The end of Q4 — and the 2019 tax year — is now in sight. One of the simplest ways to reduce your income tax bill is to make sure everything is in order now to ensure that all of your ducks are in a row at tax time.
Get Your Bookkeeping in Order
The first thing you need to do to get ready for tax time is get your bookkeeping in order. You’ll need to gather up all your receipts and bills from purchases you’ve made during the tax year, as well as your customer invoices and bank account statements.
Update your expense records
First, pay off any outstanding bills right away. Make note of any expenses that you’ve used, but haven’t been charged for yet, such as phone, gas and electricity bills, and also any expenses you’ve pre-paid but haven’t yet used, such as insurance, rent, and some kinds of equipment. Don’t forget to include any personal expenses that you also use for your business.
Update your income records
Check for billable sales or services that you haven’t invoiced for yet and send those invoices out. Follow up on any outstanding invoices and send final payment reminders to late customers—start calling if you need to.
Make note of any customer deposits you’ve received for work you haven’t done yet, as well as work that you’ve started but can’t invoice for just yet. We’ll cover these in a bit.
Run your final payroll
Remind your employees to submit any outstanding expense reimbursements and complete your payroll. Make sure this final payroll is reflected in your books and create any necessary journal entries for adjustments after you receive your final payroll reports. Keep in mind that the final check date should be in 2019, in order for it to be recorded in 2019.
Reconcile your bank and credit card accounts
Make sure you’ve properly categorized and verified all your income and expenses, and that taxes are accounted for within each transaction. Then reconcile your bank and credit cards to make sure all of the transactions in your monthly statements appear in your accounting records, and that there aren’t any duplicates.
Don’t make these common mistakes:
- Don’t record your assets as expenses. Your capital assets and equipment purchases are adding value to your business, so they’re not considered expenses.
- Make sure you’re consistent with how you record your inventory purchases. Goods and materials for resale are considered inventory.
- Don’t record an owner’s withdrawal as an expense. This is a reduction of owner’s equity, not a business expense.
- Don’t record loan payments as an expense. They should be split between principal payment on the loan and interest expense.
Once you’ve caught up on your bookkeeping, made the necessary adjustments, and converted your income and expenses from accrual to cash basis (if necessary), then you’re ready for year end! The final step is to pass your books along to us to work our magic.
Trust the Professionals at Goldin Group
At Goldin Group LLC, we understand that as a business owner, keeping up with accounting and taxes is time-consuming and can even be overwhelming. That’s where we can help! We work with individuals and businesses in Maryland (DC Metro Area), offering a variety of financial services designed to save you time and lower your tax burden. If you are a small business that is looking to outsource your accounting or if you need help managing any aspect of your business’s or nonprofit’s finances, we want to hear from you. Call us at (301) 913-0008 or email email@example.com to make an appointment.