Are Your Small Business’s Books Ready for Tax Filing?
Tax season is quickly approaching. Americans from coast to coast will file their personal and business taxes with the IRS in less than 70 days. The question is whether your business’s books are ready for the tax filing deadline? Instead of relying on guesswork and assuming you’ve crunched all the numbers as necessary, double-check your books to guarantee they are accurate and properly prepared for tax filing. As always, we recommend you have a small business bookkeeping and accounting expert review your small business books prior to tax filing. This additional analysis provides you with the reassurance you need to file your federal and state taxes with confidence.
Reconcile Balance Sheet Accounts
Reconciling your company's balance sheet accounts is imperative to ensuring your Profit and Loss numbers are accurate. Your balance sheet tells you what your company owns, what it owes and what is left as equity. The balance sheet reconciliation process is a golden opportunity to pinpoint numerical discrepancies and proactively address them. Unreconciled balance sheet accounts, or balance sheet accounts that are showing the wrong balance is a tell tale sign your Profit and Loss statement is inaccurate.
Owner Accounts Must be Accurate
Your business owner accounts, also known as your equity accounts, should be verified as well. The equity accounts directly translate to your personal tax returns. The last thing you need is for a misrepresentation of your earnings to trigger an audit of your personal tax or business tax return. When in doubt, lean on experienced small business bookkeeping and accounting experts to confirm the accuracy of equity accounts.
If you make the mistake of overstating or understating your business’s income, you can face financial penalties. It can also hinder chances with lenders or investors. You want to ensure all income is tied out to the appropriate source reports or documents. This can be POS reports, 1099’s received, merchant processor statements and more.
Accrue all Year-End Bills
If you are reporting on an accrual accounting basis, any bills left at year end that have not yet been paid, must be properly accrued. If you are using the cash basis approach, transactions through the last day of the year should be in and accounted for.
Reconcile Accounts Receivable and Accounts Payable
Accounts receivable, commonly referred to as AR, and accounts payable or AP for short, must be reconciled prior to tax season. Your accounts receivable should show what your customers still owe you, while your accounts payable should show any outstanding bills you have left to pay. Both of these accounts directly relate to your small business’s Profit and Loss Statement.
Reconcile All Payroll
The money paid to employees and taxing agencies for payroll should match what your company reflects on its Profit and Loss statement. This can often be a small business’s biggest expense. The expenses for payroll and payroll taxes on your Profit and Loss statement should tie out to the total of the
W2’s you send to employees and what is reflected on the W3 you file with the IRS and state agencies.
Issue Tax Forms
There are some tax deadlines small business owners should be aware of. Business tax forms including employee W2s and 1099s are required to be sent to employees by January 31st. This deadline is in place to ensure hardworking employees have enough time to plan and file their taxes. If you did not meet the deadline, it is better to file these forms late than not at all.
The Small Business Bookkeeping Experts are just a Call Away
Bookkeeping & CFO Solutions 5280 is your go-to source to get your books clean and ready for your taxes. Our expert small business accountants and bookkeepers are here to help!
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