While representing my clients over the last two and a half decades, I have inevitably forged amazing relationships with their bookkeepers and accountants. I have come across many fantastic, skilled professionals who have made our job of working through the client’s financials and tax obligations a breeze. I have also, unfortunately, crossed paths with those who, despite their best intentions, didn’t have the skillset necessary to ensure everything was properly recorded and reported for our mutual clients. When reflecting on these “speedbumps,” I thought it would be great to share recommendations from your part of the tax world.

I issued a poll to the accountants and CPAs in our Golden Lion Tax Solutions referral network about what makes their list of the top items they wish bookkeepers knew, and here are the most common items I heard:

1. Know what belongs on the Balance Sheet versus the Profit and Loss Statement as applicable to each client’s unique circumstances. One of the most common errors that affect a Balance Sheet is the incorrect classification of assets and liabilities. One of the most common mistakes on Profit & Loss Statements is expensing owner draws/distributions.
2. Properly record all payroll expenses from third-party processors. It has been reported that many bookkeepers will only enter the net payroll that is clearing the bank, which leads to expensing the full amount of the taxes and employee benefit amounts, causing a big mess that needs to be unwound at the end of the year. Double-check the payroll reports provided by the company handling the payroll and ensure your line items are thorough.
3. Stop giving tax advice. I hate to say this to all of you well-intentioned bookkeepers, but don’t be pressured by your clients to provide an off-the-cuff answer regarding tax planning or advice. Accountants are specialists when it comes to the long-term picture; let them carry the weight of those big decisions!
4. Take your education further than the work in front of you. Take some time to gain insight into the work you produce for your clients and how it translates into the annual tax returns. The more you understand about that translation, the better services you can provide your client for their year-end reporting needs.
5. Take precautions with employee reimbursements. Your client must require an expense report and receipts for any and all reimbursements. If those items are not secured, the reimbursement cannot be counted as an allowable expense and those monies convert to taxable income. We’ve all had those clients who “have always done it this way, and it’s never been a problem.” Don’t hesitate to push back on them! Tell them that the IRS has strict guidelines and you would rather them follow the proper procedures than pay for it later with added tax, penalties, and interest assessed in an audit.
6. Communicate with the accountant throughout the year. It is always best to be proactive whenever a question arises about properly handling a transaction instead of guessing with an “if it’s an issue, we’ll deal with it later” attitude. Going back eight months later to track down a problem in the books is not an efficient use of the accountant’s time or the client’s money.
7. Understand the proper handling of different entity types. Over 70% of the accountants who responded to our poll brought this up as a concern. Examples shared included: for partnerships, you need to close out the prior year's profit-to-equity based on the partnership agreement, and for an S-Corporation, you need to close out distributions from the prior year on January 1st.

I hope you take this information shared with the good intentions we have behind it. We all want to make sure we live up to the commitments we make to our clients and do the very best job possible. Bookkeepers, reach out to your client’s accountants and forge the communication pathway to make the relationship and your work a success! And stay tuned… next week, the tables will turn as we share the top items bookkeepers wish accountants would know. This is all excellent stuff!!!

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