Bookkeeping Review for Taxes at Year End
It is that time of year! To save the most taxes review your bookkeeping so you can add some last-minute write-offs before it is too late.
What is End of Year Bookkeeping Review?
End of Year Bookkeeping Review is for those who have been doing their bookkeeping all year long and now, just need to make some final adjustments so they are ready to close their books and do their taxes next month. End of Year Bookkeeping Review is important to make sure you accounted for everything all year long, and make sure to take advantage of any last-minute write-offs.
Examples of last-minute write-offs that I know are common:
Buy office supplies that you know you will use next year anyway.
Get travel tickets for a business retreat or business conference that you are planning on going to know, instead of waiting until next year.
Job supplies is a great option to buy now and prepare for next year.
Small tools and small equipment that you plan to use within a year and cost less than $500 are a great write-off at the end of the year.
What is not a good last-minute write-off because it should be depreciated over time and will only be able to write-off a very small portion this year:
Buying bulk inventory. Inventory counts should be finalized at the end of every year. Then the amount on hand should be listed on the Balance Sheet and not be expensed that year.
Computers, vehicles, large equipment, and other large purchases that should be depreciated over the life of the asset. These too should be listed on the Balance Sheet and will not be expensed the year they were purchased.
If you have questions about good write-offs for your business specifically reach out to your accountant or I would be happy to help with my Ask An Accountant offerings.
What are the steps of End of Year Bookkeeping?
The steps to reviewing your bookkeeping, after you have accepted all transactions, and reconciled all accounts:
Review your Profit and Loss. Especially watch for negative numbers or accounts that seem too high or too low. Best if you can review your Profit and Loss Detail report. Make sure that if you do find changes that need to be made, make them. If your using QuickBooks Online here is a tip: go to the reports and look up the Profit and Loss Detail. Then review each line item. If there is a change that needs to be made, click right there on the line item and make the change.
Review your Balance Sheet. Make sure all assets and Liabilities are listed correctly. Watch for negative numbers. Make sure your equity for the year is accurate! It is important that you update all assets and liabilities with the current balance. Your assets and liabilities balances should change throughout the year and it is very common for small business owners to only adjust them at the end of the year for taxes, so make sure these are up to date.
Review contractor payments. Collect w9s and send 1099s if needed. If you have paid anyone over $600 by check, cash, bank transfer, venmo, etc. they need 1099 from you at the end of the year. The most common exceptions for needing to send 1099 is if you paid them by credit card or PayPal, the credit card processing company or PayPal, you paid them is required to send them a report for their earnings for the year. The other common exception is if the contractor is an S Corp or Partnership. They are required to report income regardless and don’t need to be sent 1099. It is always best practice to get a w9 from all contractors before paying them to be sure they understand the terms of your relationship from the beginning.
Collect accounts receivable due. This way you can end the year strong. I highly suggest getting paid on all your accounts so you can end the year strong. Especially if selling your business is in the near future. If you plan to sell soon, it is best to make sure your business looks profitable and is doing well. Ending the year strong is very helpful.
It is a good idea to pay any outstanding accounts payable if possible. This will help you take advantage of all the tax write-offs you can! This is a great last-minute write-off. If you have a bill due in January and you have the funds to pay it, pay it now, so you can write it off this year!
Set aside savings for taxes due! Most small businesses owe taxes at the end of the year. It is the not-so-fun part of being a business owner but is required, so we might as well plan for it now. Ask your accountant to help you decide how much you should start sitting aside now, so there is no surprises.
Would you like a free printable that shows all of this information for you to have on hand in your office?
What if you have done your bookkeeping all year long?
You have put off you’re bookkeeping all year long and now it is too overwhelming? I got you covered! This month, I have an opening for my VIP Days! It is one day when I take your bank accounts and setup, up you’re bookkeeping in QuickBooks Online. The best part is I will do up to 12 months of bookkeeping for you and I will even train you on how to keep your books going! VIP days combines all of my services into one! It is the best deal! Let’s meet to discuss your needs and see if VIP days are right for you!
By the way, in January, I will not be offering a VIP Day, so today is the time to sign-up. January is my busiest month because I have year-end reports and 1099s that are all due at the end of January. During the rest of the tax season, I will open up the VIP Days again since I don’t do taxes and I know people put off their bookkeeping until tax season. You’re not alone if that is you. I would be happy to help you!