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Restaurant 1099-K forms include sales tax AND tips that were charged on a credit card. The 1099-K income is always overstated, sometimes by a significant amount. The sales tax and tips have to be reported as income and then they are expensed out on the tax return. Regular bookkeeping wouldn't do this, but since the 1099K is an important puzzle piece, we have to make the accounting fit the reporting. I'm curious why the client didn't give you the form 1099K? And, it would help if we knew the what kind of business. RitaB is totally correct that unless the income was received only via credit card payments, it is very fishy that the underreported income would be such a large amount. I could see something like happening if the client sold via the internet only and charged sales tax and netted shipping charged against shipping expense. Another thing is that the credit card payments probably don't match with client's records since December 2014 sales might not be deposited to the bank until January, although there is a reversing effect since Dec 2015 might not show up until Jan 2016. I hope the guy is just dumb and not a crook. Crooks are so disheartening...

The biggest hurdle to passing the SEE (once you know the material reasonably well, of course!) is to take the time to parse out what the questions are really asking. Yes, they are couched in conditional double and triple negatives. This is stupid, because it tests your ability to decode convoluted grammar rather than if you are competent at tax issues. But that is the test, and so that is the single key skill to hone.

The geniuses at Quickbooks have decided to implement a Complex Password requirement on most customer accounts with the newest update. Because my companies have routing numbers with the checking accounts (supposedly) and I have SSNs for employees, I'm forced to enter a complex password before entering each company account. It is currently impossible to remove this requirement and has been dictated by the geniuses at Quickbooks. How arrogant of a company do you have to be to implement this requirement on your customers and force it upon them without any possibility of removing the feature? My computer is fully encrypted so an unauthorized hack is very unlikely. This royally ticks me off probably more than it should.

"I'm curious why the client didn't give you the form 1099K? And, it would help if we knew the what kind of business. " Good question, this client has been a cash only restaurant for 30+ yrs, until recently they starting accepting CC. TP does their own accounting and I will be asking how this information was missed. In order to show a profit, the floundering gourmet seafood restaurant was allowed to cook its books since there is no accounting for taste.

The gross income they reported was a fraction of the credit card receipts is what I got from your first post. And they reported zero cash is what I'm surmising from your second post. Do I have that right? A restaurant that reported no cash receipts? If that is true, I would be running, not walking, away from this client. (If I ran.)

I would want to see bank records for the tax year to check deposits against income reported. Had a friend(not a client) who is involved with criminal over a problem that started the same way.I would demand proof of income and expenses or fire client.

Ask him why he did not give you the total amount of his income, thereby causing the income to be understated. Then fire him.

Regarding the can of worms. All you're interested in is completing a correct return. Forgive my candor, but I'd be sure and instruct my client, who under-reported income, that he better not NOW be over-reporting expenses. If a client is not honest, I really don't care if worms come up, but that's just me. Regarding the sales tax being included in the 1099-K, if that's correct, yes, report the gross amount on the 1099-K and expense the sales tax. I don't understand how there was no other income besides the 1099-K amount, however.

Intuit's arrogance and stupidity stopped amazing me a long time ago. I've come to expect it. But I was surprised by their grey on grey depressing default color scheme for QB2015. Looks like it was designed by a depressed, alcoholic, Russian poet.

Me as well. Plus, you have to CHANGE the bleeping thing every three months. However they do allow numeric increments (password1, password2, etc). I have been sorely tempted to tell my clients to go back to paper systems. And my preferred qb password is a cryptic imprecation directed towards intuit.

Yes! I had some clients come to me new a couple of years ago, who "forgot" to include information on that, as well as "forgot" to bring a copy of their prior-year return. Oh, they got a letter all right, and suddenly "remembered" they had taken that re-pay-able credit. And their bill went up, and I question *everything* they hand me, now.

Yes, that is the impression I get too when comparing the 1099K & reported gross receipts. I am going to question the client first and if there is good reason I will continue working with them, if not, I am going to refer them to get tax attorney.

You're welcome. That first version of the credit (a loan) is still being repaid, I'd know that one. https://www.irs.gov/taxtopics/tc611.html

Catherine, Indeed that is the key: to answer the question that they are asking not the question that I think they are asking! I recognize that I must slow down and read every word...

Thanks Rita. I won't clutter up my brain with the fine points. I figured that they would be testing on things we need to know now to do accurate returns. Not details about a long outdated subject matter. Isn't is amazing how many years ago that credit was!! Feeling very old these days...

/s

I don't recall a single question on FTHB on the SEE exam. Not a one.

Preferably after being certain all payments to *you* are up to date. But better to fire them without payment than to have a known-dishonest client. However, it's also possible that the guy is just utterly clueless and/or inept. In which case you may decide to keep him, asking lots more questions in future, and for a much higher price because he's going to cost you effort to keep.

I have a twenty-seven page, password-protected document with all the various passwords I am required to keep. Some of the sites also require that you never repeat a password, so I keep a list of the old ones as well as the current. Ridiculous. And yes, my disks are encrypted too.

I have a spreadsheet for my passwords too. I'd never be able to remember all of them. And some require changes every 3 months.

Better chance of you winning the PowerBall...

In the update process, Intuit says something to the effect of: "We are making these changes based on input from our users." MALE BOVINE SCAT!!

I detest all of their garbage. If I could get away from using QuickBooks or having any of my clients use them, I would be ecstatic.

Ditto, likewise, and me neither!

Just yesterday we were discussing the amount that we would raise prices this year. I have to....I need to keep up with the costs. I will lose a few I am sure. I charge by the form, so I need to do a thorough review of all my fees. Not looking forward to it. Tom Newark, CA