Spring is a good season to clean your house or your office, but Winter is the season for cleaning up your inner workings of the business. Why? Because for most companies, December 31st marks the end of the fiscal year. This clean up process can help make sure you didn’t miss anything and gets you ready for tax season.
Didn’t Miss Anything
In all types of companies, it is not good to end up with a large surplus balance at the end of the year. In an LLC, this can result in a higher personal tax and in a corporation, this can result in a large corporate level tax. If you have a large expenditure, and are deciding whether to make that expenditure on December 31 or January 1, chances are you’re going to want to make it on December 31. There are a few good reasons why you may want to wait, but the majority of the time, you’ll want the deduction immediately so you have higher cash flow heading into the new year.
That said, if you have negative cash flow already or this expenditure will put you in the negative, you may want to avoid it. Also, if having the deduction a part of your following year is part of the overall plan, you should definitely wait. Additionally, some people realize their tax rate will be significantly higher the following year, so deductions are worth more than they are this year.
Even if you don’t have a doubt in your mind, you should discuss these sorts of things with your CPA or other tax professional. It could make a very large difference.
Getting Ready for Taxes
Part of the clean up process, at least for me, is going through the prior 12 months of bank statements to classify them and leave notes on any odd items. By classifying them in terms of their tax treatment, you can save your CPA or other tax professional a lot of time. You also get a great snapshot of where you’ve been earning and, more importantly, spending your money so you can change any behaviors you may need to change.
With the year ending, you should also get ready to send out W-9s and 1099s, as needed. Payroll is also important to ensure that it is ready for W-2s once January arrives.
Hit Those Goals
When you clean up your company’s finances and other documents, you get to reflect on the goals you set for yourself and see what you can do to achieve them. This also gives you a good opportunity to begin planning your next set of goals for the following years.
If you have any questions or want to discuss what you can do to make your year end more beneficial for you, feel free to schedule a consultation with us by contacting Richard Bobholz at 919-912-9640 or richard@lawplusplus.com.