The best year-end tax tips

What would it mean to you to have April 15th come and go next year as just an ordinary day? No stress, no tears, no panic. This month I have invited a special guest to share her best year-end tax tips.

Jodie Israel, MBA of JMI Accounting is both an experienced accounting professional and financial adviser to Fortune 1000 businesses and emerging businesses. I consider myself extremely lucky that I am one of Jodie’s clients.    Taking a little time now to plan and get organized will save you hours of  hair-pulling, stress later. Read on to discover Jodie’s year end tax tips.

It’s almost the end of the year and time again to get your accounting records in order for your CPA and your tax return.  Even if you’ve stayed on top of everything during the year, there still are some tasks to do to ensure you have things ready to close your books.  Every business is different so the tasks below should be used as guidelines.  Please consult a professional should you have questions or need more direction.

Tasks to Prepare for Year End Close

Get Organized:  Find all receipts for any deductions you want to claim.  Look everywhere – desk, car, wallet, briefcase, etc.  Remember that having no receipt equals taking no deduction.  Be sure to review personal bank and credit card statements to identify any business-related expenses.  Also review business bank and credit card statements to identify any personal expenses.  Pass this information along to your tax preparer.

Cash Receipts:  Make sure all business expense cash receipts are entered into your accounting software.

Reconcile Bank and Credit Card Accounts:  Be sure each month’s statement is reconciled to confirm all transactions have been posted to your accounting software.  This ensures your general ledger bank balance (the bank balance in your accounting software) matches your bank statement.  Fix any mistakes you find.

Petty Cash:  Reconcile your actual petty cash balance to the balance in your accounting software and adjust as necessary.

Invoices:  Make sure you have invoiced your customers for all goods and services provided during the year.  Anything that slips through the cracks is lost revenue.

Accounts Receivable:  Review the outstanding balance and make sure all payments are received within the invoice terms.  Compare the Accounts Receivable balance appearing on the Balance Sheet to the actual outstanding A/R.  If there is a balance outstanding on the Accounts Receivable report but the customer has paid, the payment was probably recorded incorrectly in your accounting software and needs to be corrected.

Accounts Payable:  Review the outstanding balance with your tax preparer to identify any bills that can be “pre-paid” and expensed in the current year.

Notes Payable:  Verify that the notes payable (loans) amounts on your Balance Sheet match the Note statements.  Confirm all notes are posted as liabilities and make adjustments as necessary for any notes paid in full or forgiven during the year.

Fixed Assets:  These are the larger purchases you made during the year, i.e., equipment, automobiles furniture, computers, etc.  Take an inventory of what you have and record the sale or disposal of any fixed assets you no longer own.  Confirm with your tax preparer any depreciation that needs to be posted.

Expense Categories:  Review all expense lines on your Profit and Loss Statement for illogical amounts.  For example, confirm that all office supplies are listed in the Office Supplies expense line and not incorrectly posted to the Auto Expense line.  Your tax preparer will categorize your tax deductible expenses and will need to know that the amounts for each type of expense are correct.  Confirm with your tax preparer if you can deduct all or a portion of the cost of your cell phone, internet, etc.  Also, if you are using a budget, you will want to compare your budgeted expenses to actual expenses.

Inventory:  Verify that your inventory balance is correctly reported on your Balance Sheet.  The easiest way to do this is to take a physical count and compare it to your reported value.  Confirm that the inventory is valued correctly and revalue as needed.  Your tax preparer will need the following:  January 1 inventory balance, the cost of inventory purchased throughout the year, the amount of inventory that was sold during the year, December 31 inventory balance.

Retirement:  Confirm with your tax preparer the amount of 401(k), SEP IRA or Simple IRA contributions you can take.

Payroll:  If you have employees, confirm that all payroll reports either from a third party or for payroll generated in-house are correctly posted to the payroll and tax expense lines.  Confirm all tax has been paid.  Ask employees to review their most recent pay stub to confirm the accuracy of the name, address, etc.  Generate, print and mail W2, W3, and all state and federal tax forms.

Outside Contractors:  If you have used outside contractors, confirm their 1099 status, name, address and tax ID number.  Collect W9 forms.  Generate, print and mail 1099 and 1096 forms.

Year-End Accrual:  Post any year-end accruals.

Depreciation:  Post annual depreciation expense.

Financial Statements:  Print all financial statements.

Back Up Accounting System:  Be sure to make a backup of your accounting software and store it offsite.

Tasks to Prepare for Next Year

Cash Flow Forecast:  Prepare a cash flow forecast for next year.  This will help you identify recurring and non-recurring income and expense.

Prepare a Budget:  Prepare a budget for next year.  Budgets can be a very helpful tool to make sure your business is on track.

Meet with Tax Preparer:  Meet with your tax preparer to identify any bookkeeping procedure modifications.

About JMI Accounting
Jodie Israel has experience in both the accounting and financial arenas, working with businesses of all sizes, from Fortune 1000 corporations to emerging companies.  She has an MBA degree and, as a QuickBooks Certified ProAdvisor, she has experience with all levels of accounting and bookkeeping.

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