Here are some questions and answers about QuickBooks and Turbo Tax. These questions apply to any tax program, and even when you have a tax professional do your return.
I read elsewhere that I need to reconcile all accounts before using Turbo Tax. Why is this?
Reconciling accounts is important because it ensures that all entries for the balance sheet on your tax return have been verified and entered correctly. If you need help reconciling, click here for instructions.
You mention that we need to examine customer and vendor balances before using Turbo Tax. Why?
This is similar to above. This step ensures that your Accounts Receivable and Accounts Payable have accurate balances for your balance sheet on the tax return.
I don’t understand tax line mapping. What does it do?
This is the actual process that enables QB and TT to work together. It ensures that all accounts in the Chart of Accounts will point to the correct line of the tax return in Turbo Tax.
I have a large balance in my Suspense account. Must this be categorized before using Turbo Tax?
Yes. All transactions in the Suspense account are for something. If they don’t get assigned correctly, then the Suspense account will get assigned a tax line during the tax line mapping process. Since there is no corresponding tax line for Suspense on a tax return, these transactions will be incorrectly reported. Avoid this and make sure the Suspense account is cleaned up before importing to Turbo Tax.
Please explain the Income Tax reports in QB.
These reports help make sure the tax line mapping was correct, and also give you a snap shot of the return. The Detailed report gives the detail from the Summary report. Run all three to make sure things look right before importing to Turbo Tax.
What is the advantage of preparing 1099s in QB?
Once it’s set up, it’s a nice feature. You don’t need to wait for an outside service to do it, meaning if you are prepared and have all the forms, you can take care of your 1099s in early January (assuming your books are closed for the prior year). Get the forms directly from Intuit – they are guaranteed to work.
Do we really need to close the books and set a password after using TT? I’ve never done this before.
Let me ask you a question. Do you want the data in your QuickBooks file to support what is on your tax return? If so, then there a number of ways to make sure that happens. One way is to prevent data that appears on a prior tax return from being altered. We do this by setting a closing date and password. If you get audited, I’m sure you want the confidence to know that the past data in QuickBooks is the same as was used to prepare the returns. Believe me, everybody thinks, “I don’t change anything from the past in my QuickBooks file.” But it happens. A lot.
What is the advantage of using QuickBooks and Turbo Tax together?
Importing data is quicker and more accurate than entering it by hand. However, I suggest that you have the return reviewed by a tax professional before filing it. I’ve seen a lot of mistakes made by people who prepare their own returns.