Year-end troubleshooting

[DTS]

This morning, I went into a client's P&L to verify all income and expenses and was going to start on her return.

I got this nagging feeling to check her income against the bank statements, which always balance to the penny when I reconcile. The bank statements are showing $15,000 more income than my P&L.

Her income consists of cash/checks, A/R and CC deposits. She's cash method. Like I said earlier, I am always on the penny at the end of each month's reconcile.

What is going on here? Where can I look at to rectify this?

I am really baffled!

Thank you,

Dennis

[ChEAr$]

It's not surprising

This morning, I went into a client's P&L to verify all income and expenses and was going to start on her return.

I got this nagging feeling to check her income against the bank statements, which always balance to the penny when I reconcile. The bank statements are showing $15,000 more income than my P&L.

Her income consists of cash/checks, A/R and CC deposits. She's cash method. Like I said earlier, I am always on the penny at the end of each month's reconcile.

What is going on here? Where can I look at to rectify this?

I am really baffled!

Thank you,

Dennis

Many times our clients will also deposit to the business account other monies received,
maybe capital contributions, loan proceeds, even rental income not a part of any
schedule c business.

You just have to get client to explain each deposit to you. After all, "deposits" are not
"income", unless.... IRS auditor is deeming them so.

[DTS]

Harlan

She did make some deposits of contributed capital a few times this year, which I did not take into account. I will check those. However, I can tell you off the top of my head, they don't total $15,000.

I will go into the GL and see if I can pinpoint this. This really has me scratching my head!

Thank you,

Dennis

[DTS]

Owner's contributions...

for the year were approx. $5,600. So, without that, I need to find $9,400.

Dennis

[sea-tax]

for the year were approx. $5,600. So, without that, I need to find $9,400.

Dennis

Dennis- could it be transfers between savings accounts or credit cards and checking accounts? I know my clients banks code these as deposits when actually they are transfers. Just a thought, good luck!

[SunTaxMan]

Differences in "deposits" and "income."

My 2 cents' worth....

First, ask the client if they know why there is a difference, explaining that you need to know why - if you, the preparer, find it and explain it in your notes, there is nothing incriminating for IRS or the states to find - AND, you have fulfilled (so far anyway) your new "auditing/policing" task for IRS!

Second, if client says, "I don't know." or "I have no idea!" the next question is, "Do you want to look for it or do you want me to look for it. I need to find the difference, eliminate it or document the reason for it both in my records, and in your records, in order to complete the tax return."

Third (perhaps/probably, depending on "facts and circumstance"), document this conversation in a letter to client.

Simple motto - find it -- then cure it or explain it!

[ChEAr$]

maybe

direct deposit of client's 1040 tax refund last year? (grin

[DTS]

Problem solved!

Thank you, all for each suggestion of where I can look to get this problem solved. I appreciated each one. I was so panicked yesterday, I could not imagine where a mistake like this occurred.

Well, after working until 11 last night and printing up countless reports, our board member Sandy, emailed me late last night to see why I had been so quiet! I told her to check out this thread and she would know why.

Anyway, she remembered a thread Dany posted about 1-2 years ago with the same problem. QB does not include the sales tax on their sales reports, so the $9,400 in question is sales tax.

Thanks, again!

Dennis

[ChEAr$]

Know thy client

I was reminded of this thread this morning when closing out the books for a client who
operates a garage, "fixing cars". Well yes, he is an automobile mechanic and a friend who,
if my car breaks down anywhere within say 75 miles, I can call him and he'll come.

Anyway, there's 17,000 credit balance in cash! Yep, 17,000 more deposited in bank
than garage receipts. Not surprising, since he deposits in business account his rent
receipts from four properties. So I'm comfortable.