Get Ready for Tax Preparation: What You Should Do
April 17 is still months away, but now’s the time to start your tax preparation.
You’re undoubtedly very busy right now. It’s the middle of the holiday season and moving quickly toward the end of the year, so you probably have reports and other documents to prepare. Perhaps you’re running sales or offering discounts to pare down your inventory before December 31.
Why should you be thinking about something that’s not due until next spring?
Two reasons. First, there are tax-related activities you may want to know about and take care of before the calendar flips over to January. And second, you’re already deep into year-end wrap-ups of one kind or another. Some of your tasks may be able to do double duty.
Give your accounting application a workout for your tax preparation.
You’ll want to have all of your 2016 expenses recorded, your bills paid up, and all income entered.
- Pay special attention to expenses, many of which will be tax-deductible. What about employee expense reports? Ask your staff to submit expenses quickly or risk not getting paid in 2016. Same goes for any billable time they may have forgotten. Have you or your employees bought anything that needs to be charged to a customer?
- You’ll find a lot of your expenses in your bills.
- How do your aged receivables look? Although December is a terrible time to try to collect outstanding debts, at least get on past-due customers’ radar. You may not get paid until January, but you’ll have started the conversation.
Stress the importance of accurate, promptly-submitted timesheets.
If you have full-time or contract employees, you’ll have to prepare and dispatch 1040s and/or 1099s in January. Since people will be coming and going during December, send out an email or otherwise remind your employees they’ll need to take care of timesheets before December’s end. You’ll want a solid year of payroll information when tax time rolls around.
Check your estimated tax payment history for 2016.
You should have made three payments by now. If you need to catch up, try to do so before the end of the year. You may still be penalized, but make a good-faith effort to have fulfilled your 2016 quarterly IRS obligations.
Designate a special place for all tax-related information. This is more applicable if you do your accounting tasks using paper and/or Excel, since accounting applications serve as clearinghouses for all of your financial information. If you do a lot of your financial tracking in Excel, be sure that those spreadsheets are saved to one folder, with nothing extraneous included. Store papers in folders with flaps, not file folders that can spill critical documents.
Shoot for an early filing. You can’t, of course, actually file your taxes until sometime in mid-January, when the IRS releases its finalized forms and opens the official filing season. If you find out in January that you’re going to owe money, you still have almost three months to pull that together.
Make your to-do list for January.
Again, January will fly by because of the holiday slow-down. Remember to:
- Make your fourth quarterly estimated payment by January 17, 2017.
- Create and distribute 1099s and W2s.
- Educate yourself on any end-of-year tax laws changes from 2016. It’s a good idea to do this throughout the year so you can do any financial planning necessary, but certainly see if anything slipped in under the wire.
Squire can help by answering any last-minute tax questions, and we’d be happy to work with you on preparation. Either way, January is a good time to start thinking about your 2017 income taxes, as odd as that sounds. Year-round tax preparation gives you peace of mind throughout the year, and can help you minimize your tax obligation.