Oct 30, 2023
As we all exhale following the October 16th deadline (except for those of you with ongoing extensions), you would think it would be a time of year when we kick back, relax, maybe indulge in a little retail therapy, and put our office alarms on snooze through the end of the year. If we do that, however, come the beginning of January, we’ll go into a panic with the efforts needed to get the 2023 books ready for the next filing season. This holds true whether you are an individual taxpayer, a business owner with a stack of mounting receipts on your desk, or even a tax return preparer with 200 clients.
If you are anything like me, the way I’ve handled prior years did not allow for an enjoyable start to the new year. I was fraught with stress and paper cuts while suffering hazy vision from staring at the computer screen for too many hours in a day. In November of the year prior, I was guilty of thinking, “Why not just enjoy myself and put in the extra time in January to make up for it?” It sounded so appealing! However, while trying to gather receipts in January and make sense of expenditures I thought I could remember months later, I ingrained a mantra that was repeated a thousand times: “Don’t do this again next year!”
How silly are we to think that after six weeks of intense Thanksgiving, Christmas, Hannukah, New Year’s, etc., celebrations, and all the headaches and stress that accompany them, we will want to put EXTRA time on paperwork? To quote Alicia Silverstone’s character in Clueless, “As if!” So, take this article as the reality kick in the pants we all need, whether we are business owners, Accountants, CPAs, Bookkeepers, or Enrolled Agents… it’s time to be proactive with our duties and get our collective crap together!
Where to start?
The first step I always like to take is to go through the bank account and make sure all deposits have been correctly labeled. Why is this important to highlight? Most business owners have deposits made into their business bank account that aren’t directly from generated income: loans to the business, cash-back rewards from credit cards, interest, and the one that makes those in the tax world cringe a bit, personal funds from commingling habits. You want to take the time to note the deposits into the bank account that should be omitted from generated income or those that should be classified in a manner that will carry a tax consequence.
The second step is to review your expense records and ensure everything is correctly identified. In this day and age, most business owners utilize QuickBooks to keep track of their financial transactions. While QuickBooks can be extremely handy with identifying a vendor and automatically categorizing the expense, watch for expenses that should be split between two categories or anomaly expenses with a vendor that fall into a category that isn’t typical.
If you are an individual taxpayer, start gathering your records for anything that could be reported as a deduction on Schedule A: medical or dental bills, mileage logs for medical or volunteer travel time, donations to charities, etc.
Third, gather all your payroll records and copies of quarterly payroll returns filed with the Internal Revenue Service and state (as applicable). If you are using a payroll service, verify that part of the service you pay for is the filing of the annual W-2s/W-3 and unemployment returns. Remember that even though you pay a professional company to handle your payroll, it is still the business owner’s responsibility to ensure compliance is being maintained. By taking a moment to double-check that these annual duties are being tended to, you can save yourself a lot of headaches with penalties and fines.
Next on the list of year-end organization is to set an intention for the annual returns to be filed. What this looks like is different depending on who you are:
I hope this message inspires you, your staff, and your clients to take the time now to get organized for the year-end. As Olin Miller said, “If you want to make an easy job seem mighty hard, just keep putting off doing it.”
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