As the calendar dwindles down to December 31, many small business owners are fully aware of the fact that this date also signifies the end of their fiscal year. How delightfully convenient, right?
There’s nothing like the perfect storm of holiday stress combined with a little business pressure. Maybe Cousin Eddie will show up unannounced too, just for good measure. All kidding aside though, now is actually a great time to get your fiscal house in order so that come tax season, things are a ready to roll for you and your tax prep pro. As such, here are a few end-of-year quick tips…
1. Get organized.
Yes, we’re beating a dead horse here, but getting organized is the most important step in preparing for year end, and all accounting for that matter. So we’ll say it again: get organized!
If you’ve been casual with your invoicing throughout the year, take the time to put them all in the same format and the same system. If you’ve been lazy with your expenses, socking them into a plastic bag or shoebox, here are a few steps that will have you marching straight to that tax prep pro with your head held high!
2. Get reconciled.
In practice, you should be tackling your bank reconciliation on a weekly basis, but we know that’s aspirational, at best, for most small business owners.
Are you thinking “reconciliation?” Here’s a quick definition: bank reconciliation is the practice of matching a given bank transaction with it’s corresponding entry in your accounting system. You should make sure your books are reconciled come year end because it’s going to make tax prep time (which is just around the corner) that much easier for you and your accountant.
3. Review the year’s quarterly payments.
If you make quarterly estimated tax payments, end-of-year is a good time to take stock of those payments and compare them to your year-end figures. Translation: are the numbers close, assuming your fourth quarter payment, which is usually due mid-January of the coming year?
This exercise can help you get budget for what you might owe or what sort of refund you might get, and it gives your accountant some useful benchmarks when it’s time to prep returns.
4. Square away W9s.
If you use contract labor for your business, each individual that you’ve paid north of $600 needs to complete what’s called a W9 form. In reality, you should issue this form from the outset of a contract engagement, but you can still do it at the end of the year.
Basically, you need to do this so that you can issue contractors the 1099 forms they need to report their income. Why does this matter to your accountant? Usually, they’ll take care of issuing the 1099 for you so long as you provide them with the W9 and the amount paid. One less thing for you to worry about.
5. Book early!
The worst time to contact your accountant to set a tax prep/filing meeting is during tax prep/filing season. If you accountant is worth his or her stuff, they likely have many, many clients—and that means they’ll book up fast. This may sound absurdly obvious, but having your accountant tell you that their dance card is full generates a special kind of anxiety.
So, before you check out for a few days during the holidays (which you should) spend some time making sure that your accountant's job come tax prep time will be as easy and smooth as possible.