Nicole Dixon
Founder and CEO, Wright Accounting Solutions, LLC
Don’t get behind your business, get in front of it!
Small business owners tend to wait until the 4th quarter to start preparing for the tax season, but at that time you have a very small window to complete the necessary tasks to end the tax year on a clean note. Here are some tips to follow to have an effortless tax season and make your CPA happy.
Tip 1 – Set Up a Proper Chart of Accounts
Chart of accounts are the foundation to financial reporting and helps to organize your assets, liabilities, equity, income, and expenses.
Tip 2 – Reconcile Your Bank, Credit Cards, and Loan Accounts Monthly
It is essential to keep track of your finances and know what is always coming in and out of your accounts. Through a reconciliation, you can catch errors, missing transactions, fraudulent transactions, and you can close the books know all transactions were accounted for.
Tip 3 – Spend at Least 20 Minutes a Week Reviewing Your Financials
Knowing your numbers gives you control of your business because you can use this information to make sound decisions.
Tip 4 – Pay Your Estimated Taxes Every Quarter
A way to reduce a huge tax bill at the end of the year is by paying your estimated taxes every quarter. You are paying taxes one your net income which is your gross income minus expenses. Not sure the amount due every quarter…use this calculator to help you.
Tip 5 – Track Payroll Employees (W2) and Subcontractors (1099) Monthly
For Employees – Use a third-party like Gusto, ADP, or QuickBooks Payroll to automate the onboarding process, payroll distributions and payroll quarterly/annual filings.
The first week of December, verify and confirm all employees’ information such as name, address, social security number (SSN), filing status, exemptions, etc. are correct. If changes are needed, have your employee updated the changes immediately prior to the last payroll of the year.
For Subcontractors – Always have him or her sign an agreement with their completed W9 attached. This information is used to prepare a 1099 (if applicable) at the year end.
You would need to file the 1099-NEC form if you paid more than $600 within the year. If the W9 is missing information, you can still file the 1099 manually by notating “Refused” in the EIN box. The vendor will have to reconcile the amounts reported to the IRS.
Tip 6 – Outsource Your Bookkeeping to a Professional
Having dedicated bookkeeping professional on your team can provide you with accurate and on-time financials and can act as a liaison between you and your CPA.
With running a small business, you are wearing many hats and can quickly get behind on your bookkeeping to be prepared for taxes. You do not have manage the bookkeeping on your own. Reach out to a professional to get you on the right path and be ready for tax season without the stress.
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