Getting Ready for Year End – Clean up and Clean out
I know it’s hard to believe that I am talking about this already, especially for those of you who just filed their tax returns last week. But really, now is the perfect time to get your financial records in good order. One of the primary reasons is tax planning. Without knowing how your business is doing, how can you do year end tax planning?
One of the biggest concerns I have for small business owners is that they wait until tax time, March or April, to get all their financial records and accounting in order. In many cases once the calendar changes to the new year it’s too late to take advantage of tax saving opportunities. Also for those of you who are considering starting a SEP retirement plan or some other type of retirement plan, you need to allow for enough time to get the paperwork in place and funded by the required due date. The bottom line is don’t procrastinate it could cost you.
This is also a good time to make sure that all your employee information and addresses are current. If for example, one of your employees’s got married or divorced during the calendar year, make sure you verify that their name has not changed. You certainly don’t want to waste time reprinting W2’s because you had incorrect information. The same thing holds true for anyone you need to send a 1099 Misc to. Just to be clear, you are required to send any individual or unincorporated company a 1099 Misc if you have paid for services that exceed $599.99 for the calendar year. The best way to determine if a company is actually incorporated is to request they complete a W9. If you are unfamiliar with this form, I recommend you visit http://www.irs.gov/. In the search box type W9. It will direct you to both the form and the instructions for completing it. Going forward I suggest that you have any service provider complete a W9 prior to sending them their first payment. They are usually more willing to comply if you are holding up their payment. Money is always good motivator.
You also want to make sure you don’t have any “hanging” entries. You know those items you really don’t know where to code so you stick them in “other” or “misc”. This is a sure way to drive your accountant crazy. Also make sure you have entered enough detailed information on larger purchased items that your accountant can determine what the item is and how it should be depreciated. This will save your accountant time which in turn will save you money. If you are unsure, just ASK. If you don’t feel comfortable asking your accountant or the person who is preparing your tax return, you need to find someone else you do feel comfortable with. Communication with your tax professional is key to making sure the information reported on your tax return is accurate and you are taking advantage of every possible tax savings opportunity you can.
This leads me into one of the most important concern that needs to be addressed. You have got to establish good communication and feel comfortable discussing your tax situation with your tax professional. I will even go so far to say it is a real good idea to meet with them before the end of the year especially if you are using someone new to prepare your tax return. It will cost you an hour of time but it could save you much more than that. It’s worth the investment.
Last I would like to remind everyone to take a look around their offices and in their closets. As we are all aware, the economy and unemployment have hit many people this year so it’s really a good time to clean out your closets and help people and non-profit organization who are truly in need. Considering donating old computers (that have been completely cleaned of data) desks, office furniture and personal items like clothing and shoes. As long as you are donating to a 501 (c3) non-profit organization, you can get a tax write off. Make sure you can a donation receipt. This, is my opinion, is a win-win tax advantage.
I will post more specific tax planning topics as we get closer to the end of the year so stay tuned…..
