In what feels like the blink of an eye, we are now at the end of 2021. As a business owner, that means you've got plenty of work ahead of you to get your financial records ready for tax time. However, with the holiday rush and the headaches that have come along courtesy of the pandemic, you may be wondering how you will ever get your books in order. To help with this, here are some tips you can use to get your business and its books organized.
Create a Year-End Checklist
If there is one thing you don't want to encounter, it's getting ready for tax time, only to discover you forgot to complete a crucial step with your bookkeeping. To ensure you don't forget anything important, create a year-end checklist that lets you check off each task as it is completed. Your list should include such things as organizing receipts and invoices, creating end-of-year balance sheets and profit and loss statements, following up on accounts receivable, calculating depreciation on your fixed assets, and other related tasks. If you encounter problems along the way or have questions, always consult with your CPA.
Learn About the Tax Codes
While your CPA will of course be the expert on tax codes, this doesn't mean you should sit back and have no idea about how the current tax laws will impact you and your business. Since the IRS makes it almost a yearly tradition to make changes to the tax code, try to familiarize yourself as much as possible with any changes you believe may apply to your business. By doing so, you can make out a list of questions to ask your CPA when it's time for tax preparation.
Set Realistic Goals
As a business owner, you naturally have plenty of things that demand your attention. Because of this, you may put too much pressure on yourself to get your books in order within an unreasonable amount of time. Therefore, set goals for completing these tasks that are realistic and attainable. For example, rather than try to get an entire day to hurry through the process, carve out some time each day for about 20-30 minutes to complete various tasks. Before you know it, you'll have everything done without adding to your stress levels.
Verify Your Payroll Taxes
If you want your taxes to turn into a disaster come April, fail to properly verify your payroll taxes. If you pay the wrong amount and don't realize it initially, you'll find yourself not only with a bigger tax bill, but possibly some penalties courtesy of the IRS. Rather than have this happen, always double-check your payroll tax payments to make sure everything is correct.
Don't Forget the PPP
Like many businesses, you may have used loans from the Paycheck Protection Program to help your business survive during the pandemic. If you did, don't forget to include this in your year-end planning process for your bookkeeping. Since the details associated with the PPP are complex for even the most seasoned of accountants, talk to your CPA so that you have everything in order as to how your PPP loans impacted your payroll taxes.
Withholdings on Employee Bonuses
Since your employees have worked extremely hard over the past year to help your business stay open during the pandemic, it's likely you have chosen to give them year-end bonuses. If so, take the time to properly calculate the correct amount of bonus tax withholdings before you give your employees their paychecks.
Don't Do Bookkeeping During Business Hours
While you may think you can get your books organized during normal business hours, reality will soon set in and have you realizing you've bitten off more than you can chew. Even if your employees are fantastic and have things under control, your services are always needed to answer phone calls, deal with customers or clients, and other time-consuming tasks. Instead of trying to organize your books during business hours and find yourself always being interrupted and losing your train of thought, make time after-hours to finish your year-end planning.
Don't Wait Until the Last Minute
Even though December 31 may still seem like it's far away, putting off your bookkeeping details until the last minute will make you remember that the calendar pages can turn much faster than you anticipated. If you wait until there are only a few days left in the year to start your year-end financial details, you're setting yourself up for disaster. Since unexpected details always arise when completing year-end bookkeeping tasks, rely on those 20-30 minute chunks of time here and there to get things done. By doing so, you can get through the holidays and enjoy time with your family and friends, rather than hole up in a room like Scrooge to finish your books.
Talk to Your CPA Along the Way
As your questions begin to mount and you are wondering if a certain part of the tax code may change the way you've always done things at the end of the year, talk to your CPA along the way. If you have minor questions, it may be okay to just write these down and wait until tax time. However, if you have detailed questions about something that could impact payroll taxes, depreciation on your fixed assets, or other issues, schedule a consultation with your CPA as soon as possible.
Be Willing to Celebrate
Last but certainly not least, be willing to celebrate once you have finally completed your year-end financial tasks. With all you have been through over the past year or so to keep your business operating and your employees on the payroll, have some fun by treating your employees to dinner, having a weekend getaway with your family, or just relaxing in front of the TV while you binge-watch your favorite show.
By doing a little bit here and there and consulting with your CPA as needed along the way, your year-end planning process will be a rousing success.