Preparing for tax filing season can be time consuming and even a bit overwhelming if you’ve waited until the last minute to organize everything. Here are eight tips to help you get ready for tax season…
- Make your estimated tax payments. Your fourth quarter payment is due on January 18, 2022. You should also calculate your initial estimate for first quarter 2022 tax payments. That first installment is due on April 18, 2022.
- Reconcile bank accounts. Reconciling your bank accounts ensures that your books are accurate. Up-to-date cash accounts will give you confidence that your income is not over-reported (or under-reported) on your tax return.
- Organize your credit card statements. If you use credit cards for your business, create an expense report for those expenses. On the report, recap the bill and place each of the transactions into the correct expense accounts. Attach copies of the expenses to the credit card statement.
- Reconcile accounts payable. Make sure your accounts payable and cash disbursements are up-to-date so you can identify which vendors and contractors require 1099 forms. If you need to issue any 1099 forms, those forms need to be sent by the end of January.
- Gather necessary reporting information. Once you’ve identified the vendors and/or contractors that will require 1099 forms, you’ll need their legal name, address, identification number (like a Social Security number) and the amount paid to each. If you need to request missing information, send out a W-9 as soon as possible.
- File employee-related tax forms. If you have employees, you’ll need to file W-2 and W-3 forms, along with the applicable federal (Form 940) and state (Form 941) payroll returns. This should be done as soon as possible in January so you have ample time to identify any potential problems.
- Make a list of any major purchases. Compile a list of any purchases made by the business of $2,500 or more. Once you’ve compiled the list, gather the detailed invoices that support the purchase. You’ll need to determine if you wish to depreciate each purchase over time, take advantage of bonus depreciation or expense each purchase using code section 179.
- Review the impact of COVID-19 on your business. There are federal and state initiatives that will need to be considered when filing your company’s 2021 tax return. If your business received payroll credits for employee retention or have a Paycheck Protection Program (PPP) loan that needs to be accounted for this year, you’ll need to be prepared with the details.
Have questions? Contact Tax Smart Advisors today!