2023 is almost in the books, and that means it is time to take care of some bookkeeping and tax-related tasks in the remaining weeks of the year. With these tactical items out of the way, you can also focus on strategic areas like tax planning.
Clean Up Loose Ends
First, make sure information needed for important tax forms is accurate and complete.
- W-2s: Ask all employees to verify their address to ensure they will receive their W-2s on time.
- 1099s: For all vendors to whom you will pay more than $600 in 2023, confirm their address and taxpayer ID so 1099s can be produced and mailed by the end of January.
- Make sure you have a sales tax exemption certificate from any vendors that you do not charge sales tax.
Account balances are another item that should be cleaned up as the year comes to an end.
- Any clearing accounts, such as undeposited funds, should be at zero.
- Bank reconciliations should be up to date and book balances should match the bank or have documentation for any discrepancies.
- Inventory should be checked and adjusted to reflect actual quantities.
- Loan balances should be examined and need to correctly reflect interest and principal allocations.
- Depreciation entries should be calculated and noted.
Now is the time to maximize any deductions. Review estimated net income. A higher income means you want to be more aggressive in looking for deductions. A drop in income provides an opportunity to be eligible for tax breaks.
- Bad debts not expected to be collected can be written off.
- Any inventory that is no longer saleable or is worth less than you paid for it can be adjusted on your books.
- For cash basis taxpayers, any excess profits should be used to pay any large bills before year-end.
- Pay out any employee bonuses prior to year’s end.
Get Organized Now
Establish a process and place to store any tax-related documents, including W-2s, brokerage statements, and tax returns. Convert each of them to PDF format and upload to your accountant’s secure client portal as they are received.
Careful preparation will make tax season easier and allow you to check this off your list early. You can also get a jump on your tax planning with some tips we shared recently, as this is the time of year for tax strategy as well. LCW CPAs has the expertise to help with the full range of accounting services including tax planning services.