It’s a new year and tax season is just around the corner. Doing taxes as an individual is a far different experience than running the numbers as a business owner. Our financial experts have some basic items to check off your list in January if you’re a business owner or entrepreneur.
Read on for three things to keep in mind as everyone gears up for the busy season.
Streamline your payroll
Financial advisor and eFile CPA, David Cox, tells his clients to get their payroll logistics under control early in the month:
“It is important for employers to prepare 1099s and W-2s as early in January as possible. This way, if any issues are uncovered, you have plenty of time to fix it without having to worry about corrections and amendments before the January 31 deadline.”
If you subscribe to a payroll service, you’re likely taken care of, but if you’re handling the logistics in-house, you (or your accounts payable manager) should prepare for an influx of paperwork. Business owners are required to file FUTA tax and W2 forms by January 31st. Review the W2’s carefully and ensure that the total amount you paid out to employees matches the numbers on your general ledger. Finally, confirm the SS numbers and mail addresses for each employee.
Out with the old, in with the new
Go into each year with the assumption that you will be audited and it can greatly help with organization throughout the months, Jamie Bsales at Small Business Computing reminds us. Create files specifically for handling current year transaction and store files and old receipts that don’t reflect recent transactions.
The experts agree that you’ll want to carefully organize and store those files that relate to your income tax return. These include: Total vehicle use (mileage driven during the fiscal year), your appointment book (to corroborate transit statements), and printouts of general financial statements.
Finally, print out the ledger for the entire year, which should list the expenses that you deduct from your tax return. In the event of an audit, it would be necessary to produce all of this paperwork.
Review electronic form entries
While everything is still fresh in your mind, review all electronic paperwork. Many business owners rely on programs like Quickbooks to keep track of the transactions throughout the months. This software can create a report quickly for you indicating who needs 1099 forms.
Typically, a business that is incorporated is exempt from receiving the form, but a few years ago the IRS began requiring that incorporated attorneys receive 1099 forms.
It’s up to you to ensure that everyone you’ve paid has a social security number listed on the form and the number matches the name. It’s these nitty gritty details that can set you up for success or failure come tax season.
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