The following is a guest blog post submitted by Eide Bailly LLP. The topic covered in the post is how to prepare for year-end tax reviews, great for business owners and individuals alike.
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Balance Sheet Checklist
- Make sure your assets match your liability and equity on your balance sheet.
- Perform bank reconciliation for all cash, credit card and loan accounts through December/year-end.
- Make sure any checks for December that have not cleared are entered if you are on a cash basis.
- Make sure all customer invoices and accounts payable are entered if you are on an accrual basis. This ensures you’ve captured everything for the current year.
- Gather copies of all fixed asset purchases and loan documents if any were financed.
- Clean up your accounts receivable aging. Will everything be collected? Do you have any bad debt that needs to be written off or sent to a collection agency?
- Adjust inventory, prepaids, etc. as needed.
- Look at your accounts payable aging. Is there anything that you will not be paying or that was entered twice?
- Prepare copies of your W-2s and W-3s and provide them to your accountant.
Learn more about how to correctly fill out your W-2s.
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- Look at your liabilities. Do your loans balance? Remember to include loan histories for your accountant if you don’t break out principal and interest every month.
- Make sure the December sales tax and payroll liability balance match your January payment.
Profit and Loss Checklist
- Are there any expenses entered to a revenue account that should go to cost of goods sold or an expense account?
- Provide your accountant with any 1099s your company has received.
- Review your expense accounts and determine if any 1099s should be prepared.
Learn how to properly prepare your 1099s.
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- Remember that any expenses over $2,500 should be a fixed asset. The safe harbor threshold for capitalization is $2,500. If you have an audit of your financial statements, this threshold may be different depending on your capitalization policy.
- Look through miscellaneous or uncategorized accounts. Code to a proper expense account unless very minimal.
- Separate officer health from employee health insurance. If you are an S Corporation, be sure to appropriately include this amount on the W-2s for the owners as required.
- Review your contribution accounts. Reclass any promotion/sponsorship items to advertising. Remember, only donations to qualified organizations (which exclude political contributions) are deductible. Your accountant will need a copy of your receipts.
- Review your meals and travel accounts, and be sure to capture meals in a separate account and separate any entertainment expenses.
Want to know more about meals and entertainment expenses?
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These are just a few of the items to consider as you prepare for year-end. Make sure you take the time to gather the correct information and talk with your business advisor and/or accountant, so you can close out year-end without a headache and start 2020 right.