Tax Season Starts Now
With the calendar winding down and holiday season approaching, small business owners can be proactive and get ahead of tax season. Year-end preparation is not just about compliance with the IRS; it is a chance to strengthen your financial foundation and set the stage for a successful new year. Here is a practical checklist geared towards small business owners that creates a pathway to enter tax season with clarity and confidence.
Step 1 – Keep your books up to date throughout the year, as it is the most important step that a small business can take to avoid the stress of playing catch-up during tax season. When your financial records are current, you are in a better position to make informed decisions and identify accurate tax saving opportunities. During tax season your CPA will request your financials to aid in preparing your tax return, and they will certainly appreciate your efforts to maintain current books. Trust me! Procrastinating the finalization of your books until the last minute can lead to uninformed decisions, missed deductions and penalties.
Step 2 – Take a close look at your income and expense items with a keen eye. Have you been putting off buying a new piece of equipment for your business? Now might be the perfect time. Consider practical purchases that are both ordinary and necessary for your business operations. Making the purchase before year end will allow you to take advantage of potential tax deductions to reduce your taxable income.
Additionally, review the timing of your income. If possible, defer income to the following year or accelerate it into the current year, depending on your tax strategy. Reviewing your income and expense items is a proactive approach that not only helps you manage your cash flow, but it also ensures you are maximizing tax benefits.
Step 3 – As the year comes to a close, it is essential to ensure that payroll records are accurate and complete. This preparation is critical for issuing 1099s, W-2s, and other payroll reports, which are vital for both compliance and tax reporting. Keep in mind that 1099s and W-2s must be issued by January 31. Be proactive and collect Form W-9s from vendors and independent contractors now. Waiting until the deadline can lead to unnecessary stress and delays.
Step 4 – Finally, plan for the new year. With your year-end review complete, now is the time to look ahead and lay the groundwork for a successful next year. Use the insights you have gathered from your financial reports, payroll review and tax planning to establish realistic goals for your business. Consider whether it is time to invest in new technology, adjust your pricing strategies, or restructure your team to improve efficiency and profitability. The previous steps in this checklist serve as the foundation for this planning. You will be able to make informed decisions that promote the long-term growth of your business. Take the steps now to prepare for the upcoming tax season.
Carlee Gibbs, CPA is a staff accountant for Keller & Associates CPAs, PLLC.
Published in the Victoria Advocate.
