The new year has been rung in and I’m sure your first thought in 2020 was, “2019 is over, I need to get my accountant my tax forms STAT!” However, you may have to take a breather and wait for everything you need to be ready. What should you wait for? It depends on the type of taxes you’re filing and what types of income you have.
Businesses typically have their tax information prepared much earlier than individuals. In many cases, business information flows onto an individual taxpayer’s tax return which is why the filing deadlines are usually earlier.
- Bank reconciliations: If your bank statements are available online, download your bank statements as soon as they are available. This should be shortly after the end of the year. Once you have your statements or transaction detail you can do the year-end reconciliations.
- Credit card reconciliations: Similar to bank statements, credit card statements should be available shortly after year-end, or you can print your balance detail from your account online and complete these reconciliations as soon as the year is over.
- Inventory adjustments: If your business has any inventory on-hand at year-end remember to count inventory on the last day of the year and adjust your balances to the proper values.
- Fixed asset adjustments: If your business has any fixed assets (property and equipment) on the books at year-end, review that purchases and dispositions of fixed assets are properly recorded in your financial reports.
- Payroll accruals: If you are an accrual basis taxpayer you may need to adjust for wages in the last week or two of the year that won’t be paid until the following year
- Other accruals: Many accrual basis businesses keep their books open for a few weeks to make sure there aren’t any unanticipated bills that still need to be recorded.
So what does this mean in terms of having your information available? If you only need to worry about items #1 - 3, you could potentially have your information ready as soon as January 1st. If you need to adjust for payroll, you may need to wait a few weeks for the final payroll to be paid. Other accruals will depend on how soon you receive bills. If they come shortly after the end of the month, you’ll be ready sooner, if not, you should wait as long as needed to ensure that all income and expenses related to the current tax year is captured in your financial reports.
One caution: if you have any concerns about the 1099s you will receive, you may want to hold off having your tax return filed until you have received all 1099s. The due date for 1099s to be furnished with recipients is January 31, 2020. Accounting for time in the mail, you should have the last of your 1099s within the first or second week of February. However, you can still give your information to your accountant to prepare ahead of time and wait until you verify income reported on 1099s to file your tax return.
If you have any questions on what your accountant needs to prepare your tax return, please contact us at 603-224-2000.
Didn’t clean up your files regularly throughout the year? The following blog posts have some suggested tips for cleaning things up. These are just suggestions and not a complete list so reach out to your accountant if you need further assistance: