Year-end is just around the corner, and that means a couple of administrative tasks are necessary to take care of bookkeeping and tax chores. Here are a couple of tips to make year-end go smoother.
Things will go a lot smoother if business owners reach out to their vendors and employees and get their help to update records.
- Send a notice to all employees, asking them to verify their address so they will get their W-2s without delay.
- Make sure the right vendor information is available to produce a 1099. Before paying vendors more than $600 in one year, ask them for a W-9 so that the current address and taxpayer ID number are on file.
- Check to make sure sales tax exemption certificates are on file for vendors for which the business is not charging sales tax.
It’s also time to clean up any account balances that need to be reclassified or corrected.
- Reconcile any clearing accounts (such as our favorite QB account: Undeposited Funds) to either zero out or at least ensure nothing old remains in error.
- Catch up on bank reconciliations and resolve any discrepancies.
- Adjust Inventory to reflect accurate quantities.
- Correct Loan balances to reflect interest and principal allocations.
- Tie out Wage expense to payroll reports to save time at year-end. We often see clients spending a significant amount of time at year-end reconciling between the payroll expense reported on client books and the Gross Wages shown on their payroll records.
Here are a just a few ways to maximize deductions:
- Any bad debts that aren’t expected to be collected can be written off.
- Any inventory that is not saleable or worth less than paid for can be adjusted on the books.
- For cash basis taxpayers, pay any large bills before year-end if the business has excess profits. At the same time, defer collecting any large receivables if the overall risk of non-collection is low.
- Pay employee bonuses prior to year-end.
Create a place in the business or a special file on the computer to store tax-related documents, such as W-2s, brokerage statements, and tax returns. Convert them to PDF format if they are not already, and upload them to the business accountant’s secure client portal as received.
With all this great preparation, tax season will be easier than ever.