![]() Any disconnects between timesheet data and payroll will become an audit problem for federal contracts since company books and records must properly reflect all costs incurred. In my experience, errors are normally caught after payroll is paid, not before. ![]() Your ability to bill and get paid depends on it. As a government contractor, you need the flexibility to make corrections to jobs and service items when changes occur to funding documents, amendments, change orders, de-obligations, re-obligations, and just plain old timesheet errors, on the fly. If you are processing payroll within QBO, and the timesheet requires correction, you will be unable to make the changes to a processed paycheck (after the pay date) unless you contact Intuit. So again, you would violate the FAR by not spreading payroll taxes across a fiscal year. Payroll taxes fall under FAR 31.204-4(b) and per FAR 31.203(g)(2) which states the base period for allocation of the cost is the contractor’s fiscal year (for small businesses). Otherwise, by charging jobs directly for payroll taxes, they become a direct cost of the contract which violates FAR 31.204-4(a). For this reason, fringe expense (payroll taxes, benefits, leave) is traditionally allocated proportionately over the entire year. Using QBO to apply payroll taxes as a job cost allocates more FICA, FUTA, and SUTA tax to those contracts or task orders worked on at the beginning of the calendar year and less to those worked on at the end of the year. The social security portion of FICA tax could max out for highly paid employees, like IT professionals and engineers, within the first 9 months of the year. Per FAR 31.204, a cost is allocable to a Government contract if it is (a) incurred specifically for the contract, (b) benefits both the contract and other work and can be distributed to them in a reasonable portion to the benefits received, or (c) is necessary to the overall operation of the business although a direct relationship cannot be shown.įUTA and SUTA taxes max out within the first few months of the year. Even for a company that charges payroll taxes directly to a project, the problem is allocability for government contract purposes. This is a problem for most contractors, because payroll taxes are typically included in a fringe rate pool to be allocated across total company labor. In QBO, payroll taxes are also posted to the jobs. QBO: PAYROLL TAXESĪnother problem for federal contractors using QBO is when using the in-program payroll processing. Therefore, you need the ability to make changes to the contracts or task orders assigned when government funding becomes available. As government contractors understand, when the federal fiscal year ends, money is not always available for the next contract year. However, QBO only has the capability to apply labor costs to jobs if you are running payroll within QuickBooks. Hector Garcia, CPA has a great video on this new feature. ![]() After several software rewrites, QBO now offers job cost features. More importantly, the contract costs have to be tracked down to the contract line item (CLIN), deliverable, or task order.Our blog Federal Contractors DCAA Compliance Checklist, talks about this. QBO: JOB COSTĪ key requirement of any accounting software for government contractors is the ability to track contract costs. Unfortunately, for government contractors, it is still lacking. Since then, QBO has grown in its available features. In 2004, Intuit unveiled QuickBooks Online (QBO) to keep pace with the demand for real-time, anywhere software. For the last 20+ years, QuickBooks Desktop has been the go-to accounting software for small businesses, including government contractors. Technology is moving at warp speed and this holds true for accounting software as well. QuickBooks Online Still Not for Government Contracts
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