The new year is well underway, which means it’s time to close your books for 2014. Wrapping up year-end can be complicated and stress-inducing for many small business owners. Here are four helpful tips that will help you avoid making mistakes.
Confirm employee info on W-2s
There are a few critical deadlines in the beginning of the year. All W-2 (employees) and 1099-MISC (contractors) forms needed to be in the mail by Feb. 2. Then, forms W-2 and 1096 must be filed with the IRS by Mar. 2 — or by Mar. 31, if you file electronically.
Before you drop the forms in the mail, make sure you have the correct name, address, and Social Security number (SSN) for your employees and contractors. You can use the Social Security Number Verification Service (SSNVS), provided by the IRS, to help minimize mismatches.
Review employee benefits
It’s easy to forget about employee benefits once you’ve set them up, so this is a great time to review benefits that need to be used or adjusted.
- Confirm which employees are eligible for retirement benefits, like a 401(k) or an IRA. If you match contributions, remind employees to top-up their plan. Learn more about 401(k) plans for small business.
- Employees with a Flexible Spending Account (FSA) should have spent any money in the account before the end of the year. However, send a reminder if you offer a grace period or allow them to carry over any funds.
- Make sure you’ve held back taxes for any taxable fringe benefits your employees received during the year, like a company car or cell phone. Check out IRS Publication 15-B for details.
- Confirm all sick and vacation time used throughout the year. While there are exceptions, any sick pay your employee has is likely subject to several deductions so make sure it’s been withheld properly.
- Year-end bonuses are one of many ways to recognize your employees during the year, just confirm that you withheld the appropriate taxes.
If you need to make an adjustment after you’ve filed your W-2s, you can make a correction by filing W-2c as soon as possible.
Get your financial records in order
With the number of apps that simplify and even automate parts of the record-keeping process — like Expensify, Shoeboxed, Xero, FreshBooks, or Gusto — staying on top of the books is getting easier every year. Here are some things to track:
- Review your profit and loss statement to see how you’ve spent money and categorized expenses.
- Collect W-9s from any vendors you worked with last year.
- Gather and organize your receipts.
- Make sure your bank accounts and credit cards match your financial statements.
- Check your payroll system for accurate employee information and withheld taxes.
- Check accounts receivables and invoices for funds you still need to collect.
- Take physical inventory and make sure it matches your balance sheet.
Take advantage of small business tax deductions
Nobody wants to pay more than they need to. Here are some small business deductions are often missed.
- The home office deduction lets you to write off part of your home, if you often work from there.
- The vehicle and mileage deduction allows you to deduct expenses like mileage, parking, and tolls.
- There are other deductions you may be eligible for. Read more about credits and deductions and Publication 463, Travel, Entertainment, Gift, and Car Expenses.
Tax time can be intimidating, but hopefully this advice will help you get past the common bumps. Always refer to your tax specialist, accountant, or bookkeeper if you need counsel.