Are you running a small business or you are self-employed? You need to file your tax returns on time. There are several penalties associated with tax reporting. Penalties for underpayment, tax fraud, and late filing are among the most dreaded. Before the end of the year, your bookkeeping needs to be in order. Ensure employee data is accurate and audit all employee data. Also, ensure that you report all taxable business income, payments to vendors and contractors, and other expenditures. Here is an End of Year Checklist that will help you avoid mistakes.
Report all income sources for the business and have supporting documents for the income. You need a report for all sales and services, sale records for accounts receivable, interest on the business savings account, returns and allowances, and any other income that comes to the business. An accountant can help you prepare your income statements.
Not all categories will apply for all tax seasons. As such, you only need to include what applies for every tax year on the checklist. Businesses in production, purchase, or sale of goods need to take into account the inventory at the beginning of the year and at the end of the year.
When accounting for the inventory, businesses need to consider the inventory at the beginning of the year in dollars and the end of year inventory in dollars. Your business also needs to consider any inventory purchases, goods that go into personal use, and materials and supplies.
Business expenses fall under tax deductions. If you fail to report any of these expenses, you will pay more taxes than you should. Some of the expenses include:
- Travel And Transportation
- Commission And Fees
- Contractors and Professional Expenses for lawyers, consultants, and accountants
- Depreciation of Assets
- Business Insurance
- Interest Expenses
- Amortization of intangible assets such as patents and copyrights
- Rent and office supplies such as pens, paper, and staples
- Office-in-Home expenses
- Wages to employees
- Employee expenses
- Other expenses such as repairs, tax payments, and health insurance
The business also needs to report any COVID-19 grants and loans. These will only apply to the 2020 and 2021 tax years. Your bookkeeper needs to be careful with accounting so that you do not overpay taxes.
Complete Tax Forms
Your business needs to review the payroll information for the year. Such involves the cash and non-cash income for employees. Record payments and bonuses to employees and remind them of their 401k contributions. You need to file these forms:
- W-2 and W-3
- 940, 941
If you have challenges with tax preparation, you can ask for help. Tax prep should be easy, but if you miss one thing, it can lead to huge penalties.