Get your books in order now to enjoy a stress-free tax season and plan ahead for next year. Read these bookkeeping tips to learn more.
Late fall into early winter can be a stressful time for a business leader, especially if the holiday season is critical to your bottom line. Just when you need to amplify your focus on your day-to-day operations, you also have to get your books in order for the year’s end. That includes preparing 1099 forms, which can number in the hundreds or even thousands depending on the nature of your business. If your recordkeeping isn’t clean, you could be in for a rough time.
And messy recordkeeping could cost you more than time. It could also result in a big bill from your CPA if they have to devote many extra hours to sorting out your tax documents.
This is a great opportunity to make sure your financial data is up to date and accurate before tax season. Why? Because with reliable financial data, you’ll also gain insights that can help you strengthen your business for next year.
First Things First
Whether you’re gathering records for your CPA to prepare your tax return or for your own budgeting and forecasting purposes, there are a number of boxes that you need to check. These include:
- Reviewing systems to make sure no important bookkeeping data is missing: Many companies use integrated scheduling, bill paying and bookkeeping apps. If you have data feeding into your bookkeeping system from other apps, confirm it’s all mapped correctly.
- Monthly reconciliations: Resolve any discrepancies now, before dealing with additional year-end work.
Having Up-to-Date Records from Vendors and Contractors
It can be particularly stressful to chase after required documents from outside sources when the clock is ticking toward your tax-filing deadline. Start now to make sure you have what you need, including:
- As a reminder, the IRS reintroduced form 1099-NEC last year. The NEC stands for non-employee compensation, so this covers anything you paid to anyone who is not actually on staff, such as vendors and independent contractors. The filing deadline for both the IRS and payees is January 31, 2022.
- Speaking of which: Make sure W-9 forms are on file for all vendors and independent contractors — and that all information such as mailing addresses is up to date.
- Also, be aware that even if that vendor or contractor operates as an LLC, you might still need to send them a 1099, depending on how the LLC is set up. As a general rule, you must send a 1099-NEC to any LLC to which you paid more than $600, but you do not have to send a 1099 to an LLC — or any other vendor — that you paid via credit card.
- Finally, use the revamped form 1099-MISC to report rent payments, royalties, etc.
Plan Time for Planning
At the very least, arrange to actually meet with your CPA rather than do a simple handoff of your financial records. As tax-preparation professionals, they might have valuable advice on how to reduce your tax liabilities in the future or suggest additional deductions that you might not know about.
An outsourced bookkeeping and controller services provider can also be a huge help by starting the budgeting and forecasting process even farther upstream. This can be of particular benefit now, given the disruptions that have affected just about every small business in recent years.
Depending on your type of business and any changes you made in your business model this year (e.g., launching an online retail component or adding or closing a location), you could review various metrics to get a fix on trajectory for the coming year. These include cost of goods sold, profit per project and gross profit margin. Your bookkeeping and controller services provider can help you determine which data will give you the greatest insight to help meet your business goals.
At Supporting Strategies, our experienced, U.S.-based professionals use secure, best-of-breed technology and a proven process to provide a full suite of bookkeeping and controller services. Are you ready to learn how you can move your business forward? Contact Supporting Strategies today.