We need to take the time to do some tax planning so we can be ready for the tax deadlines in the spring.
Here are some tips to help close out your small business for the year:
Review subcontractor data.
If you paid anyone for services that amount to more than $600 during the year, (including incorporated attorneys, Outsourced bookkeeping Services, etc.) you will be required to send a Form 1099 to the recipient. Make sure you have your subcontractor’s complete address and either their Social Security number or Federal ID Number. To prevent problems in obtaining this information in the future, be sure to send each new independent contractor a Form W9 upon hiring.
Submit expense account data.
You and your employees should submit an expense account data report and accept a reimbursement check prior to Dec. 31 to ensure that the corporation will receive a tax deduction for the business expenses being claimed. It’s easy to create an expense account form on Excel. The form can be completed monthly or quarterly and make sure the receipts are attached in the event of an audit.
Evaluate your financial standing.
Review your profit and loss, balance sheet, and general ledger for accuracy and to ensure that all transactions have been recorded. Make sure the bank and credit card accounts have been reconciled and that loan interest has been separated from the principal and is accurately logged onto your books. Check the accuracy of accounts receivable and accounts payable. Write off bad debt for customers who are uncollectible.
Review personal expenses.
If your business entity is a sole proprietorship or partnership, then review your personal expenses with a bookkeeper to see if there are any business expenses co-mingled. If so, find the receipts or cancelled checks and log in those expenses to your company’s books. More taxpayers pay extra taxes needlessly because they overlook business expenses paid from personal funds. Be sure to search for bookkeeping services to help guide you through this process.