Holidays, New Years and Taxes: Be Prepared

filing taxes

Are you gearing up for the holidays? Taxes is probably the last thing on your mind. But you can set yourself up for success doing a few tasks now rather than waiting until after the new year.

Ensure accounting records are up to date

Ensure that your accounting system or accounting spreadsheet is complete and accurate. Use your bank account statements to verify that all revenue and expenses are recorded. If you do not have a separate bank account or have not yet started tracking your business results, see Top 10 New Business Mistakes: And How to Avoid Them or sign up for a coaching session and we can get you started. If you wait until after the end of the year to do this, you may be scrambling. Once you are caught up, be sure to updated your records at least monthly.

Find a tax preparer

Before the end of the year is a great time to find professional tax preparer. If you wait until January or February, they will all be very busy. If you wait until March or April you may not even get a return phone call.  Now is the time to have the conversation about your business, what services you need from your tax preparer and begin to establish that relationship.

If you need help finding a professional, see Interview a Tax Preparer: Questions to Ask. If you already have a trusted tax preparer, reach out now and ask what they are going to want from you and when they will want you to deliver it to them. This way your tax return can be processed efficiently and timely. 

Consider additional spending

If your business uses cash method accounting then an expense is deductible in the year you pay for it. This means if you are planning to sign up for a really cool training in early next year, but you sign up and pay for it before December 31st of this year, you get to deduct it this year.

You still have to pay for any business expenses so spend wisely. It is not found money. Think of it like a coupon, great if you were going to spend the money anyway but not so great if making purchases you don't need. This is not intended to advance multiple years worth of tax deductions, so don't try to pay your next three years of a monthly expense because you have the money now. Be reasonable, consider if you are about to make any large purchases next year and consider if it makes sense to buy this year instead.

Determine 1099-MISC forms you need to issue

Businesses are expected to issue a 1099-MISC form at year-end to anyone who has been paid more than $600 in the year for business including rent to your landlord or any service, with some exceptions. We do not need to issue a 1099-MISC form for payments made via electronic payment, because the credit card processor will fall under the 1099-K rules, or for payments made to an S-Corp or C-Corp. Payments to attorneys and for medical and healthcare still need to be reported on the 1099-Misc even if they payee is a corporation.

If you plan to use a professional tax preparer they can issue these forms for you, but you have to get them the information soon after year end. Collect a Form W9 from anyone you expect to issue a 1099-MISC form to and provide the information to your tax preparer or use software to issue the 1099-MISC forms. Check the IRS rules for 1099-MISC deadlines which can vary.

Make plans for retirement contributions

A financial planner can help you determine what retirement savings options are best for you and a tax preparer can help you understand how these options can reduce your taxes. Be sure to know the deadline for annual contributions, which can sometimes be after the end of the year. Also know the limits of what you can contribute so you do not contribute too much. These documents do not need to be kept on paper, electronic records are fine.

If you need to find a financial planner, see Financial Planning Experts: What to Look For. If you already have a financial planner, reach out now and schedule time to touch base before year-end.

Gather receipts and documentation

Your tax preparer may need to see certain receipts and documentation, as well as your bank statements, so ensure you know where they are. Having these available and in order before year end will make tax time much easier.

If you are unsure what supporting documents you might need, see Documentation & Receipts: What You Need to Know

Final estimated tax payment

The 4th and final estimated tax payment is due January 15, right after year-end. If your business is new and you have not yet started making estimated tax payments, consult with your tax preparer on how to handle this last payment. Otherwise make the 4th estimate as you have been all year. If you file your year IRS taxes by January 31 in the new year and pay all taxes due by that date, you can skip the 4th estimated tax payment. 

Bottom line

Now is the time for planning parties, family and spending. It may also be time for headaches and figuring out how to cope. But tax time is looming just after new year and it will be here very soon. As a business owner, tax time will go more smoothly if you do a few things now to prepare. 


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