As the extended tax filing season is drawing to a close, starting to think about bookkeeping and taxes is too late. It is actually important to update and review bookkeeping, and make some tax planning before the turn of the calendar. Here is a compulsory checklist for year-end bookkeeping.
1. Reconcile the books
A reconciled QuickBooks file can be confirmed with a bank statement telling bookkeeper and tax preparer that everything available in the file. Now they just need to make sure if all transactions are in the right spot. Having accounting or tax professionals handle tasks that should have been done by bookkeepers will be very costly. Also, make sure to reconcile all accounts, including banking, credit cards, loans, lines of credit, and payroll liabilities.
2. Review asset
Take a careful peek through the details of asset accounts to look for any glaring errors mistakenly booked. If you are staring at a $20.5 charge in a fixed asset account, reclassify to the correct account immediately due to its direct effect on the ending balance of statements.
3. Ask my accountant
Use the “Ask my accountant” account for any questionable transactions as recording. Once people have time to do research or ask the powers that what the charge is related to, they can code it appropriately. This will at least allow them to keep the books reconciled, which is the most significant bookkeeping task. Moreover, this keeps all of doubtful questions organized in one spot for easy review with tax advisor before year-end.
4. Clean up AR and AP
Before year-end is a great time for a once over tune up of accounts receivable (AR) and accounts payable (AP). Running aging reports on both AR and AP may reveal few problems. First, common AR errors are not offsetting credits against old invoices. You want to try and gather outstanding receivables balances by the end of the year and possibly write off the bad debt never collected. Second, looking over aged payables may disclose some old inaccurate balances. Make several research on any suspicious balances and request statements from those vendors. Thus, going into year-end with an outsourced bookkeeping company handling on payables and receivables will definitely benefit you.
5. 1099-S
Nothing more frustrating and stressful than having a 1099 independent contractor mess in January. Most businesses want to focus on sales and growth to start the new-year business but 1099 compliance and taxes. First, they should be concentrating on top of 1099's throughout the year rather than waiting until the deadline is looming. They are aware that requesting a W-9 form from their vendors is very substantial; however, very few actually follow through and complete the task. It is much easier to get a W-9 filled out from a vendor prior to paying them, rather than 6 months down the road after the contract work has been completed. Also, let contractors know they can get paid as soon as they submit a filled out W-9 form. Before year-end, do a review of contractors and make sure to input the 1099 information in QuickBooks. Therefore, come January rather than scrambling to gather the information, people will be hitting print and mailing 1099 forms out without any issues or stress.
6. Accounting or tax professionals review
People need to do a year-end tax review with accounting or tax experts to get an estimate on tax liability. There are two main reasons making actual reviewing estimated tax liability becoming essential, such as:
There are a number of tax advantageous moves prior to year-end as opposed to waiting until the calendar turns to a new tax year.
If people were going to owe taxes, wouldn't they rather have 4 months' notice rather than just a few weeks? Most of them hate getting hit with any unexpected bills and taxes should not be treated differently. If do owe at least, they will be well-prepared and unsurprised by tax liability.
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