While we’re all recovering from turkey hangovers and contemplating the daunting task of holiday shopping, our beloved businesses need attention at the end of the year too. These items are universal for any small business owner and should be followed each year to avoid having unnecessary post-holiday business stress.
1. Contact or find a CPA ASAP – I realize that some of you do your own taxes and that’s great. At some point, as your business grows, you’ll need to take the plunge and hire a CPA to do your taxes for you. They are experts and typically find a way to pay for themselves through their ever expanding knowledge of the tax code. Here’s the thing, getting a great CPA is like getting reservations to a fine restaurant. If you wait until Saturday afternoon to get a reservation for that night, they’re all booked up and you’re stuck with over-priced takeout. Ask someone you trust for a recommendation. If you’re referred by an existing client your odds of getting in with a great CPA increase. If you wait until January, it’s going to become infinitely more difficult to find a good CPA.
2. Review last year’s tax return and make a check list – Nothing will drive you or your CPA crazier than having to go back and forth 5 times just to get the necessary back up to complete your taxes. Look at your returns from the previous year and make a checklist. What did you need? Interest statements, financial statements for the business, a spouse’s W-2, mortgage statements, etc… Be prepared! It’ll save you time, aggravation, stress and maybe even some money.
3. Get your bookkeeping up to date – If you haven’t started or updated your bookkeeping in months than let’s face it, you’re not in love with this task. If given the choice between holiday parties, black Friday sales, watching Gilmore Girls: A Year in the Life and doing your bookkeeping, we all know what’s going to lose. Here’s the thing, it’s important. If you wait until January to figure out the financial health of your business, it’s too late to adjust the year that ended. However, if you get it done now and find out you can save some money from going to Uncle Sam by making a few key investments or purchases then you’re proactively helping your chances of being successful. Don’t be afraid to outsource. This is another area that pays for itself. Great bookkeeping isn’t necessarily intuitive and if you’re doing it on your own you may be inadvertently making errors that can cause you to lose money.
4. Get ready for 1099s – Make a list of all your subcontractors that you’ve paid more than $600 for the year. Get them to fill out a W-9 now so you’re not chasing them down during tax season. You need the W-9 so you have the necessary information needed to issue them a 1099 in January. The IRS has become strict in regulating the issuance of 1099s. If you don’t send them out at all, or send them out late, it can cost you $30-$100 per form. The max penalty is $500,000 in a calendar year. Worse yet, if they determine you intentionally ignored the requirement, you face a minimum penalty of $250 per form with no max limit per calendar year. One more tip, if you’re doing them yourself, get the forms now. The local office supply stores tend to run out before the end of January. If you wait until the last minute, just getting the forms can be your biggest challenge. If you have a CPA, accountant or bookkeeper already, confirm they are doing it for you and find out how much they charge for the service.
5. Plan for Retirement – Even if you’re fresh out of college, just started your business and retirement is the furthest thing from your mind, talk to someone. It’s a proven fact that the earlier you start the more you can have for retirement. If that doesn’t appeal to you then remember there is significant tax savings that can occur if you do it correctly with the guidance of an expert. Whether your 18, 32 or 42 your money should be working for you and not someone else. Putting it into retirement instead of paying additional taxes is just a sound practice.
Finishing the year strong is the best way to start the coming year off successfully with reduced stress. It gives you the opportunity to focus on ways to improve your business and move forward with confidence.