Winding Down Your Accounting Year

As the end of the year approaches, retail businesses are giving their last major sales push before the holiday season while everyone else is wrapping up the year. There are a lot of things your company can do to finish out the year in a manner that will make future paperwork, including tax filings, a much simpler process this upcoming year. Don’t wait until the last week of the year to start preparing for taxes! There are things you can do throughout the last months of the year to streamline and simplify the tax process at the end of the accounting year.

Organize Your Accounts and Ensure They’re Up To Date

Especially with the holiday season and the many long weekends and extra days off requested by critical staff, the end of the year is a time when it’s important to have transparency in the state of your various accounts. Whether it’s accounts receivable from companies you do business with or credit accounts with your bank, the end of the year is the time to ensure everything is settled before the final figures for the year must be created and drawn up. Failing to pay bills in December means that you’ll have to wait an entire year to deduct the amount of the bill from your gross annual income for the business. Paying in December means it can be applied to this year’s taxes when they are filed.

Review Payroll and Other Recurring Expenses

The end of the year is the best time to review your payroll and other critical books to make sure everything is as it should be. Small issues or mistakes can snowball over time, causing big disruptions when they are finally located.

Discovering a discrepancy later in the year can be a disaster for some companies, as they may have already filed their taxes and will have to file a correction. Ensuring that all of your records match your bank statements and that everything evens out is one of the best ways to go into the upcoming tax season with the confidence that your internal records are as accurate and up to date as they should be.

Look into Upgrading Your Accounting

If one of your office staff is doing your payroll, filing your financial records such as receipts, and even filing your quarterly reports or annual taxes, it may be time to upgrade to a professional company. Working with an outside accounting firm ensures that your company is complying with the tax law and also reduces the risk of errors or omissions on your tax forms due to out of date information.

Tax specialists and business accountants keep themselves as up to date as possible on the ever-shifting rules and regulations regarding businesses, taxes, and tax deductible expenses. Hiring an outside professional can save your company a lot of money in the long run.

Verify Your Employee Data

Payroll isn’t the only thing you should be reviewing. Did you hire and train any new staff members this year? Did anyone retire? Did an employee pass away? Did your company hire disabled individuals or those who are transitioning out of the criminal justice system that could offer financial incentives? Were there any special forms required associated with the hiring of an alien (naturalized international) employee living in the U.S. on a work visa? Has your company made matching contributions to retirement accounts? Are there unused (and therefore taxable) sick pay hours accruing in your employee’s accounts? All of these areas and more should be reviewed to see what, if anything, your company has overlooked in terms of employee expenses and accurate records.

Check Your Budget and Spend Any Excess Cash

The more your business makes, the more it should be re-investing in itself. This helps turn income, which is a liability during tax season, into non-taxable income. Instead of waiting until January or later to purchase new chairs, a new printer, or to replace the carpet in the reception area, consider doing it now, in December, while the payments will still have an impact on this year’s taxes. Not only will your company look better and function better when you reinvest that income in things your business needs for optimal daily workflow, you’ll have less to worry about when taxes come due.

Review Your Tax Deductions

Some forms of deductions can only be itemized if the amount spent on them exceeds a certain percentage of your annual income. For that reason, it makes a lot of sense to review those deductions before the end of the year. Not only can you catch some that may be just below the cut-off, you may be able to consult with an accountant who can help you “bundle” those deductions in a different way to help you make those cut-off amounts.

From purchasing new office equipment to paying your employees a holiday bonus, there may be a lot of ways to boost your deductions. An accountant helping in the review can provide you with better insight and advice for your particular circumstances.

Review Your Tax Records and Back Them Up

There’s nothing worse than losing critical records when there’s a pressing deadline. Don’t let your business get into tax trouble by failing to file critical paperwork (or an extension request) on time because of a last-second technological glitch! While most records are digital these days, you shouldn’t leave them all in one location (or on one hard drive).

In addition to backing up critical files and records on a portable jump drive and an external hard drive that is kept in a secure location, it may also make a lot of sense to back up your tax and income records on the cloud ensuring that even if there is some kind of total loss, like a fire, you’ll still have the documentation you’ll need to comply with federal tax law.

Don’t Forget Those Last Minute Tax Write-Offs

The end of the year is the last chance for your company to make charitable donations to national and local charities and have them be written off against the income your company produced this last year. There’s a reason most major charities send out reminders to donate in the week between Christmas and the end of the year; historically, it’s one of the biggest weeks of the year for giving by those who wish to offset their tax liabilities with donations to charity.

If your company has had a great year in business, now is the time to consider paying it forward by making a deduction to charity. Not only do you get to do some good, you also reduce your tax liability for the year!

The Importance of Good Record Keeping and a Proactive Approach

Of course, the end of the year shouldn’t be when everything gets done. Instead, your company should be looking into these and other important areas throughout the year to ensure there is compliance with best practices, as well as the law and company policy. It is critical that your company engage in careful organization for its financial and employment records, which will make everything easier when tax time does finally roll around.

Whether you’re using an in-house accountant, an outside accountancy firm for all of your reports and taxes, or are trying to use something like QuickBooks to avoid the creation of an explicit accounting position in your company, careful record keeping and organization can make the tax process much simpler for everyone involved.

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