An entrepreneur’s quick-guide to filing your year-end reports.
Introduction
We all love the end of the year because it means the greatest holiday parties, lots of presents, and the best desserts. If you are an experienced small business owner then you have probably learned to hate the reports that also come with the end of the year. Today we are going to get ahead of the game by getting organized and prepared for the year-end reports.
What is a the Year-End report?
Simply put, the year-end reports provide your state and federal government with information about your business that you are required to report every year. This information informs our governments about the amount of money that we have spent on our employees and received as business owners. Each year-end report is required to be filed by any individual who does business in the United States and by individuals who employ others to operate that business.
Why are Year-End reports important?
Although they are very necessary for government oversight, most of the year-end reports are useless to the business owner. The time, energy, and software costs put into creating these reports can place a time and financial burden on a new, and undercapitalized, business owner. However, these reports provide a wealth of information to economists and researchers on the financial health of our nation. These reports are also essential to the fair and accurate reporting of employee wages and ensuring that your employees are properly compensated for and taxed. Social security and unemployment insurance tax reports ensure that your employees receive unemployment wages after layoffs from an unfortunate pandemic. Finally, our sales tax reports ensure that you have remitted the amount of money that you are required to collect from your customers. If you do not remit this money then the state can require you to pay if from your net income. The reports that we are talking about in this blog are of the utmost importance.
What are the top 4 Year-End reports?
1. Payroll Reports
Though I am not a fan of any year-end report, the payroll reports are one of the easier reports to prepare if you record and gather the data beforehand. Here is a non-exhaustive list of payroll reports that you might need to prepare for your business.
- Form 940 – Federal Unemployment Tax Act Tax (FUTA)
- Reports the federal and state unemployment expense paid by the employer
- Required by: all employers required to pay and report FUTA and SUTA
- Due: January 31st following the reporting year
- Form 941: Employer’s Quarterly Federal Tax Return
- Reports income, social security, and Medicare taxes withheld from all employees
- Required by: all employers in the United States, though some employers may be required to file monthly reports.
- Due: January 31st following the reporting year, and 30/31 days after the end of each quarter.
- Form 944: Employer’s Annual Federal Tax Return
- The same report as the 941, though filed annually instead of quarterly
- Required by: all employers whose tax withholding is less than $1,000
- Due: January 31st following the reporting year
- W2’s: Employee Wage and Tax Statement
- A statement reporting gross wages and tax withholdings of individual employees.
- Required by: all employers required to withhold any tax from employee’s pay.
- Due Date: January 31st following the reporting year
- W3: Summary of Employee Wage and Tax Statement
- Used to report a summary of the individual W2’s, and must be filed along with all W2’s.
- Required by: all employers required to withhold any tax from employee’s pay.
- Due Date: January 31st following the reporting year.
Tips for preparing your reports: the numbers you are looking for will be found in your accounting software’s payroll reports. If you are using QBO then you can navigate to the payroll reports in the Reports tab. Be sure that you have collected up to date W4 forms for all employees who have worked for you during the year.
2. Sales and Use Tax Reports:
This is the year-end report that I hate the most. Most states have their forms, and might even require you to file more than once a year. I highly encourage that you go straight to your state’s comptroller website and begin the process of setting up an online account for e-filing. Preparing for this report will require the calculation of your company’s annual gross sales. Then, you will separate taxable gross sales from non-taxable sales. Finally, you will report the sales tax that you are required to withhold and remit. The form will help compute the sales tax you should remit to the state by multiplying taxable sales by the sales tax rate.
3. State Income Tax Reports:
Only 43 states in the USA require a state income tax return. The other states will possibly require a franchise tax return or other types of forms used to collect tax on business income. Different states that do require income tax returns will compute the tax liability in different ways. Therefore, your tax preparer will need to see the same financial statements that are required to create your federal income tax return. State income tax returns are typically due along with your business’s federal return.
4. Federal Income Tax Returns:
This report is required by all individuals, business entities, trusts, estates, etc. Your financial statements will be required to complete these forms. If you are a business owner then I highly recommend that you seek out a tax professional that is a competent tax preparer and strategist. Even sole proprietors are likely leaving significant tax deductions on the line.
Tips and Reminders for Year-End report preparation
The best advice that I can give a new business owner is to seek out a tax professional with the heart of a teacher. You have embarked on an adventure that requires a team to be successful. A knowledgeable business advisor and tax preparer will be the best addition to your team. Seek out your advisor as early in the game as possible, and let them do the hard work for you. Tax preparers will be able to file all end of year reports that your business is required to file.
What Next…
First, comment below with any question that you have about the year-end tasks. Then, sign up for our blog alerts because Next month’s theme is all about budgeting in the Spirit of Christmas. 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.