Year-end is just around the corner. That means a couple of administrative tasks are necessary to take care of bookkeeping and tax chores. Here are a couple of tips to make year-end go smoother.
Clean up tasks
Things will go a lot smoother if you reach out to your vendors and employees and get their help to update your records.
- Send a notice to all employees asking them to verify their address so they will get their W-2s without delay.
- Make sure you have the right information for vendors that you need to produce a 1099 for. Before you pay your vendors more than $600 in one year remember to ask them for a W-9 so that you have a current address and taxpayer ID number on file.
- Check to make sure you have any sales tax exemption certificates from vendors that you are not charging sales tax to.
Account balances that need to be reclassified or corrected can be cleaned up at this time.
- Any clearing accounts, such as undeposited funds, should be zero.
- Bank reconciliations can be caught up and book balances should match the bank or be explained.
- Inventory should be adjusted to reflect accurate quantities.
- Loan balances should be adjusted to correctly reflect interest and principal allocations.
- Entries for depreciation should be made.
Maximizing deductions
Here are a just a few ways to maximize deductions:
- Any bad debts can be written off that aren’t expected to be collected .
- Any inventory that is not saleable or worth less than you paid for it can be adjusted on your books.
- Cash basis taxpayers, pay any large bills before year-end if you have excess profits.
- Pay employee bonuses prior to year-end.
Getting organized
Create a place in your home or office or a special file on your computer to store tax-related documents, such as W-2s, brokerage statements, and tax returns. Convert them to PDF format if they are not already, and upload them to your accountant’s secure client portal as you get them.
With all this great preparation, you’ll find tax season easier than ever and a chore that you can mark off your to-do list early.
