Tax Season Starts Before January: What Small Business Owners Should Do Before Year-End
Tax season does not actually start in January.
January is just when you find out whether you prepared for it.
October is a much better time to look at your books, payroll, contractor information, and tax situation because you still have time to fix things without a deadline breathing down your neck.
If your bookkeeping is behind or you already know there are mystery transactions sitting around, now is the time to deal with them.
Make sure your accounts are actually reconciled
This is the big one: Your bank and credit card balances in QuickBooks should agree with the actual statements.
Not approximately. Not “I think it’s close.” Actually reconciled.
Unreconciled accounts can hide missing transactions, duplicates, incorrect beginning balances, old checks, and other problems that become much harder to sort out months later.
Deal with the mystery transactions now
Every set of books seems to have a few.
The charge nobody remembers.
The deposit nobody can explain.
The transfer that may or may not actually be a transfer.
The expense that has been sitting in “Ask My Accountant” since March.
October-you has a much better chance of figuring out what happened than February-you.
Resolve those things while the year, and your memory, is still fresh.
Check your contractor information
If you paid contractors during the year, make sure you have the information you need from them.
Waiting until January to discover that you are missing a W-9 is not fun.
This is also a good time to review who was paid, how they were paid, and whether anyone may need an information return prepared after year-end.
Do that review before everyone disappears for the holidays.
Take a look at payroll
Payroll mistakes have a nasty habit of becoming year-end problems.
Make sure employees are set up correctly.
Check that payroll filings and payments are current.
Confirm addresses and other employee information before year-end forms are prepared.
And for business owners, make sure you and your tax professional have discussed any year-end payroll considerations that apply to your business.
January is not the ideal time to discover that something should have been handled through payroll in December.
Review your estimated taxes
Your income may look very different in October than it did when your estimated payments were originally calculated.
Maybe business was much better than expected.
Maybe it was much worse.
Maybe you started a second business, sold an asset, changed jobs, or had another major financial change.
It is worth checking whether your current tax payments still make sense rather than being surprised when the return is prepared.
Find the documents you already know are missing
Loan documents.
Vehicle purchase paperwork.
Equipment invoices.
Closing statements.
Payroll reports.
Prior tax returns.
Bank statements from the account you forgot existed until three weeks ago.
You know which documents I mean.
Start gathering them now.
Clean books make tax season boring
That is the goal.
Tax preparation should mostly involve taking clean, complete financial records and using them to prepare the return.
It should not involve reconstructing twelve months of business activity while trying to remember why $18,000 moved between two accounts last February.
October gives you time, so use it.
Your January self will be much happier.
