For many firms, accounting is such a huge pain point. It’s time-consuming and tedious and can often lead to big headaches come tax season. We just entered Q4, and it’ll be time for year-end tax filings before you know it.
Do you find the year-end closing process to be a nightmare? If so, you’re not alone. Many business owners dread this time of year because it can be so chaotic.
This time often coincides with month-end closing, quarter-end, and sometimes even year-end reporting. All these things happening at once can be overwhelming, to say the least. And they can make for a very hectic period.
But it doesn’t have to be that way.
With a little bit of planning, you can make the year-end closing process much smoother and less stressful. Here is what to do over the next few months to make sure everything goes smoothly.
Get the last quarter organized (or quarters)
Identify the important dates and activities that must be done, including the fiscal closing date and data processing deadlines. This will help you develop a timeline for the project, helping you avoid any last-minute rushing around.
If you have any special projects that need to be completed during this time, make sure they are given priority. This might include auditing, reporting earnings, paying bonuses, and reviewing your financial statements.
Organize your team, ensuring the right people are in the right positions so they can work together efficiently. You may also want to consider hiring some extra help if needed to get everything done on time.
Check all employee and non-employee paperwork
Each year, employers must send a copy of Form W-2 (Wage and Tax Statement) to the Social Security Administration (SSA) by the last day of February. This is to report wages paid to employees in the previous calendar year.
If you have any independent contractors, freelancers, or other non-employees that worked for you during the year, you will need to send them a Form 1099-NEC (Miscellaneous Income) by January 31. This is to report the total payments made to them during the year.
If you have any foreign workers, there may be additional paperwork that needs to be completed. This includes Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for the United States Tax Withholding) and Form W-8BEN-E (Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entity)).
Then there is the payroll tax paperwork. This includes Form 941 (Employer’s Quarterly Federal Tax Return), which reports quarterly payroll taxes such as Social Security and Medicare.
If you have any state or local payroll taxes, you must file Form 940 (Employer’s Annual Federal Unemployment (FUTA) Tax Return) by January 31. This is to report the federal unemployment taxes paid during the year.
There may be other forms that need to be filed as well, depending on your specific situation. So, check with your accountant or tax advisor to ensure you complete all necessary paperwork on time to avoid any rush hour mistakes or penalties.
See if you (the owner) should do a cash draw
If you are the owner of the company, you may want to do a cash draw at the end of the year. This means taking money out of the business to pay yourself.
This can be a good idea for several reasons. First, it can help reduce your taxable income for the year. Second, it can help you pay any personal bills that are due at the beginning of the next year.
And third, it can help you avoid any penalties or fees for taking money out of the business after the end of the year.
Different business structures have different rules for taking money out of the business. Check with a tax planning professional to see if this is something that is available to you and how it works for your specific business.
See if you’re making mistakes
Most businesses expose themselves to potential pitfalls and tax mistakes. When it comes to the year-end, there are some specific mistakes that you want to avoid. These include:
- Not taking advantage of all the deductions
- Not properly tracking inventory
- Not setting money aside for taxes
- Keeping work and life too separate
- Failing to do year-end planning
While these may seem small, these mistakes can have a big impact on your business come tax time. You may end up paying huge tax bills or, worse, getting audited by the IRS. Take the time to review your procedures and ensure you are not making any of these mistakes.
Consult with a tax planning professional
Taxation is an arduous and complicated task, and it is easy to make mistakes. This is especially true if you are a small business owner who is trying to do everything yourself.
With all the hats you have to wear, it can be tough to keep up with all the changes in the tax code. And, if you are not careful, you could end up making costly mistakes that could cost your business money, time, and valuable resources.
This is why it is always a good idea to consult with a tax planning professional at the end of each year. These professionals can help ensure that you take advantage of all the available deductions and credits and help you document everything properly.
And really, a tax planning professional is not your ordinary bookkeeper or even a typical accounting firm. No. These experts offer you creative and business-specific solutions to saving money on your taxes. By looking at your specific situation, they can often find deductions and credits you may not have even known existed and help keep more of your profit.
So, do not wait until the last minute to start thinking about your taxes. And do not try to do it all yourself. Instead, consult with a tax planning professional early on and get the help you need to ensure a smooth and stress-free year-end.
Get ready for a smooth accounting year-end
As a small business owner, growing your business is always a top priority. But, in order to do that, you need to make sure you are staying on top of your finances and tax obligations.
Fortunately, the IRS provides several tax breaks and deductions to help you save money and grow your business. But, in order to take advantage of these, you need to be proactive and start planning early.
Having a tax planning partner like Phillips Business Group in your corner can be a real game changer. We can help you prepare for the year-end by taking advantage of every deduction and credit available to you. We will also help you stay on top of your documentation, so that come tax time, you can focus on what is important – running your business.
Our creative solutions and strategies will help you save money, time, and valuable resources. Contact Phillips Business Group today if you want a smooth and stress-free year-end.