How To Do the Year-End Wrong

A guide on how NOT to handle your year-end tax and accounting tasks.

Introduction

Retail entrepreneurs love the end of the year because of the holiday sales revenue. Service-based entrepreneurs love the beginning of the year because of New Year’s resolutions. I think it is fair to say that very few entrepreneurs love Year-End accounting and business tasks, and they come to every business regardless of your industry. But why all the fuss? Well, what if you make the most money you have ever made but do not save any for your tax liability? What if you have the chance to sell all your inventory for the Christmas crowd, but you did not budget in costs for the extra shipping supplies and labor required? What if you forget to file your yearend payroll reports with your state and federal government? Do not worry, we are going to talk about what not to do.

What & Why of the Year-End

The Year-End tasks are the most crucial in your accounting and tax preparation to-do list, and they will directly affect your attitude on Christmas day. Within this list, we must get our books in order, and reconciled, for our tax accountant. We must ensure our payroll forms are correctly filed and filled out for the year-end payroll tax filings, we call them the 940’s, W2’s, and 1099’s. All of this must take place while we are also filling the largest customer orders of the year because we cannot forget that it is CHRISTMAS. Christmas means lots of sales, lots of inventory in and out the door, and lots of extra overhead. Failing to stick to your budget can have deadly effects on end of year officer salaries, the dreaded tax payments, and our personal Christmas budgets. The great news is that this to-do list is achievable, and it can be mostly automated. Plus, we are here to help so that Christmas comes off without a hitch.

How to do the Year-End wrong.

Incomplete Financial Reports:

I am specifically talking about the company books. Show of hands; who has their transactions entered, and reconciled, in QBO through September?  Yikes! Did that just put a lot of pressure on you? Well, good news, you are in a like-minded community because this is a very common occurrence. Please keep in mind that it will cost you more money to have your accountant play catch up on your books right before your taxes are due. This could end up costing you several hundred, or even several thousand, more dollars in accounting fees if they have to do a rush job just to file your tax return. The best advice is to get caught up on your books and reconciliation through September. One quarter is much better to deal with than 4 quarters.

Just throw out the budget and wing it.

Why did you even create a budget in the first place if you are not going to stick to it for the final quarter of the year? Did you know that most households create the bulk of their consumer debt during the holiday? Not surprising, I know. Create the year-end budget right now. Consider your increase in inventory costs and all costs that go along with completing your customer orders. Add this to your typical monthly budget and you will be much better off. Finally, don’t forget to increase your monthly take-home pay requirements so that you can buy the most awesome Christmas gifts. Once you have created the year-end budget, stick to it no matter what. You will hate yourself in January if don’t and love yourself in January if you do.

Ignoring your tax projection meeting with your accountant.

What, my accountant can estimate the amount of taxes I will owe next year?  YES!  This is one of the greatest meetings of the year. It will tell you what you need to save in the bank so that your tax liability due next April does not ruin the summer vacation. Get it done and get it over with it. Trust me, it is much better to know that you need to spend money on the business during Christmas than find out you owe lots of money to Uncle Summer in the spring. By the way, accountants should be good tax strategists and know how to reduce your taxes with allowable tax deductions. This is a good thing regardless of what political debates might try to make it sound like.

Filing your payroll tax forms late, or not at all.

A client story might help you understand this one best. Several years ago, a client for a firm that I do work for contacted the firm to inform them they were receiving IRS notices for lack of payroll tax remittance and filings. The IRS was threatening liens, and the penalties assessed were astronomical. The client was flustered, and they wanted the firm to do something about it immediately. The firm contacted my company to do the tax research on penalties and interest, ensure the accuracy of the penalties and interest assessed, and finally determine if the client could be forgiven for a first-time offense. Luckily, I was able to find an error in the number of penalties and interest and reduce the final payment. Also, we constructed a memo from the client’s tax preparer discussing unwritten leniencies for first-time offenders which eliminated all but the interest. The client made their payroll tax payments, we filed all required forms for them, and they were off to the races again.  Do not miss this crucial step, or just call us and we will handle it for you.

 

Tips for the Year-End.

If you need a few pointers to get started then here is my best recommendation on the fly. Enter your transactions from your bank statements for the business through September. Next, create your budget for the year using the average monthly expenses from the categories you just created in QBO. Then, schedule your annual tax projection meeting with your tax preparer. Finally, ensure all employee W4’s are up to date and accurate, and use your QBO reports to create your payroll summaries including; gross and net employee pay, payroll tax withholdings, payroll tax expense for the employer, and year to date payroll tax liability remittance.

Closing

If you accomplish these tasks then you are sure to NOT do the year-end wrong. These are crucial tasks that will make or break your business, and we are here to help. Do not hesitate to email our firm with any questions that you have or advice that you may need.

Call-to-Action

First, comment below with any question that you have about the year-end tasks. Then, sign up for our blog alerts because I will be breaking these tasks down in the following 4 blogs. You won’t want to miss what is coming for the Holiday season and get ready for next year because it is time to become a pro at QBO.

Published by Jeremy Knight

Hi! I love people, and helping people become Money Savvy!

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