3 Tips to Avoid Surprises at Tax Time, for Real Estate Agents and Independent Contractors

Independent Contractors, and other 1099 type individuals such as Real Estate agents are in a unique position compared with more traditional employees. They are not subject to normal tax withholdings, and are responsible for managing their own tax payment and planning. This can create a surprising burden for those focused on the day to day challenges of keeping up with their professional responsibilities.

We offer the 3 steps to help you prepare. These are the same steps that we follow to provide services for our Agents and independent contractors to help them be successful throughout the year and at tax time.

1. Get organized

There is a lot to this, but something is better than nothing. Your organization system should be automated, and pain free. The easy way to do this, is to have a separate; card or bank account (Preferably) where all business transactions flow. This means only business, if it is a separate personal checking account, or a business checking, separating personal from business will help a software solution to easily classify transactions without you having to identify all the personal ones to exclude.

We recommend Freshbooks. It was designed for low complexity businesses, real estate agents, and independent contractors. It uses a feed from your bank to capture transactions. Easy ones like your morning coffee it classifies itself, other ones can be classified quickly and easily. It also integrates with MileIQ to track mileage automatically.

By getting organized you can more clearly identify how much money you have made and your deductible expenses. Which leads us to tip #2.

2. Plan ahead

There are a couple ways to do this, a simple method is to use a tax calculator to estimate your taxes and set the cash aside in a savings account. You can use these calculators, but recognize your final tax liability may be more or less. The goal here is to have cash available to pay your taxes, and reduce the impact of your tax liability at year end.

HR Block calculator

TurboTax Calculator

The other way to manage this is to make quarterly tax payments to the IRS, there are some rules related to this, so do your due diligence, but you can fill out a 1040-ES and make your payments online to the IRS here.

3. Maximize deductions

Know your deductions and track them throughout the year. We have more details on them in our blog 10 Tax tips for Real Estate Agents to Start Saving Right Now, you need to know them, track them throughout the year, and have all the supporting documentation consolidated in one place. Using software like Freshbooks, can accomplish this for you.

A final, rarely discussed method of tax savings available to independent contractors is called the Simplified Employee Pension or SEP IRA is available to Real Estate Agents, and other 1099 individuals. This can be a powerful way to both save for retirement and create a truly significant tax deduction. That deduction can be as much as $54,000 in 2017, based upon your contributions.

To summarize

  1. Get organized
  2. Plan ahead
  3. Maximize deductions

However you accomplish this, you will be better off than if you hadn’t.

It is important to do this sooner rather than later, it takes time to get it right, and the year end is less than 2 months away, or less depending on when you read this.

Our Pitch

At Wilson Lake we recognize a few things about Real Estate Agents, and independent contractors, specifically about their time:

  • It is the most scarce resource
  • Everything above still takes time to learn
  • No matter how easy, it takes precious time to execute
  • Time spent on tax preparation is time not selling, or caring for clients
  • Time spent working is time spent away from living your life

We do offer services to Agents and independent contractors, where we manage the above so that you can focus on higher return tasks. When someone buys our services they aren’t paying for compliance and planning, they are buying their own time back, and getting a financial partner to help them be successful.

If you are interested in learning more about how we can help you, download our one-pager, which describes our services:

Wilson Lake for Real Estate Agents

You can also contact us directly by filling out the short form below.

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Disclaimer: The information contained in this document is provided for informational purposes only and should not be construed as financial or tax advice. It is not intended to be a substitute for obtaining legal, accounting, or other financial advice from an appropriate legal professional, financial adviser or for the purpose of avoiding U.S. Federal, state or local tax payments and penalties.

5 steps to turn data you already have into actionable business intelligence

Understanding what happens in a business is important. For a small business going with their gut is often the only option for a business owner. Data takes time to collect, and time to convert into meaningful information.

The goal is to maximize the value of the information already being gathered and convert it effectively into meaningful information to make decisions with. One way to do this is to understand the questions that are important to the business, and understand the places where data may already be gathered as a part of normal processes to ensure this data is consolidated and converted with the lowest impact on everyone within the business.

Follow these 5 simple steps:

  1. Identify the problem
  2. Find the right question
  3. Gather the data
  4. Analyze the data
  5. Convert the data into actionable business intelligence

1. Identify the problem

Start by looking at what don’t you know, but do want to know. Or consider a problem/concern you have.

For a restaurant owner, they may simply want to provide the best quality service to their customers.

2. Find the right question

You can start by looking at who you already have on your staff.

Who is your most effective server, what might you consider as the best indicator?

  • Time guests spend at their table?
  • Size of tip?
  • Additional items sold?

3. Gather the data

How do you gather that information? Start with your register, or Point of Sale system. It is already gathering data on every transaction that runs through your restaurant.

4. Analyze the data

Now we understand the questions and the source of the data we can begin to analyze the data.

  • Table time
    • First, in a basic system the original order may be entered in as the guests first place their order. The system will capture the time when a server first enters the order, until the time the server finally clears out the table’s check. The difference is an approximate amount of time each table spends sitting. Is there a limitation? Yes, if the waiter takes forever to enter the order, and is quick on the check the turn around time will be very low, but that isn’t really what happened, and your guests may be very unhappy. So, it is important to understand the limitations to keep a watchful eye on your servers.
    • What if your system is based upon handwritten checks during the meal and a final receipt at the end? Then look at how many receipts the cashier processed during a shift. You have their time cards. 16 tables in 8 hours, is about 2 tables per hour, or 30 minutes per table. Is this perfect? No, but it can start to give you a better idea. If you notice one cashier has a consistent volume than you can start asking more questions, about their behavior and learn if there is something to either improve on with them, or a lesson to be taught to the other servers.
  • Tip Size
    • Size of Tip is another decent measure of quality of service. Total tips may not be the best indicator either, a $100 tip on a $5,000 table is only a 2% tip. Where a $20 tip on an $80 bill is a 25% tip. The guests may not leave a comment card, but built into your accounting system you can see if there is a pattern emerging.
  • Upselling superstar
    • Does one server consistently sell more? If your system isn’t detailed enough to show individual items the size of each check is a simple measure, but if your system can show the items on each check, look for drinks, appetizers and desserts. These are the items that a server will have to hustle more to move, and if one moves more than another there may be something to learn.

5. Convert the data

We talked briefly about it above, but it is more than just to learn about learning who is best and who isn’t. Make sure you have a clear picture of the reality. There may be more to the story than what is on the spreadsheets, a single behavior difference can affect how data is inputted. Consistency is key, when data is inputted, and how can affect data significantly. Also, definitional changes can affect it (what each person believes each item or behavior represents). In a restaurant situation there may be less room for ambiguity, but a small difference on when they ring up the check could be huge. Because if they are quick to get drink orders, and food orders, but slow to get it into the system, there may be no actual difference between how long the guest is at their table, but the perceptual difference from the data will be different. By clearly communicating when and how to perform certain tasks that ambiguity is reduced.

If the data is consistent, and there are noticed trends, understand that this isn’t the time to start slapping gold stars on your high performers and dunce caps on your low performers. Learn what behavior differences impact these metrics and use training to modify behaviors. Understand your staff and how they will behave when they know the data and how they are being measured.

A word of caution

Everyone will try to game the system, if they know what behaviors to adjust to improve the perception of their performance they will do their best. It is your job as a business owner to communicate the real message you want communicated. If you want faster turnover on tables, train the behavior for that, don’t tell your servers this is how you analyzed the data, then they will have the keys to the castle, and will start adjusting their behavior to affect the data not the turnover on tables.


It started with some simple questions, and can turn into a full dashboard and process for identifying high and low performers. High performers should be praised, and retained, low performers should be retrained or replaced. But if you don’t know who is a high or low performer, you may be running on your gut, and the cool bartender may be fun to talk to but his performance may be lacking in performance.

This doesn’t just apply to servers, within your own business consider what questions you have, or even problem. Follow the 5 steps:

  1. Identify the problem
  2. Find the right question
  3. Gather the data
  4. Analyze the data
  5. Convert the data into actionable business intelligence

Best of luck.

Disclaimer: The information contained in this document is provided for informational purposes only and should not be construed as financial or tax advice. It is not intended to be a substitute for obtaining legal, accounting, or other financial advice from an appropriate legal professional, financial adviser or for the purpose of avoiding U.S. Federal, state or local tax payments and penalties.

Bank Reconciliation, why and how.

No one likes Bank Reconciliations, well, maybe. Either way, we recognize that they aren’t fun. But they are important. First we will identify why they are important, then we will talk about how to do them. Because if they aren’t done frequently, they only get harder. And we don’t want to end up in the situation like our stock photo above where it becomes an unsurmountable mountain to climb.


The bank reconciliation is the difference between what has actually happened and what your accounting thinks has happened.

That is important to understand.

Consider a business owner has been working within their Quickbooks and has been writing checks and cashing checks. They are all sitting in Quickbooks. Quickbooks is going to present a balance of, $200,000, for example. Then the business owner looks in their checking account and sees $250,000. So, what is the truth?

They both are.

This is where the reconciliation comes in. It is understanding the differences.

Differences can be caused by:

  • Timing
    • Uncleared checks
    • Uncleared deposits
  • Errors
    • Banking errors
    • Book errors
  • Bank related transactions
    • Fees
    • Interest

By understanding this activity you can better control your cash flows.


  1. Open the bank reconciliation module of your accounting software. Have the bank statement for the period under reconciliation out/open.
  2. Going down the line, of the bank statement, transaction by transaction, within the module check off every check that has cleared the bank as cleared.
  3. Going down the line, of the banks statement, within the module check off every deposit that has cleared the bank.
  4. Enter any transactions that are in the bank statement that were not in the general journal. This may include wire transfers, automatic transactions, and bank fees/interest.
  5. If the ending balance of the bank statement doesn’t match the reconciled general journal amount investigate the following:
    1. Checks recorded in either the bank or general journal at the wrong amount.
    2. Deposits recorded in either the bank or general journal at the wrong amount.
    3. Investigate any other remaining issues.

If the bank made an error, they will need to be contacted. It does happen. So, don’t be afraid to correct it.

As a side note, this is also a good time to identify any old checks still uncleared. Each business is different, but set a period of time, 2 months is probably plenty. Any uncleared check after that time will need to be investigated. Reference our blog on uncleared checks for more details.

When it is all done you should have a report from your software that says the beginning balance, and the ending balance, with a section for uncleared checks. It is important to not dismiss the uncleared checks. Those checks will clear.

Balance                    –  250,000

Uncleared Checks – (200,000)

Available balance    – 50,000

If this is what you see, don’t cut checks that will total more than $50,000, because that is all the cash available.

Helpful hints

The more you do this the better. We know it is a pain, but for our clients we do it weekly. For one, there is only a quarter of the transactions, but it also gives us a weekly clear picture of the exact cash position. If you were to pull statements weekly or daily, but only do the reconciliations monthly you may be in a situation where you think there is $250,000 in the bank, but you forgot about the $300,000 check out there waiting to be cashed.

A bank feed doesn’t eliminate the need for this, unless your business doesn’t use checks. If that is the case, well done. One less thing to worry about.

Best of luck.

Disclaimer: The information contained in this document is provided for informational purposes only and should not be construed as financial or tax advice. It is not intended to be a substitute for obtaining legal, accounting, or other financial advice from an appropriate legal professional, financial adviser or for the purpose of avoiding U.S. Federal, state or local tax payments and penalties.

How to Build your Chart of Accounts

The Chart of Accounts is like a file cabinet for your transactions. There are a variety of reasons to use the information generated by properly recording your transactions. And how you structure your Chart of Accounts can impact not only the presentation of your financial statements, but also the value of the information which you derive from it.

Consider the users

The financial statements are designed to be used by business owners, management, and stakeholders, who could include banks and regulatory agencies. As a result there are a variety of different groups whose needs will need to be considered. So, it is important to strike a balance between detail and common sense. It is possible to go into excruciating detail, but this creates a burden upon your bookkeeper, and increases the possibility of error.

We believe that you should be detailed, but no more than necessary. An example of this is here.

Keep it Simple

As Albert Einstein said, “Everything should be made as simple as possible, but not simpler.”

We also recommend not to stray too far from the standard model, this is because financial statement users have a certain expectation of where things should be within a financial statement. And unless you want a lot of questions being asked, support those expectations.

At Wilson Lake we have worked hard to ensure our clients have a reasonably standardized format for the chart of accounts. This is because as we move from client to client, we don’t want to drop the ball, and if every chart of accounts is different, and every account name is different than we waste valuable time trying to remember which transaction goes where. Every business is unique, but there are a lot of similarities among them as well.

By the Numbers

Account numbers can be a tool for developing your chart of accounts. They are designed to show at a glance hierarchy, and placement within the financials. For most small businesses, this may not be necessary. Because if your account is named “Truck Repairs and Maintenance,” we can pretty easily guess, this is an expense.

Numbers may become useful if there are similar names, but in multiple places. For example:

5200 Truck Repairs and Maintenance 

6200 Truck Repairs and Maintenance

The 5000 series are Cost of Goods Sold, these would be the repairs to trucks that are used in the production of your good or service. Where the 6000 series may be your sales, and that could be new tires for a salesman’s truck. They belong in separate lines, but are similar in name.

For account names, we recommend at a minimum 6 numerals. Numbers would be assigned based upon hierarchy. Some number are more standard:

010000 – Assets

020000 – Liabilities

030000 – Owners Equity

040000 – Revenue

050000 – Cost of Goods Sold

060000 – Operating Expenses

070000 – Non-Operating Expenses

080000 – Non-Operating Income

090000 – Extraordinary Items

The structure is simple, but not at a glance. The numbers are broken up into 2 digit sets. The further to the right you move, the lower within the hierarchy the account is.

060000 – Operating Expenses

060100 – Selling Expense

060101 – Sales Salaries and wages

Keep in mind that this is a simple numeric structure for a small business, and it allows 99 sub accounts at each level 01-99 for each 2 digit string. If there was a greater need for complexity, an 8 digit code may be necessary.

Greater complexity within your organization will require a greater amount of complexity regarding account the account numbers, but that is something that would require more specialized attention.

Devil is in the Details

As much as we want to keep it simple, details can be helpful as well. As an example consider a construction company. They have vehicles that are used for multiple purposes. And the expenses related to those vehicles needs to be monitored. Using the Chart of Accounts can be a powerful and easy way to do this. Consider two separate vehicles, a construction Crew’s Backhoe, and a Salesman’s truck.

The Backhoe will be on the balance sheet, as well as the income statement and at a glance management may want to know how much it is worth, and how much it is costing during a period. Same with the Salesman’s truck.

So, within the balance sheet under Assets:


Construction Equipment

Backhoe – 1

Sales Equipment

Truck – 1

Accumulated Depreciation

Acc Dep – Construction Equipment

Acc Dep – Backhoe – 1

Acc Dep – Sales Equipment

Acc Dep – Truck – 1

Within the Income Statement:

Cost of Goods Sold

Construction Equipment Expense


Depreciation Expense

Dep Exp – Backhoe – 1

Repairs and Maintenance

Repairs and Maint – Backhoe – 1

Sales Expense

Sales Vehicles Expense


Depreciation Expense

Dep Exp – Truck – 1

Repairs and Maintenance

Repairs and Maint – Truck – 1

At a glance, you can now see, these vehicles impact the financials in a variety of ways, and by breaking them out as separate accounts, it is easy to see if one vehicle is costing more or less than others. Also, by making them sub accounts within other areas it is easy to view things as a batch. This way questions can be answered based upon high level or detailed level analysis.

We also want to point out that we didn’t break out fuel by vehicle. This is not an accident. Not every account needs to be explicitly specific. And the needs of your financial statement users needs to be considered for each account.


Remember, Consider the users, Keep it Simple, and the Devil is in the Details. Also, the chart of accounts is a living structure and don’t be afraid of change, if a need arises, consult the other users of the financials and make a change if needed. Businesses evolve, and the chart of accounts should change with it. The more thought you put into it up front the less change will be necessary but that planning reduces the need for change later on, it doesn’t eliminate it.

Best of Luck.

Disclaimer: The information contained in this document is provided for informational purposes only and should not be construed as financial or tax advice. It is not intended to be a substitute for obtaining legal, accounting, or other financial advice from an appropriate legal professional, financial adviser or for the purpose of avoiding U.S. Federal, state or local tax payments and penalties.

How to clear an uncleared check on Quickbooks Desktop

Bank reconciliations are hard enough, and unless things are going smoothly, can be postponed until this important task becomes a mountain to climb.

First lets answer why.

Why is it important to reconcile accounts?

Account reconciliations ensure that the General Ledger (GL), is in line with what really happened. Simple really, but for anyone that has done them, we know they aren’t.

One of the biggest issues that can come up are uncleared checks. Which can reduce the GL’s checking account balance inappropriately, understating the balance sheet.

Aside from presenting bad information on the balance sheet, there is a real risk of having not paid a vendor or employee. If a check was printed, processed through the GL, but never mailed, it will sit as an uncleared check but the invoice will show as paid. When in actuality the vendor was never paid.

Another real risk is escheatment (Click here for a very detailed explanation of this.) The simplified version is that if this check were real, and was simply not cashed after a certain period of time it needs to be surrendered to the state as unclaimed property, state law dependent.

So, each uncleared check needs to be thoroughly investigated, and documented.

For those checks that are uncleared because of an erroneous entry, perhaps they were generated in the system, but not printed. Then later when the vendor hadn’t been paid a check was hand written, not recorded properly in the GL. So, there has been a double payment in the books.

We had a client whose previous bookkeeper had done this accidentally for several years. As a result we had to unclear checks from current and prior periods. These are two separate processes.

For checks recorded twice within the current period the extra/uncleared one can be voided. **Don’t forget to ensure you properly investigate to make sure this is really the case.**

For uncleared checks from prior period, things get more complicated. We spent a lot of time trying to come up with the best approach, making the below considerations. But also wanting to make sure that there was a trail that could be followed later.


Overstatement of expenses from prior periods. Quickbooks automatically books a debit to expense and a credit to the bank when a check is written. Because that check had not cleared the expense remained while the check waited to be cashed, and is now in Retained Earnings.

Quickbooks processes require that the check be cleared, which will generate the entry, but a simple JE will not clear the check appropriately.


  1. Create a Ghost customer “Deposit” and jobs for each year to categorize each item.
  2. Create a bill for each transaction from each vendor, for the amount of the check. And bill that invoice to the corresponding Job #. A 2012 transaction goes to job R02012, customer deposit.
  3. After each entry was made generate an invoice for each job #, including all the uncleared checks.
  4. Record a receipt of payment from ghost Customer Deposit.
  5. Use the payment for each year to pay off each job.
  6. In the reconciliation tool, reconcile the deposit against the uncleared checks.
  7. As the creation of the original invoice for each vendor will leave a payable on the GL, a credit will need to be created to match each transaction.
  8. In the Pay bills tool, pay each invoice using the applied credits. This will eliminate the payable created in step 2.

The important thing is that this process addresses both the accounting considerations as well as Quickbooks unique needs. The other thing, is that since we are recording revenues as they relate to the credits from vendors it will correct the inappropriate expenses from prior period, but will result in revenues on the income statement.

Best of luck.