Tax filing deadlines for small businesses are fast approaching. There’s no time like the present to get your documentation in order. Our firm has prepared a list of key items to check that will help designers like you prepare for your meeting with your CPA about your taxes. It’s better to be ready instead of struggling during the last few weeks before your taxes are due and your CPA is too busy to talk to you!
Before you begin, you and your staff should check files, drawers and cubby holes, along with credit card and bank statements, to be sure you have gathered together all receipts and other documentation related to any and all payments, purchases and expenses made in 2016.
1. Account Reconciliation
Assuming you have done all you needed to do to close out 2016 and made your final estimated tax payment by January 17, if applicable, the first thing you want to do is get your accounts in order. Reconcile ALL accounts — bank (checking and savings) and credit cards — in your accounting system.
2. Petty Cash
Review petty cash expenses and receipts. Verify you’ve made all entries in petty cash. For any and all purchases made last year, make sure to use that date in your entries.
3. Journal Entries
Once you have closed 2016, then you will need Adjusting Journal Entries from your tax accountant or CPA. This will match your internal books with your tax return. Your bookkeeper or accountant will be able to enter these for you.
4. Personal Funds
Now do the same for any purchases you made from personal funds. Verify you’ve made all entries for these purchases and entered the appropriate date. These are tax deductions, so they will be entered as an owner draw and then expensed.
5. Payroll Tax
Make any adjusting entries for accruals of payroll tax liabilities or pre-paid expenses. Again, your accountant or whoever prepares your payroll should be able to help you here.
In addition to these items, if you have employees and/or use outside consultants or freelancers, you or whomever handles payroll for you should have by now sent out payroll forms (W-2, W-3, 940, 941) and 1099 statements for independent contractors. If you prepared 1099 statements, you also should have completed Form 1096 and mailed it to the IRS by the end of February.
Coordinating these activities with your bookkeeper, accountant, and/or payroll preparer will help to minimize duplication of effort and ensure accuracy in your reporting. This will save time later when you meet with your CPA and in preparation of your tax return.
Tax preparation is a chore, but you can make it less of one by taking the time to get organized and methodically going through each of the items on our list.
Gail is one of Designers Today's most prominent contributors - focusing specifically on the business side of interior design.