6 Things to Add to Your Small Business Year-End Checklist
Tax season is something only some people look forward to. However, it does not have to be something they dread. You will be fine if you know what you're doing and how to prepare. It's never a better time than now to plan, especially when we get closer to the end of the year.
You will find it more challenging to collect your tax records if you wait until next year. To maximize your tax savings and prepare for April, you can do a lot with your year-end accounting. This will improve your planning and accounting.
Make the most of your time in 2022. Learn more about the process and create a small-business year-end accounting checklist that your company can use in December.
What is year-end accounting?
Your 2022 tax return will only cover your income and expenses between January 1, 2022, and December 31, 2022. So as the 2022 tax year draws near, your last chance to make changes in the calculation of your taxable income is fast approaching.
End-of-year accounting refers to the management and bookkeeping involved in preparing the company's accounts for the close of the fiscal year. The year's end is crucial for managing company finances, whether you are a business owner or a tax professional.
What time does the accounting year-end?
Each business owner may have a different accounting year. For example, businesses follow the calendar year. Therefore, their accounting year starts on January 1 and ends on December 31. Others may need to adapt their 12-month fiscal years for their company.
What Should Small Businesses Do to Create an Annual Accounting Checklist?
It's a great time to take control of your tax bill by being proactive at the end of the year. You can do many things to reduce your tax burden and manage your liabilities before the books close for 2022.
Your business will be more successful in tax season and next tax year if you create an accounting checklist. Then, you can end the tax year according to your terms and prepare for the next.
You can take a step back and plan for these natural transitions. This will allow you to react at the moment rather than plan for the future.
6 Things to Add to Your Small Business Year End Checklist
With your year-end accounting checklist, you've taken the time to ensure your company is financially sound for the coming year. But where do these items begin? These are the most important things you must remember as you close the year.
Tax deductions
Closeout and review records for the current year
Make sure you pay your quarterly estimated taxes
Estimate your tax liability
Get organized for the New Year
Talk to a tax professional
1 - Maximize Deductions
Your year-end accounting checklist should include tax deductions. All tax-deductible expenses must be claimed before the end of the accounting year. This will make a big difference in your small business's tax return.
If you wish to deduct your business expenses from your taxable income, schedule them before December 31. If you anticipate having more revenue in the next year, you can postpone major expenses to January.
2 - Check Your Books for the Year
The year-end closing process involves closing the books on previous years' finances to prepare for tax season. Therefore, you will need thorough and complete bookkeeping for the past year to get there.
You can group similar transactions and separate significant purchases made during the year. Recognize refunds, income, and owner contributions. A complete accounting should be done of all assets and liabilities. This includes accounts payable and accounts receivable that still need to be processed. Double-check your inventory and make any necessary updates to it.
You should also go back and review your financial statements. You will have to recall more information to accurately and efficiently review these files if you wait for months.
Bookkeeping for small businesses can initially seem simple, but it quickly becomes overwhelming. So before you submit your tax information, get help if you are having trouble.
3 - Quarterly taxes
Remember to keep up with your quarterly estimated taxes in your year-end checklist. These pre-payments are made to your tax bill according to what you expect to owe.
These are the estimated quarterly tax deadlines
Quarter 1 Deadline: April 15
Quarter 2 Deadline: June 15
Quarter 3 Deadline: September 15
Quarter 4 Deadline January 15
It is better to overpay than to pay more estimated taxes. However, underestimating your tax liability can result in a large tax bill at the end of the fiscal year and possibly underpayment penalties.
4 - Get an estimate of your liability ahead of time
Estimating what you will owe on your final tax return is another crucial step in year-end accounting. You can prepare for filing and pay by knowing how much you will owe.
Calculate your total gross receipts. Understating income can lead to penalties from the IRS. Overstated receipts will result in paying unnecessary taxes. Both of these things are different from what you want. To get started, you can use tax records from prior years.
Schedule a year-end consultation with an accountant to ensure that you are on top of your income streams and deductions. You'll need all that information to estimate your final liability accurately.
5 - Get Organized for Next Year
A year is like closing a chapter in your or your business's life. With organized recordkeeping, you can close out that chapter and start a new one.
Use your year-end accounting checklist to ensure you are ready for the new year. This is the ideal time to make significant changes to your accounting process. You can either upgrade your system with current accounting trends.
6 - Talk to an expert accountant
Consult your accountant now about how to do your company's year-end accounting.
This is an excellent opportunity to be ahead of the curve and ensure you are as prepared and informed as possible regarding your year-end financial planning. It is wise to consult your accountant about year-end planning. Your company's finances will be controlled no matter how you choose to proceed. It takes time to do your small business taxes right. Now is the best time to invest in your future savings.
