiliar with what the IRS and Idaho state filings actually require from your chart of accounts. It's reviewed by the same CPAs who sign your return.

PDK is also BBB accredited with an A+ rating, and the firm has built its reputation in Idaho Falls on personalized service rather than passing clients off to whoever's available. If you'd rather talk to the same person each time instead of a rotating support queue, that's the model here.

Frequently Asked Questions

How do I know if my QuickBooks needs a cleanup or just a quick fix?
Run the 10-minute check above. If only categorization is off and you're less than 60 days behind, a quick fix usually covers it. If reconciliation has lapsed for a quarter or more, or balance sheet accounts don't match real statements, that's a cleanup project, not a quick fix.

Will a QuickBooks cleanup affect my past tax returns?
No, as long as the periods covered by already-filed returns stay locked and untouched during cleanup. A CPA doing the work should confirm this with you before making any changes to closed periods.

How long does a QuickBooks cleanup take?
Most cleanup projects take 1 to 3 weeks, depending on how many months are unreconciled and how many accounts are involved. A file that's 2 months behind takes far less time than one that's 2 years behind.

Can I clean up QuickBooks myself?
Yes, for smaller issues like uncategorized transactions or a few months of missed reconciliation. Once payroll, sales tax, or loan accounts are involved, or you're unsure why a balance is wrong, professional review prevents a second round of corrections later.

What's the difference between QuickBooks cleanup and monthly bookkeeping?
Cleanup is a one-time project to bring historical books to an accurate, reconciled baseline. Monthly bookkeeping is the ongoing work that keeps books accurate going forward so cleanup doesn't become necessary again.

Does a messy QuickBooks file actually affect my taxes?
Yes. If income is miscoded, expenses are missing or duplicated, or sales tax payable doesn't reflect what was actually collected, those same numbers flow directly into the return prepared from them.

Ready to Find Out Where Your Books Actually Stand?

Run the 10-minute check above. If something doesn't add up, or you'd rather have someone else confirm it, Poston Denney & Killpack has been helping Idaho Falls business owners keep accurate books, and accurate tax returns, for over 40 years. Contact PDK to talk through what your file actually needs.

Tax Refund FAQs: When to Expect Your Refund and How to Track It

 

Filing your tax return is an important financial task, and most taxpayers eagerly anticipate their refund. Understanding the process can help ensure you receive your money as quickly as possible. Below, we answer common questions about tax refunds, tracking your refund status, and potential delays.

When Can You Expect Your Tax Refund?

The timeframe for receiving your refund depends on how you file your tax return. If you e-file and choose direct deposit, you can expect your refund faster—usually within 21 days. However, if you file a paper return, it may take six weeks or more.

The IRS provides the following general guidelines for refund processing times:

• E-filed return with direct deposit: 21 days

• E-filed return with a paper check: 4-6 weeks

• Paper return with direct deposit: 4-6 weeks

• Paper return with a paper check: 6-8 weeks

Keep in mind, these timeframes may change due to IRS processing delays, holidays, or increased filing volumes.

How Can You Track Your Refund Status?

You can check the status of your refund using the IRS "Where’s My Refund?" tool on the IRS website. To track your refund, you need the following information:

• Your Social Security number or ITIN

• Your filing status (single, married filing jointly, etc.)

• Your exact refund amount

You can also track your refund through the IRS2Go mobile app or by calling the IRS refund hotline. If you filed electronically, your status should be available within 24 hours. If you mailed your return, allow four weeks before checking.

What Factors Can Delay Your Refund?

Several issues may slow down your refund processing, including:

1. Errors on Your Tax Return

If there are errors in your return, such as incorrect Social Security numbers, mismatched income figures, or missing information, the IRS will need additional time to process your refund.

2. Identity Theft or Fraud

If the IRS detects possible fraud or identity theft, they may place a hold on your refund while verifying your identity. You may receive a security notice requesting additional details.

3. Filing a Paper Return

A paper return takes longer to process than an e-filed return. To receive your refund faster, file electronically and opt for direct deposit.

4. Owing Child Support, Back Taxes, or Other Debts

If you owe past-due child support, unpaid income tax, or federal debts such as student loans, the IRS may use your refund to pay these obligations. You will receive a notice explaining the offset.

5. Issues With Your Bank Account

If your financial institution rejected your direct deposit refund due to an incorrect account or routing number, the IRS will mail a refund check to the taxpayer’s address on file.

What If Your Refund Goes to the Wrong Account?

If you mistakenly entered the wrong account number when filing, the IRS cannot recover the money once it has been deposited. You will need to contact the financial institution to request a reversal. If the bank cannot return the funds, you must notify the IRS and file a claim using Form 3911.

To avoid this issue, always double-check your bank account and routing numbers before submitting your return.

Can You Split Your Refund Between Multiple Accounts?

Yes, the IRS allows you to direct deposit your refund into up to three accounts using Form 8888. However, you cannot split it between a joint account and a single financial account in your own name.

What If You Move Before Receiving Your Refund?

If you change your taxpayer’s address after filing, the IRS will mail your refund check to the old address unless you update your information. To update your address, you can:

• File Form 8822 to officially change your address

• Contact the IRS and provide your new details

• Notify your financial institution if receiving a direct deposit

What If Your Refund Is Lower Than Expected?

If your refund check is smaller than expected, the IRS may have adjusted your return due to child support, debts, or math errors. You will receive a notice explaining the changes. If you disagree, you can file a request for reconsideration.

What Happens If You Don’t Receive Your Refund?

If your refund has not arrived within the expected timeframe, check your refund status using the IRS tracking tool. If the tool shows the refund was issued but you have not received it, you may need to:

• Verify your bank account information if you opted for a direct deposit refund

• Confirm your mailing address if expecting a paper check

• File Form 3911 to report a missing refund

Final Thoughts

Understanding these tax refund FAQs can help you navigate the refund process smoothly. Filing your tax return accurately and choosing direct deposit ensures you receive your refund as quickly as possible. If delays occur, check your refund status, verify your bank account, and ensure your taxpayer’s address is correct.

For additional assistance, contact Poston, Denney, & Killpack, CPA. We’re here to help you with all your taxes, ensuring you get the money you deserve without unnecessary delays.

When Can You Start Filing Taxes 2024: A Guide by Poston, Denny, and Kilpack, CPAs in Idaho Falls

 As the dawn of the 2024 tax filing season approaches, individuals and businesses alike are gearing up to navigate the intricate landscape of federal income taxes. To make this journey smoother and more rewarding, the expert CPAs at Poston, Denny, and Kilpack in Idaho Falls have compiled a comprehensive guide to help you understand the ins and outs of the upcoming tax season.

Getting Started: Key Dates and Initiatives

The excitement and anticipation surrounding the tax season often lead to the pressing question, "When can you start filing taxes in 2024?" The answer lies in the usual rhythm of the tax calendar. The tax filing season typically kicks off in late January, with the Internal Revenue Service (IRS) opening its doors to taxpayers eager to submit their federal income tax returns.

1. Opening Date for 2024 Tax Filing Season

The IRS has traditionally announced the opening date for tax season around mid-January. Keep an eye out for this announcement, as it marks the starting point for filing your returns.

2. Inflation Reduction Act Updates

The Inflation Reduction Act plays a significant role in shaping the tax landscape each year. Stay informed about any changes it brings to tax brackets, deductions, and credits for the 2024 tax season.

Leveraging the Expertise of CPAs: Why Choose Professional Assistance?

Navigating the complexities of tax laws and maximizing your returns requires expertise. Poston, Denny, and Kilpack emphasize the importance of seeking professional assistance during the tax season.

3. Tax Professionals at Your Service

Engaging the services of a qualified CPA ensures that your tax returns are accurate, compliant, and optimized for maximum benefits. Our team at Poston, Denny, and Kilpack is well-versed in the ever-evolving tax code and can provide personalized guidance tailored to your unique financial situation.

4. The Role of Tax Counseling

Tax counseling is an integral part of our services. We assist clients in understanding the implications of tax law changes, maximizing deductions, and planning for future tax obligations.

Important Considerations During Tax Season

As you prepare for the 2024 tax filing season, certain considerations demand your attention to ensure a smooth and hassle-free experience.

5. Electronic Filing: Fast and Efficient

In an era dominated by technology, filing your tax returns electronically is not only convenient but also speeds up the processing time. Learn about the IRS Free File initiative, which allows eligible taxpayers to file their federal income taxes for free using IRS-approved software.

6. Direct Deposit for Swift Refunds

Opting for direct deposit ensures that your tax refund is deposited directly into your bank account, significantly reducing the waiting time compared to receiving a paper check in the mail.

7. Child Tax Credit and Earned Income Tax Credit Updates

Stay abreast of any changes or updates to tax credits, such as the Child Tax Credit and Earned Income Tax Credit. These credits can have a substantial impact on your tax liability and potential refund.

8. Additional Child Tax Credit

For those with qualifying dependents, the Additional Child Tax Credit is a vital consideration. Poston, Denny, and Kilpack can guide you through the eligibility criteria and help you maximize this credit.

Navigating the Process: Tools and Resources

The IRS provides various tools and resources to assist taxpayers in the filing process.

9. Where's My Refund?

The "Where's My Refund?" tool offered by the IRS allows taxpayers to track the status of their refunds. Our experts recommend using this tool to stay informed about the progress of your tax return.

10. Free File Options for Eligible Taxpayers

Explore the IRS Free File options available to eligible taxpayers. This initiative provides free access to reputable tax software for those within specified income limits.

Conclusion: Empowering You for a Successful Tax Season

As the 2024 tax filing season approaches, arming yourself with the right information and professional support can make all the difference. Poston, Denny, and Kilpack are committed to guiding you through the complexities of federal income taxes, ensuring that you make informed decisions for your financial well-being.

Remember, the key to a successful tax season lies in staying informed, leveraging available resources, and partnering with trusted professionals. With Poston, Denny, and Kilpack by your side, you can navigate the 2024 tax season with confidence and achieve the best possible outcomes for your personal and business finances.

Court defines "financial interest" and makes other FBAR rulings

This article was originally published by Thompson Reuters in their Checkpoint Newsletter for Tax Preparation Professionals and CPAs on February 1st, 2019. Poston, Denney, & Killpack, PLLC does not claim any ownership or copyright of this article nor is any implied by our republishing of this material. All rights reserved by the original and respective author(s).

Horowitz, (DC MD 1/18/2019) 123 AFTR 2d ¶2019-362

A district court has ruled on various issues regarding the Report of Foreign Bank and Foreign Accounts (FBAR), including the statute of limitations for assessing FBAR penalties and the definitions of various FBAR terms, including the term "financial interest".

Background. Under 31 USC 5314(a) and 31 CFR 1010.350, every U.S. person that has a financial interest in, or signature or other authority over, a financial account in a foreign country must report the account to IRS annually on an FBAR. The penalty for violating the FBAR requirement is set forth in 31 USC 5321(a)(5). 31 USC 5321(a)(5)(A) provides that the Secretary of the Treasury may impose a civil money penalty on any person who violates, or causes any violation of 31 USC 5314(a). The maximum amount of the penalty depends on whether the violation was non-willful or willful. (31 USC 5321(a)(5)(B))

The statute of limitations for assessing civil penalties for FBAR violations of 31 USC 5314 is six years, and it begins to run on the date that the FBAR is due. (31 USC 5321(b)(1))

Facts. United States citizens Peter Horowitz and Susan Horowitz lived in Saudi Arabia for most years between '84 and 2001. Beginning in '88, they maintained a Swiss bank account at the Union Bank of Switzerland ("UBS"). When they returned to the United States they did not close their Swiss bank account; by 2008, its balance was almost $2 million. Toward the end of 2008, Peter closed the UBS account and intended to open a joint account at another Swiss bank, Finter, but Finter would not allow him to do so because Susan was not present. When Peter opened the account, he filled out a "List of Authorized Signatories and Powers of Attorney for Natural Persons", designating Susan as a person to whom he gave "an unlimited power of attorney", but that form was also not put into effect because Susan wasn't present. As a result, Peter transferred the money to Finter in his name only.

The Horowitzes did not make any additional deposits after opening the Finter account. In 2009, they traveled to Switzerland and added Susan as a joint owner of the Finter account.

The Horowitzes' tax returns, including those for 2007 and 2008, were prepared relying on summaries of information that Peter prepared and mailed to the return preparer each year; those summaries never listed the UBS or Finter accounts. Additionally, Peter, who communicated with the accountants on behalf of himself and his wife, never asked whether he should disclose either account.

The Horowitzes signed their tax returns each year without ever answering "Yes" to the income tax return question about whether they had money in an overseas account or filing a file Form TD F 90-22.1 ("FBAR") to disclose either account.

In 2010, they disclosed the funds for the first time. They requested they be accepted into the Department of the Treasury's Offshore Voluntary Disclosure Program (the "Program"), which they were that same month. As required by the Program, the Horowitzes filed an FBAR for each year 2003 through 2008 and amended Form 1040 income tax returns for 2003 through 2008. They opted out of the Program in Dec. 2012.

In June 2014, IRS assessed penalties of $247,030 against each of them for their alleged willful failure to disclose the UBS account for the 2007 tax year and penalties of $247,030 against each of them for their alleged willful failure to disclose the Finter account for the 2008 tax year.

Thereafter, Peter filed an FBAR protest, appealing the proposed FBAR penalties to the IRS Appeals division. The Appeals officer assigned to the case determined that the Horowitz case should have been in an unassessed posture for purposes of IRS Appeals review. In Oct. 2014, the appeals officer asked IRS Appeals FBAR coordinator Batman to remove/reverse the FBAR penalties as prematurely assessed. Another Appeals employee, Ms. Beasley, then removed the penalty "input date".

 IRS brought this action to collect those penalties, and it moved for summary judgment on its claims.

The Horowitzes filed a cross-motion for summary judgment, arguing that the IRS reversed the 2014 penalties, such that the penalties IRS tried to collect were not assessed until 2016, at which time they were untimely.

Taxpayers did not prove statute of limitations violation. The court found that the taxpayers did not meet their burden of proving that the statute of limitations ran before the FBAR penalties were assessed.

The parties agreed that the IRS timely assessed the FBAR penalties on June 13, 2014, and the statute of limitations for assessing FBAR penalties ran on Dec. 31, 2015. The issue was whether the penalties could have been, and in fact were, reversed.

IRS conceded that, around Oct. 24, 2014, Ms. Beasley removed the penalty input dates from the modules in her database corresponding to the penalty assessments against the Horowitzes, as well as that she took this action in response to Ms. Batman's request that she remove/reverse the assessed penalties. But, IRS did not agree that these actions amounted to an actual removal of the penalties themselves.

The court concluded that the Horowitzes did not provide sufficient evidence that Beasley reversed the assessment. It also said that the Horowitzes did not show that, even if Beasley believed she reversed the penalty, she had the authority to do so. Notably, to assess the penalties in the first place, Beasley not only had to input the data; she then printed a form that her manager signed. For Beasley to be able to reverse or remove an FBAR penalty assessment without her manager's signature would be incongruous with his initial signature required to impose the penalty in the first instance.

IRS also noted that an agency must have Department of Justice (DOJ) approval to compromise a claim of the government that exceeds $100,000. (31 USC 3711(a)(2)) And, it noted that the penalty section of the Internal Revenue Manual advises IRS employees that post-assessed FBAR cases in excess of $100,000 cannot be compromised by Appeals without approval of the DOJ.

The Horowitzes argued that removal or reversal does not fit the definition of compromise. But, the court said, the Horowitzes did not establish that, given that IRS could not "compromise" an FBAR penalty above $100,000 at all without DOJ approval, it nonetheless could eliminate the debt altogether by removing the FBAR penalties after they undisputedly were assessed.

Wife not liable for 2008 penalty. But the court held that Susan was not liable for the FBAR penalty with respect to 2008.

IRS argued that Susan had a financial interest in and authority over the Finter account, based on the Horowitzes' intent to include her as an account owner and Peter's designation of Susan as a power of attorney. Susan countered that, despite their intent, she simply was not an owner of the Finter account in 2008 and, because she had not provided a "signature specimen" on the power of attorney form, she did not have any authority over the account.

Instructions to the 2008 FBAR Form provide "A United States person has a financial interest in... [a] financial account in a foreign country for which the owner of record or holder of legal title is... a person acting as an agent, nominee, attorney, or in some other capacity on behalf of the U.S. person".

The court said that when Finter would not allow Peter to open the account in both of their names, he proceeded to take their joint funds and place them into an account in his name only, over which Susan could not exercise any control without traveling to Switzerland and providing a signature specimen. "Taking money that was in Susan's name and placing it in an account that was not in her name cannot, in any light, be seen as acting on her behalf."

Moreover, the court said, the question was whether Peter acted on her behalf with respect to the account, that is, after the Finter account existed. Peter did not make any additional deposits after opening the account. And, there was no evidence that Peter did anything with the account before Oct. 2009 when Susan became a joint account owner.

As to the issue of whether Susan had authority over the account, the taxpayer's and IRS disagreed as to what was the definition of "signature or other authority". IRS argued for an inclusive definition contained in 31 CFR 1010.350(f)(1) which provides the following: "the authority of an individual (alone or in conjunction with another) to control the disposition of money, funds or other assets held in a financial account by direct communication (whether in writing or otherwise) to the person with whom the financial account is maintained".

Without deciding the issue of which definition should apply, the court said that even under IRS's definition, Susan did not have authority over the Finter account in 2008. Without the required signature specimen, she could not write to, or otherwise directly communicate with, the bank "to control the disposition of money, funds or other assets" in the Finter account. Accordingly, she did not have authority over the Finter account in 2008.

Willfulness penalty applied. The court held that the willfulness penalty applied with respect to both taxpayers for 2007 and with respect to Peter for 2008.

Citing a large series of cases including Poole, (CA 4 2011) 107 AFTR 2d 2011-2163, the court said that willfulness may be proven through inference from conduct meant to conceal or mislead sources of income or other financial information, and it can be inferred from a conscious effort to avoid learning about reporting requirements. "Willful blindness" may be inferred where "a defendant was subjectively aware of a high probability of the existence of a tax liability, and purposefully avoided learning the facts point to such liability".

For 2007 and 2008, Schedule B of Form 1040 provided that taxpayers must complete part III of that schedule if they had either over $1500 of taxable interest in ordinary dividends or had a foreign account. The Horowitzes had to complete part III for the "unrelated reason" that they had more than $1500 in ordinary dividends. Question 7a of that part asked whether at any time during the year the taxpayer had an interest in or signature or other authority over a financial account in a foreign country. It referred taxpayers to the FBAR form. Nonetheless, they answered "no" to that question.

The Horowitzes testified that, based on conversations with other expatriates living in Saudi Arabia, they believed that income that was earned in Saudi Arabia was subject to tax only in Saudi Arabia if they banked it overseas. Peter stated that he did not think he needed to file an FBAR for 2007 or 2008. Susan stated that she did not even know what FBAR was at that time. Their tax accountants neither asked about overseas bank accounts nor explained the FBAR question about foreign accounts on Form 1040, Schedule B, which they completed on the Horowitzes' behalf. The Horowitzes insisted that neither of them had actual knowledge of the FBAR requirement and therefore penalties for willful violations were not appropriate.

The court said, "Because a taxpayer who signs a tax return will not be heard to claim innocence for not having actually read the return, as he or she is charged with constructive knowledge of its contents, their signatures are prima facie evidence that they knew the contents of the return, including the foreign accounts question and the cross-reference to filing requirements, which put them on inquiry notice of the FBAR requirement".

The Horowitzes argued that their friends told them they did not need to pay taxes on the interest in their foreign accounts. Maybe so, the court said, but there was not any information from which the court could assess whether it was reasonable for them to have accepted what their friends told them as legally correct. And, in any event, their friends' views would not override the clear instructions on Schedule B, which requires a "Yes" answer if the taxpayer has an interest in a foreign account, regardless of whether the funds within it constituted taxable income. Moreover, the fact that the Horowitzes discussed their tax liabilities for their foreign accounts with their friends demonstrated their awareness that the income could be taxable. Their failure to have the same conversation with the accountants they entrusted with their taxes for years, notwithstanding the requirement that taxpayers with foreign accounts complete Part III of Schedule B, "easily" showed a conscious effort to avoid learning about reporting requirements. On these facts, the court said, willful blindness could be inferred.

References: For foreign financial accounts reporting requirements, see FTC 2d/FIN ¶S-3650; United States Tax Reporter ¶60,114.06.

This article was originally published by Thompson Reuters in their Checkpoint Newsletter for Tax Preparation Professionals and CPAs on February 1st, 2019. Poston, Denney, & Killpack, PLLC does not claim any ownership or copyright of this article nor is any implied by our republishing of this material. All rights reserved by the original and respective author(s).