If you use QuickBooks, it's important that you are using bank reconciliations to ensure that you aren't missing transactions or duplicating entries in your software.  Here are a few quick pointers about how to best utilize this functionality:

1.       The starting balance of the most recent month’s bank statement (and the bank reconciliation starting balance) should always be equal to the ending balance of the previous month’s bank statement and bank reconciliation.  Any differences are typically because a transaction was voided or changed that should not have been.  If there’s a difference, you can try to fix it yourself by running the reconciliation discrepancy report under the banking section of the reports menu.  If that report shows no changes were made, or if identifying and correcting the errors are beyond your abilities, try undoing and redoing the previous month's reconciliation or contact a professional.

2.       The ending balance of the bank reconciliation should always match the bank statement exactly.  Don't be tempted to force the reconciliation, even if it is only off by a few dollars- it's often a symptom of other errors.  If you are diligent in your data entry, this feature can help identify duplicated charges, fraudulent activity, and miscategorized transactions.

3.       Every transaction in QB should match what was ACTUALLY done in the bank accounts.  If a transaction was done the wrong way or something was deposited into  the wrong bank account, both the incorrect bank transaction and the correcting bank transaction should show up in QuickBooks instead of just the transaction that was meant to happen.

4.       When you are doing the reconciliation, keep an eye out for the following, which are indicative of errors:
  a.       Debit (ACH) transactions that have not cleared the bank account by the end of the month they’re entered in QB, unless they are at the end of the month- in which case they may clear the following month.
  b.       Bank deposits that have not cleared the bank account within a few days of the actual transaction.
  c.       Checks that you’ve written and are still outstanding 90 days after they’re written.

Situation:
Taxpayer was a resident of Pennsylvania, but earned income while working at a job in another state.  Which state(s) does he need to pay taxes to?  Does he get taxed twice on the same income?

Most states impose a personal income tax on non-residents for all income earned within the state, and Pennsylvania imposes a personal income tax on residents for all income earned, regardless of where it was earned.

For a resident of Pennsylvania working in Indiana, Maryland, New Jersey, Ohio, Virginia, or West Virginia, the taxpayer would only owe Pennsylvania taxes, as each of those states has a reciprocal agreement with Pennsylvania.  A reciprocal agreement between two states means that neither state will impose an income tax on wage income of the other state’s residents.

If the second state is any other state with an income tax, such as New York, the taxpayer would be required to file tax returns in both states.  On their Pennsylvania tax return, the taxpayer would receive a credit up to the amount they would have owed on that income in Pennsylvania.  In a state with an income tax higher than Pennsylvania’s income tax, like New York, the taxpayer would typically not end up owing additional taxes to Pennsylvania for the income earned in New York.  While the taxpayer reports the income to two states, the resident credit prevents double taxation.

Mark Breon, EA will be attending the IRS convention in Las Vegas the week of August 23rd-27th.  During that time, he will be working with the IRS case resolution team to solve difficult tax cases.  If you or someone you know has an issue with the IRS, please call 267-999-9002 in order to discuss your situation with us.  This is a once-per-year opportunity to resolve difficult cases.  Don't miss this chance to get back on track with the IRS!