Questions & Answers
Answers to questions business owners ask about bookkeeping, payroll, taxes, and managing the financial side of their business.
How do I track retainage in QuickBooks for construction projects?
QuickBooks Online doesn't have a built-in retainage feature. You need to create a Retainage Receivable account and a Retainage Payable account, then use line items and journal entries at each billing cycle to track what's being withheld.
Read answerWhat is the difference between overbilling and underbilling on a WIP schedule?
Overbilling means you've billed more than the work you've completed, and it shows as a liability. Underbilling means you've done more work than you've billed for, and it shows as an asset. Both are tracked per project on a WIP schedule.
Read answerHow do I set up job costing in QuickBooks Online for a general contractor?
Use sub-customers for each job, classes for cost categories like labor and materials, and enable the Projects feature for tracking. The chart of accounts needs to be structured for construction or the reports won't tell you anything useful.
Read answerShould my construction company use cash or accrual accounting for tax purposes?
Most construction companies under $29 million in average annual gross receipts can use the cash method, which defers taxes. But cash basis hides true job profitability, so many contractors benefit from accrual-style reporting internally even if they file taxes on a cash basis.
Read answerHow do I account for subcontractor payments and ensure 1099 compliance on construction jobs?
Set up each subcontractor as a 1099-eligible vendor in QBO before you pay them, and code every payment to the correct project. Collect W-9s upfront, track retainage as a separate liability, and file 1099-NECs by January 31 for any sub paid $600 or more.
Read answerWhat is AIA billing and how do I record G702/G703 pay applications in my books?
AIA billing is the standard progress billing format used in construction, built around the G702 Application for Payment and G703 continuation sheet. Record the full application amount as revenue, track retainage as a separate receivable, and keep change orders as distinct line items so your financials reflect your true position on each project.
Read answerHow do I calculate percentage of completion for revenue recognition on long-term contracts?
Use the cost-to-cost method. Divide total costs incurred to date by total estimated project costs to get your completion percentage, then multiply by the total contract price to determine earned revenue. Update your cost estimates monthly because they will change.
Read answerHow should I handle change orders in my construction job costing system?
Track each change order as an amendment to the original contract. Update the total contract value and revised cost estimate in your WIP schedule, and keep unapproved change orders separate until the client signs off.
Read answerWhat insurance costs should a contractor track by job versus as overhead?
General liability and workers comp premiums tied to job payroll should be allocated per job. Builder's risk and project-specific bonds are direct job costs. General commercial policies, office insurance, and bonding capacity costs are overhead.
Read answerHow do I track equipment costs per construction job including depreciation and fuel?
Calculate an internal equipment rate that bundles depreciation, maintenance, insurance, and fuel into a single hourly cost. Multiply that rate by the hours each piece of equipment works on a job to allocate costs accurately.
Read answerWhat is a construction labor burden rate and how do I calculate it?
Labor burden is everything you pay on top of base wages to employ someone, including payroll taxes, workers' comp, insurance, PTO, and other benefits. It typically adds 25-50% to the hourly rate, meaning a $25/hr worker actually costs $31-$37/hr.
Read answerHow do I reconcile my construction project budget against actual costs at month end?
Pull a job cost report showing budget versus actual by cost code for every active project. Calculate line-item variances, add committed costs from open POs and subcontracts, and update your cost-to-complete estimates. This monthly process feeds your WIP schedule and shows which jobs are really making money.
Read answerShould I capitalize or expense tools and small equipment purchased for construction jobs?
Tools and equipment under $2,500 per invoice can be expensed immediately if you have a written accounting policy. Items over that threshold should be capitalized and depreciated, though Section 179 often lets you deduct the full cost in the year of purchase.
Read answerHow does bonding capacity affect my construction company's bookkeeping requirements?
Surety companies base your bonding capacity on financial statements, working capital ratios, and WIP schedules that all come directly from your books. Sloppy bookkeeping doesn't just create tax headaches. It shrinks the jobs you're allowed to bid on.
Read answerWhat are the tax implications of construction project warranties and callback reserves?
How you deduct warranty reserves depends on whether you're on the cash or accrual basis. Cash basis contractors deduct warranty costs when they actually pay them. Accrual basis contractors may deduct reserves earlier, but only if they meet specific IRS requirements.
Read answerHow do I account for Medicaid reimbursement delays and denials in my practice books?
Book claims at the expected Medicaid reimbursement amount, not your billed charges. Track Medicaid A/R separately from commercial insurance so you can forecast cash flow accurately and know which claims need follow-up.
Read answerWhat is the difference between a contractual allowance and a bad debt write-off for a medical practice?
A contractual allowance is the gap between what you bill and what the insurer agreed to pay. It reduces revenue. Bad debt is money a patient or payer actually owed you but never paid. The IRS requires you to track them separately.
Read answerHow should a dental practice track PPO write-offs and fee schedule adjustments?
Record every procedure at your full UCR fee, then post the contractual adjustment as a separate entry. Track those adjustments by insurance company so you can see which PPO plans are actually profitable and which ones are costing you money.
Read answerWhat bookkeeping system should I use to track insurance reimbursements by payer for my medical practice?
Use your practice management system for claims and aging, then reconcile monthly into QuickBooks Online. Set up each insurance payer as a customer in QBO so you can track payments, denials, and adjustments by payer.
Read answerHow do I handle patient copays and deductibles in my accounting when collected at different times?
Collect at the point of service whenever possible. When that doesn't happen, book the patient's balance as a separate accounts receivable from insurance A/R so you can track and collect it properly.
Read answerDoes HIPAA apply to my bookkeeper if they handle medical practice financial records?
Yes. Any bookkeeper who accesses patient billing data, insurance claims, or reimbursement records containing protected health information is considered a Business Associate under HIPAA. A signed Business Associate Agreement is required before they touch your financial data.
Read answerHow do I track provider productivity and revenue per provider in a multi-provider practice?
Track collections by provider, not just charges, using QBO classes or your practice management software. The metrics that matter most are collections per visit, collections per hour, overhead per provider, and payer mix per provider.
Read answerWhat are the accounting requirements for Medicaid managed care contracts versus fee-for-service?
Fee-for-service revenue is booked per claim at the Medicaid fee schedule rate, while managed care capitation is booked as a flat monthly per-member-per-month payment regardless of services delivered. Each model creates different cash flow patterns that require their own forecasting approach.
Read answerHow should I account for dental lab fees and whether to pass them through to the patient?
Lab fees are a direct cost of the procedure and belong in cost of goods sold, not general overhead. Whether you absorb them, pass them through, or mark them up depends on your fee structure and insurance contracts.
Read answerHow do I set up QuickBooks for a medical practice with multiple revenue streams?
Create classes for each revenue stream and use sub-accounts under income for every payer category. Then reconcile QuickBooks to your practice management system monthly so the two always agree.
Read answerWhat financial reports should a medical practice owner review monthly?
Focus on a P&L by provider, A/R aging by payer, collections vs charges ratio, overhead percentage, and days in A/R. Monthly review catches revenue and cash flow problems before they get out of hand.
Read answerHow do I track and account for medical equipment financing and lease payments?
The accounting depends on whether you have an equipment loan, capital lease, or operating lease. Recording the full monthly payment as an expense is the most common mistake. Each arrangement requires different treatment on your balance sheet and income statement.
Read answerCan I deduct hand tools and power tools as a self-employed electrician or do I depreciate them?
Most hand tools and power tools under $2,500 can be deducted immediately using the IRS de minimis safe harbor election. Tools over $2,500 can be fully deducted through Section 179 or depreciated over 5 to 7 years. Either way, keep every receipt because tool deductions are a common audit flag for trades.
Read answerHow much cash reserve should an HVAC contractor keep for the slow season?
Plan for three to six months of fixed overhead in a dedicated savings account. HVAC businesses have predictable seasonal dips during the shoulder months between heating and cooling demand, so building that reserve during peak season is the move.
Read answerHow do I track warranty work and callbacks in my plumbing business books?
Create a dedicated warranty expense account and track every callback against the original job. This keeps warranty costs visible instead of buried in general labor and materials, and helps you spot patterns that are costing you money.
Read answerWhat bookkeeping records does a licensed contractor need to keep for state board compliance?
Arizona's Registrar of Contractors requires financial records that demonstrate solvency. That means keeping job contracts, invoices, receipts, payroll records, insurance certificates, and license renewal documentation with a minimum three-year retention period.
Read answerHow do I account for service agreements and maintenance contracts in my HVAC business?
Record the payment as deferred revenue when collected, then recognize it as earned revenue when each service visit is performed. This prevents your P&L from overstating income in the months you collect and understating it in the months you do the work.
Read answerShould I use job costing or simple expense tracking for my electrical contracting business?
If you do project-based work like new construction, remodels, or commercial jobs, job costing is worth the effort. It shows you which job types actually make money. Simple expense tracking only works if your business is strictly service calls.
Read answerWhat vehicle expenses can a plumber or electrician deduct and should I use actual costs or standard mileage?
Both methods work, but the actual cost method usually produces a bigger deduction for tradespeople running service vans and trucks. Standard mileage is simpler. The right choice depends on your vehicle costs and how you use it.
Read answerHow do I handle progress billing for large residential trade jobs?
Define clear milestones in your contract, invoice as each milestone is completed, and track your costs against each phase. Progress billing protects your cash flow so you're not financing a customer's project out of your own pocket.
Read answerHow do I calculate the per diem deduction correctly as a 1099 owner-operator truck driver?
Multiply $69 (the 2024 CONUS daily rate) by 80%, giving you $55.20 per qualifying day. A qualifying day is any day you're away from your tax home overnight. Track every trip in a logbook.
Read answerWhat IFTA reporting requirements do I need to track for my trucking company?
IFTA requires tracking miles and fuel purchases by jurisdiction, vehicle unit numbers, and trip dates for every qualified vehicle. Returns are filed quarterly, and non-compliance penalties range from $1,000 to $16,000 with possible out-of-service orders.
Read answerHow much should an owner-operator set aside for quarterly estimated tax payments?
Set aside 25 to 30 percent of your net income after expenses. That range covers federal income tax, self-employment tax, and Arizona state tax. Transfer the money weekly into a separate savings account so it's ready when quarterly payments come due.
Read answerWhat are the most commonly missed tax deductions for owner-operator truck drivers?
Per diem alone can save owner-operators thousands each year, and most drivers miss it entirely. Other commonly overlooked deductions include ELD device fees, lumper fees, scale tickets, truck washes, and DOT physicals.
Read answerHow do I account for fuel tax credits and IFTA refunds in my trucking books?
Book IFTA refunds as a reduction of your fuel expense account rather than as other income. This keeps your fuel cost reporting accurate and gives you a clearer picture of what you're actually spending per mile.
Read answerShould my trucking company lease or buy trucks and what are the tax differences?
Both options are tax deductible, but the mechanics are different. Purchasing lets you depreciate the asset and potentially write off the full cost in year one through Section 179. Leasing lets you deduct payments as a straightforward operating expense. The right choice depends on your cash position, growth plans, and fleet strategy.
Read answerHow do I separate personal and business expenses as an owner-operator leased to a carrier?
Open a dedicated business bank account and route all carrier settlements there. Pay yourself through owner's distributions, use a business credit card for expenses, and track every deductible category separately. This keeps your books clean and prevents missed deductions at tax time.
Read answerWhat records do I need to keep for a DOT audit of my trucking company's finances?
DOT auditors review driver pay records, hours of service logs, vehicle maintenance records, drug and alcohol testing documentation, insurance filings, and IFTA/IRP compliance. Your financial records need to support everything you've reported. Keep records for a minimum of 3 years, though 6 years is safer for certain DOT requirements.
Read answerHow do I track depreciation schedules for multiple rental properties in QuickBooks?
Create a parent fixed asset account for each property with sub-accounts for building, land, and improvements. Depreciation for residential rental buildings uses 27.5 year straight-line, and land is never depreciated.
Read answerWhat is the correct accounting treatment for fix-and-flip properties — inventory or fixed asset?
Fix-and-flip properties are inventory held for resale, not fixed assets. You don't depreciate them. Every cost associated with the property accumulates as inventory until the sale, at which point it becomes cost of goods sold.
Read answerHow do I track 1031 exchange cost basis and carryover depreciation on the replacement property?
The replacement property's basis equals the relinquished property's adjusted basis plus any additional cash you paid. Depreciation splits into two layers: carryover from the old property on its remaining schedule and a new 27.5-year schedule on any additional basis.
Read answerWhen does the 14-day rule apply to short-term rentals and how does it change my tax treatment?
If you rent your property for 14 days or fewer per year and use it personally for more than 14 days (or 10% of rental days), you don't report the rental income at all. Once you cross 14 rental days, you report everything and allocate expenses between personal and rental use.
Read answerHow should I account for security deposits received and returned on rental properties?
Security deposits are a liability, not income. Record them to a liability account when received and reverse the entry when returned. If you retain any portion for damages, reclassify that amount to income and record the repair expense separately.
Read answerWhat expenses can I deduct on a rental property that has no tenants during renovation?
Renovation costs get capitalized into the property basis, not deducted. Carrying costs like mortgage interest and property taxes can be deducted or capitalized. Insurance and utilities are deductible once the property has been placed in service.
Read answerHow do I separate bookkeeping for multiple rental properties owned in different LLCs?
Each LLC needs its own bank account, its own set of books, and its own tax return. In QuickBooks Online, use separate company files per LLC rather than trying to combine everything into one file.
Read answerHow do I track commission splits and brokerage fees as a real estate agent on Schedule C?
Report the full gross commission on Schedule C line 1, then deduct the brokerage split as a commission expense. Never net them. Your 1099 shows the gross amount, and your return must match.
Read answerWhat home office deduction rules apply to real estate agents who work from home?
Real estate agents who work from home can claim the home office deduction if they meet the exclusive-use and regular-use tests. Most agents qualify because their home office serves as their principal place of business for administrative work.
Read answerHow should a real estate brokerage track individual agent commissions and 1099 reporting?
Set up QuickBooks Online with classes or sub-customers for each agent. Track gross commission received, agent split paid, and brokerage retention per transaction, then use those records to generate 1099-NECs at year end.
Read answerCan a real estate agent deduct staging costs, professional photography, and marketing expenses?
Yes. Staging, professional photography, drone footage, virtual tours, print marketing, online advertising, and open house expenses are all deductible on Schedule C. Track costs per listing when possible and only deduct your portion if expenses are split with the seller.
Read answerWhat quarterly estimated tax obligations does a 1099 real estate agent have in Arizona?
You owe federal quarterly estimates through Form 1040-ES if you expect to owe $1,000 or more, plus Arizona state estimates through Form 140ES. Plan to set aside 25 to 30 percent of your net commission income to cover income tax and self-employment tax.
Read answerHow do I classify my cleaning workers as employees vs independent contractors?
The IRS uses three tests to determine classification: behavioral control, financial control, and relationship type. Most cleaning workers who follow your schedule, use your supplies, and wear your uniform are employees, not independent contractors.
Read answerWhat expense categories should I set up in QuickBooks for a cleaning business?
Start with cleaning supplies as cost of goods sold, then set up operating expense categories for labor, vehicles, insurance, equipment maintenance, marketing, uniforms, licensing, phone, and office costs. You should also separate residential and commercial income if you do both.
Read answerHow do I calculate the true cost per cleaning job including overhead?
Add your loaded labor cost, supplies, and drive time as direct costs. Then allocate all overhead across your billable hours. Most cleaning businesses undercharge because they only count what they pay their cleaners.
Read answerShould my cleaning company use cash or accrual accounting?
Cash basis works for most small cleaning companies because it's simpler and matches how payment actually flows. Consider switching to accrual if you take on significant commercial contracts with net-30 payment terms or annual contracts where cash timing doesn't match when the work gets performed.
Read answerHow do I handle bonding and insurance costs in my cleaning business books?
Surety bond premiums and general liability insurance are deductible business expenses that belong in their own categories. Workers comp should be allocated to labor costs rather than lumped with other insurance. Tracking each type separately gives you accurate job costs and cleaner books at tax time.
Read answerWhat records do I need to keep for tax deductions on a residential cleaning business?
Keep receipts for supplies and equipment, mileage logs between job sites, payroll records, insurance policies, bank and credit card statements, and client contracts. Digital copies are fine as long as they're organized and accessible.
Read answerShould I report booth rental income on Schedule C or Schedule E as a salon owner?
In most cases, Schedule C. If you provide shared amenities like wash stations, a waiting area, reception, or supplies, the IRS considers that active business income rather than passive rental income.
Read answerHow do I account for tip income and tip reporting requirements at my salon?
Your obligations depend on whether your stylists are W-2 employees or booth renters. Employees must report all tips to you, and tips over $20 per month are subject to FICA. Booth renters handle their own tip reporting on Schedule C.
Read answerWhat is the financial difference between commission-based pay and booth rental for a salon?
Commission means higher gross revenue but significantly higher costs from wages, payroll taxes, and benefits. Booth rental means lower total revenue but predictable income with far fewer expenses. The right model depends on how you want to run the business.
Read answerHow should a salon track product inventory and retail sales separately from services?
Set up separate income accounts for Service Revenue and Retail Product Sales in your accounting software. Track inventory as an asset and record cost of goods sold when products are sold. Monthly physical inventory counts help catch shrinkage.
Read answerCan a booth renter deduct supplies, continuing education, and tools on their taxes?
Yes. Booth renters are self-employed, which means all ordinary and necessary business expenses are deductible on Schedule C. That includes supplies, tools, continuing education, booth rent, and much more.
Read answerHow does fund accounting work for a nonprofit and why is it different from regular bookkeeping?
Fund accounting tracks money by restriction type rather than by profit. Every dollar gets classified as restricted or unrestricted based on donor intent, and expenses must be allocated across program services, management, and fundraising for Form 990 reporting.
Read answerWhat is the difference between temporarily restricted and permanently restricted donations?
Temporarily restricted donations carry conditions the nonprofit can fulfill, like spending funds on a specific program or within a certain time period. Permanently restricted donations require the principal to remain intact forever, with only investment earnings available for use. Under current accounting standards, both fall under the single category of 'with donor restrictions.'
Read answerShould our church file Form 990 even though churches are exempt from the requirement?
Churches are automatically exempt from filing Form 990, but voluntary filing can increase transparency, build donor trust, and simplify grant applications. The tradeoff is that your financial details become part of the public record.
Read answerHow do I track and value in-kind donations for nonprofit accounting and tax receipts?
Record in-kind donations at fair market value on the date received. Not all donated services qualify for recording. For gifts over $250, provide a written acknowledgment describing the gift but don't state the value.
Read answerWhat accounting is required for nonprofit grant compliance and spend-down tracking?
Grant compliance requires tracking every dollar by the specific grant that funded it, broken into the cost categories the grantor requires. Your books need to be structured before the first dollar is spent, not after.
Read answerHow do I properly allocate shared costs between program services and administration on Form 990?
Pick a reasonable allocation method like time spent, square footage, or direct benefit and apply it consistently. Document your methodology thoroughly because the IRS and donors both scrutinize how much of your spending goes to programs versus overhead.
Read answerWhat are the trust accounting requirements for property managers in Arizona?
Arizona requires property managers to hold tenant deposits and collected rents in a separate trust account, never commingled with operating funds. A monthly 3-way reconciliation of the bank statement, trust ledger, and individual tenant ledgers is required, and violations can result in license revocation.
Read answerHow do I account for security deposits and tenant improvements in property management books?
Security deposits are liabilities on your balance sheet, not income. Tenant improvement allowances get capitalized as leasehold improvements and amortized over the shorter of the useful life or remaining lease term.
Read answerWhat is CAM reconciliation and how do I handle pass-through charges for commercial properties?
CAM reconciliation compares the estimated Common Area Maintenance charges billed to tenants throughout the year against actual expenses incurred. The difference results in either a credit to tenants or an additional amount owed.
Read answerHow should a property management company report owner distributions and management fees?
Collect rent into a trust account, transfer your management fee to your operating account as income, and distribute remaining funds to owners with a monthly statement. Issue 1099s to owners at year end and keep trust and operating accounts strictly separate.
Read answerHow do I track maintenance requests and repair costs by property and unit?
In QuickBooks Online, use sub-customers for each property and classes for individual units. This lets you run reports showing exactly what you've spent on maintenance and repairs at every level of your portfolio.
Read answerHow do I handle deferred revenue from annual landscaping contracts paid upfront?
Book the full payment as deferred revenue, which is a liability on your balance sheet. Then recognize $1,000 per month as earned revenue when you actually perform the work. This keeps your P&L accurate and prevents you from thinking you're more profitable than you are.
Read answerWhat is the best way to track job costs for a roofing company?
Track materials, labor, equipment rental, subcontractors, permits, and overhead per job. Compare actual costs to your estimate after every job closes out. The most profitable roofing companies know their exact cost per square by roof type.
Read answerHow should a pest control company handle recurring billing and revenue recognition?
Bill recurring contracts in advance or at time of service depending on your terms. If customers prepay, record the payment as deferred revenue and recognize it as each treatment is completed. Track recurring revenue separately from one-time jobs.
Read answerCan a landscaping business deduct the cost of a trailer and mowing equipment in the first year?
Yes. Section 179 lets you deduct the full purchase price of qualifying equipment like mowers, trailers, and trucks in the year you buy them. The 2024 limit is $1,220,000, which covers most landscaping equipment purchases easily.
Read answerHow do I track labor costs for multiple crews working different job sites in my landscaping company?
Have every crew member log hours against a specific job site or customer daily using a time tracking tool that syncs with QuickBooks Online. Multiply those hours by your burdened labor rate to get true job costs, then compare actual labor to your bid to find which jobs are profitable and which crews are most efficient.
Read answerHow does Arizona's Transaction Privilege Tax (TPT) work and how is it different from sales tax?
Arizona TPT is a tax on the business for the privilege of doing business in the state, not a tax on the buyer. The business owes the tax regardless of whether it gets passed on to the customer.
Read answerDoes my Phoenix business need both an Arizona TPT license and a city business license?
Yes, you need both. The Arizona TPT license from the Department of Revenue handles tax collection and remittance. The city of Phoenix business license is a separate operating permit. One does not replace the other.
Read answerWhat are Arizona's requirements for filing state payroll taxes and Form A-4?
Arizona uses a unique flat-percentage withholding system where employees choose their rate on Form A-4. Employers deposit withholding quarterly using Form A1-QRT and file an annual reconciliation on Form A1-R by February 28.
Read answerHow does Arizona tax construction contractors differently under TPT?
Arizona taxes prime contractors on 65% of the total contract price under the prime contracting TPT classification. Subcontractors, spec builders, and owner-builders each follow different rules. Getting the classification wrong is one of the most common filing mistakes.
Read answerWhat business entity type is best for an Arizona small business, LLC, S-Corp, or sole proprietor?
Most Arizona small businesses should start with an LLC, which costs just $50 to file with no annual report required. Consider the S-Corp tax election once net income consistently exceeds $50,000 to $60,000, where self-employment tax savings outweigh the added compliance costs.
Read answerAre there any Arizona-specific tax credits or incentives for small businesses I should know about?
Arizona offers several tax credits that many small businesses overlook. The most notable include the Quality Jobs Tax Credit, the R&D tax credit, Military Reuse Zone credits, and the Angel Investment Tax Credit. Work with a tax professional to determine which ones apply to your situation.
Read answerWhat is the true cost of running payroll in-house vs outsourcing to a payroll service?
In-house payroll software runs $45-125/month plus 2-8 hours of your time each pay period. Outsourced full-service payroll typically costs $50-200/month and handles everything. The real difference is risk. One missed payroll tax filing can cost more than a full year of outsourced payroll.
Read answer
