It’s important to get business wrapped up from the prior year, so that you can focus on the new year and where your business is headed!
To close out your accounting:
- Ensure that all of the bookkeeping is up to date- all of the activity that happened in 2021 should be recorded in 2021.
- Verify the accuracy by reconciling the bank, investment, and credit accounts to check that 2021 information was recorded correctly.
- Gather all your year-end statements (bank, credit cards, loans, etc) for your accountant.
- Gather information on large asset purchases (>$2,500) that your business will use for more than one year, or the information on any that you sold or junked in 2021.
- Review your financial statements (including both the Balance Sheet and the Profit and Loss) for obvious errors, and reach out to your accountant for help on what you don’t understand.
- Run an aging report for both your accounts payable and your accounts receivables: look for errors, if you need to reach out to anyone, or if there’s business decisions/policies to be made (such as early payment discounts or penalties for slow payments).
- File all 4th quarter and year end payroll reports and 1099’s: include the the quarterly payroll tax return, state unemployment, federal unemployment, W2’s and 1099’s.
- Business owners should make quarterly estimated payments* (if they do not receive w2 wages or have enough federal witholdings on their W2) to avoid ‘late paying penalties’ from the IRS – the deadline for 4th quarter 2021 timely estimates is January 15h.
- *Tax planning BEFORE the end of the year will allow you to have the biggest impact on business taxes. If you’re unsure what you should be paying for a 4th quarter estimate payment (and if you need to), schedule an appointment or get on their list for tax planning without your accountant for at least once later in the year (often during the following fall) while you’re AT your tax appointment so you get this benefit.
- Get your information to your accountant early for your tax return, and get ahead of the rush.
- In your software: “close the books” – set a password such as “Expensive2Change’ when you close the books through 12/31/21 to remind yourself that changing things after the payroll reports and tax returns have all be filed could be an expensive process when you need to have everything amended (sometimes with penalties)!
If all of this seems overwhelming, reach out to the professionals at R&R Accounting & Tax for help!