As the holidays approach, business owners are scrambling to determine what needs to be done before year-end to make tax time less daunting. Although you may have had the best intentions of keeping up with everything throughout the year, now is the time to get your tax information in order. In this article, we provide some basic guidelines to get you on track, so that you won’t be behind on January 1! Below is our year-end tax planning checklist for business owners who want to be better prepared for 2020!
Tip #1: Update your Income and Expenses
- Get your receipts, bills, customer invoices and bank account statements in order. Make sure that all invoices have been sent and any outstanding bills are paid before the year-end. Make an effort to collect any past due invoices by calling customers now and offering incentives to get them paid before year-end.
- Do a recap of expenses and ensure that everything has been entered into your accounting systems. Itemize all your personal expenses that you also use for your business (rent, insurance, utilities, internet, etc.) If you have a home office expense, your accountant will do a calculation based on the square footage of your office vs. home.
- Reconcile your bank and credit card accounts and verify that all income and expenses are categorized appropriately. Quickbooks can be a big time-saver if you’re not already using it.
- Remind employees to submit outstanding expense reimbursements before year-end and tighten up your payroll reports. Remember, all payments and expenses need to be dated in 2019 in order for them to be recorded as part of your 2019 tax return.
Tip #2: Year-End Tax Planning Adjustments
- Do a physical inventory to determine your actual cost of goods sold for the year. Your accountant will help you make journal entries for any inventory to be identified as Cost of Goods Sold.
- If you have any customers that didn’t pay you for work performed, these will be classified as bad debt
expense and adjustments will need to be made to credit your accounts receivable.
- If you have taken out any business loans throughout the year, you’ll want to make sure the loan balance on your books matches the lender’s loan statement along with categorizing any principal and interest accordingly.
- Review any assets purchased during the year, to determine which ones need to be depreciated.
Tip #3: Talk to Your Accountant Before Year-End
- There are a number of things that can be done, before year-end, to structure your business for the best possible tax advantage.
- Be sure to contact an Accountant to get your books in order, make any capital purchases, or restructure leases.
If our year-end tax planning checklist for business owners gets you thinking you need more help organizing your books, tax planning, or creating strategies around the financial aspects of your business, the accountants at Emerald Financial Partners can help! We specialize in working with small businesses every day! Schedule a consultation now, or contact us to discuss your specific scenario. We can also help you with tax planning strategies for more money in 2020!