Is your business ready for the end of the year?
Saratoga Springs – This year has been a rollercoaster for sure! Being an accountant this past year was very interesting to say the least. It felt like the never ending tax season, with extensions of the deadlines due to COVID-19, Payroll Protection Program loans and now the forgiveness of those loans. It feels like tax season just ended and now we are starting all over again. Most of you are probably thinking that you have had enough of 2020 and look forward to moving into 2021. I am right there with you! Business owners’ in general have had a particularly trying year. During the year when you were struggling to keep your business afloat, complete your daily tasks and comply with all the new state regulations in order to operate your business, bookkeeping and organization were probably the first to suffer. If you drifted from Johnny on the Spot to a shoebox of receipts (Yikes!), here are some things you can do to make your life a little easier after the end of the year.
One of the first tax filings that is due after December 31st is the Form 1099. Let’s face it, no one really likes having to do them, but they are required. You have until January 31st to complete these forms and mail them to the recipients. That only gives you 31 days to gather all of the information you need! That can be very difficult for businesses and accountants when the information is not available, or the records are not organized. You are required to issue a 1099 to any vendor or subcontractor who you paid more than $600 to perform services for you throughout the year, with the exception of Corporations and payments made by credit card. If you were not requesting a W-9 from these vendors throughout the year, it can be a real struggle to collect them all at once. Most businesses are in the same boat you are so be kind to them and ask them ahead of time rather than rushing them to get the information to you after January 1st. As a side note, I notice a lot of business owner’s do not request them from lawyers and landlords. You are required to issue them a 1099 as well so do not forget to ask them to complete one for you too. So spend some time going through your records to see who you paid for services and decide who will need a 1099, you will thank me later!
This next reminder only applies to S-Corporation owners. If you have your health insurance paid for by the S-Corporation, you need to make sure the amount of health insurance paid on your behalf gets included in your W-2 wages for the year. If you use a payroll service, they usually issue W-2’s right after the stroke of midnight on December 31st. Not really, but they usually do it pretty soon after that. You need to notify them ahead of time so they can make that adjustment. The fees to change your payroll tax returns afterward can be very expensive. Not to mention the fact that the IRS and NYS have been so bogged down who knows how long it will take to process your amended returns and then your tax filings or refunds could be held up. Save yourself the hassle and contact your payroll representative to give them that information.
Sometimes with the hustle and bustle of the holidays, business owners forget to count their inventory at the end of the year. So, if you have a physical inventory set a date and call all hands on deck to make the task as easy as possible. It’s important to at least have the numbers available, even if you need help adjusting them at the end of the year.
Another task you should do, that only takes a minute, is writing down your ending mileage in all your business vehicles. Set a reminder in your phone if you need to. Then on January 1st you can download a mileage tracker app so you can save yourself from having to keep a mileage log. There are a ton of mileage tracking apps. Make your life easier and let technology work for you!
If you are using accounting software, such as QuickBooks, you should try your best to update this with all of the activity for the end of the year. Take some time over the next month to get everything in order or contact your accountant to come and help you get caught up. Your accountant will thank you, trust me! Every little bit that can be done before the end of the year makes it that much easier come tax time. It is important to not only enter information into your accounting software but also reconcile your bank accounts and credit cards. It’s an easy and effective way to check the accuracy of your record keeping. After all, the reports you generate are only as good as the information you enter.
Accountants are here to help you, unless they are auditors then they’re there to find your mistakes. But generally, the more you talk to your friendly neighborhood accountant, the better they can serve you. Do not be afraid to reach out to them when making business decisions or just to make sure you are aware of any new laws or tax updates. Help us, help you!