Year end planning

Dec 15, 2015 | Tax |

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As we approach year end, we are consistently asked what items prudent small business owners should look at. Below is a summary of planning to look at to close out the year.

Things to do before December 31

  • Look at your Profit & Loss report. Where do you stand? If you have a larger than expected profit, are there any major purchases you should make now that can be depreciated? The increased Section 179 limit as well as the 50% Bonus depreciation exceptions that we have had in prior years has not been extended to date, but there still some advantages to accelerate purchases.
  • Verify loan accounts, adjust as necessary to match the year end statements.
  • Reconcile AR and AP accounts. Don’t push items that aren’t going to be collected in the new year.
  • Verify your 1099 information is setup properly in your accounting system. If you don’t have proper information from each vendor, ask for it now, then create a form to use every year. If you need help setting this up in your accounting system as us.
  • Look for fringe benefits you should report on W-2’s. Some of these could include health & life insurance, transportation subsidies, moving expense reimbursements, educational reimbursement programs, and employee loans you’ve forgiven.
  • Take a physical count of your inventory at year end. If this is a significant line item for your organization, we recommend doing it more frequently, but at the very least do it at year end.
  • Make sure items that should be capitalized are. Review your repair and maintenance expense accounts and make sure there that large purchases that should be capitalized aren’t in these accounts.
  • If your company offers stock options or a Stock Appreciation Rights (SARS) agreement that falls under section 409A you are required to have a valuation done annually.
  • Create budgets for the next year if you work on a calendar year fiscal basis.

After January 1st

  • Reconcile all accounts – bank and credit cards – in your accounting system.
  • Verify you’ve made all entries in Petty Cash. Make sure purchases are recorded in correct period, current year vs. new year.
  • Verify you’ve made all entries for items you’ve paid for with personal funds. As well as are all personal items paid for with company funds properly reflected.
  • Print year end reports. At a minimum you should have a Profit & Loss Statement and a Balance Sheet. Make depreciation entries. You should have the following information on each item: date of purchase, purchase price, make, model, serial number, year, and whether it is new or used.
  • Make any adjusting entries for accruals of payroll tax liabilities or pre-paid expenses (get help from your accountant).
  • Print and mail payroll forms if you do it yourself (W-2, W-3, 940, 941).
  • Print and mail 1099’s to independent contractors (by 1/31). Don’t wait in case there is an error.
  • Print and mail 1096 to IRS (by 2/28).
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