We are nearing the end of the year (can you believe it?) and 2020 has tested us. Let’s not make it any harder on ourselves by procrastinating our accounting. Even the most organized business owner can sometimes feel the crunch when approaching tax deadlines. We are here to make your life a little easier in the upcoming months. No one likes to cut a powder day short because they have a few hours left to file their 1099s. What day is that again…? In this article, we’ll go over how to organize your accounting right now, to make your 2020 accounting go smoother. Let’s face it – anything to make 2020 easier is a win.
One of the most common mistakes that we see every Christmas are bonus checks to employees that aren’t run through payroll. When you pay employees ANY type of compensation, it absolutely must go through the normal payroll & tax process. ALL payments to employees must be run through your payroll app.
If you use a service such as Gusto, or work with an Accountant, W-2s will be made available in January. Do not attempt doing payroll by hand, it’s not worth it. 80% of small businesses not using software end up with at least one IRS penalty each year. Penalties run over $400!
Things are a bit different this year. If you paid an unincorporated service vendor (or received money as an unincorporated service vendor) over $600 in 2020, you will be issuing (or will receive) a form 109-NEC, which is new for this year. The 1099-NEC (non employee compensation) is a spin off from the old 1099-MISC. (Basically they took box 7 off the 1099-MISC and created a whole new form called the 1099-NEC). Landlords and Attorneys will still have their rent and legal fees/proceeds reported on the old 1099-MISC, but everyone else will have their non-employee payments reported on the new form. The January deadline to file these comes quickly after the holiday. Start collecting your service vendors information now by requesting w-9s before it’s too late. The worst thing you can do is wait until a few days before the deadline to ask for your vendors’ W-9 info and find out they’re on vacation in Mexico. That’s not on them, it’s on you.
Bookkeeping Reviews & Year End Tips
If you are wise enough to have an amazing bookkeeper, receiving end of the year reports will be a breeze. Make sure to collect each report by month or quarter to make them easier to review (and file them in a safe spot for future reference). Go over the reports to ensure all your income and expenses are accounted for. That random business lunch you put on your personal credit card a while back can be counted as a business expense. As long as you have the proof, you can turn that into another tax deduction. Organization adds up! Keep receipts, make sure to let your accountant know if anything changes, and thoroughly look over your reports. Did I mention receipts already? A paper trail is important. Keep your receipts in a safe and accessible place in case the taxman comes knocking for an audit.
If you’re still with us, this one is important. While we are on the subject of keeping a good paper trail, the end of the year is a good time to do a business audit. Take a look at how your year has been going. What unneeded expenses can you cut? Have you used all your subscriptions? Do you still need premium plans for apps you use? Is your payroll in order? This will help you create financial goals for the upcoming quarter to set you up for success. Bonus tip: Similar to creating a New Year’s resolution for yourself, create one for your business as well.
The best way to handle your accounting is to hire an accounting expert to advise you along the way. You need an accountant to review your end of year financials and any tax and audit preparation that you are required to complete. The end of the year headache should drastically decrease with an expert by your side. It is still your business and you will have important tasks to do, next year to plan, and the added stress of entering a new year but why make it harder on yourself?
At Singletrack Accounting, we are with you every step of the way. We also will go over all your reports alongside you to make sure you are utilizing every resource. Our number one goal is to help you be successful while staying compliant. Reach out today for a free consultation.