Year-End Accounting Checklist for Small Businesses

Tax season doesn’t have to be something you dread, even though most people don’t view it as an exciting time to look forward to. If you plan and are aware of what you’re getting into, you’ll be fine. There is no better time to get ready than now, particularly as the year’s end draws near. You will make things considerably more difficult for yourself if you wait until the following year to compile your records and tax information. There are several things you can do in your year-end accounting to maximize your tax savings. And be ready for tax season in April, and enhance your overall planning and accounting.

Year-End Accounting: What Is It?

You are solely accountable for your earnings and outgoings from January 1 through December 31 of 2022 for your 2022 tax return. You are therefore getting closer to the last opportunity to change how you determine your taxable income. All before the end of the 2022 tax year.

End-of-year accounting deals with the particular management and bookkeeping required to have your company’s financial statements ready for the close of the fiscal year. The end of the year is crucial for taking care of business finances. Whether you’re a business owner or a tax professional.

What Time Does the Financial Year End?

Each firm owner may choose a different accounting year. Since the majority of firms operate on a calendar year, their accounting year starts on January 1 and concludes on December 31. The 12-month fiscal year of other businesses could be modified to fit their timetable.

Why Make a Year-End Accounting Checklist for Small Businesses?

The end of the year is a great opportunity to manage your tax burden proactively. Before you close the books for 2022, there are several things you can do to reduce your tax payment and relieve your tax burden.

Your company will be prepared for success throughout tax season and the upcoming new tax year if you create an accounting checklist and go through it with your staff or an accountant. You can end the tax year at your convenience and get ready to start the next one.

At these times of natural transition, if you don’t step back and plan, you’ll always react in the present rather than consciously moving forward. Making planning a conscious part of your year requires maintaining an end-of-year checklist for small business owners.

Six Items to Include on Your Year-End Checklist for Small Businesses

With your year-end accounting checklist, you’re taking the time to make sure your business is prepared financially for the coming year. But where do you begin? Here are some important things you need to take care of as the year comes to a close.

Increase Deductions

A crucial item on your year-end accounting checklist should be tax deductions. Your small business tax return will be greatly improved. Especially if you claim all of your tax-deductible costs, all of which must occur before the end of the accounting year.

If you want to be able to deduct your business expenses from your taxable income, you must schedule them by the end of December. On the other hand, if you anticipate having more revenue to offset in the upcoming year, you can decide to postpone major expenses until January.

Review Your Year’s Books

To get ready for tax season, you should close the books on the prior year’s funds as part of your year-end closing process. Your bookkeeping for the previous year must be thorough and complete to get there.

Group comparable buys together and separate any significant annual purchases. Determine income, refunds, and owner contributions. All of your assets and liabilities should be fully disclosed, including any unprocessed accounts payable and receivable, such as unpaid invoices or outstanding obligations. Check and update your inventory’s unsold item count.

Make sure to review and examine these financial statements as well. If you wait months to review these files, you’ll need to recall more to accomplish it correctly and effectively.

Although bookkeeping for a small business may appear simple at first, it may often become burdensome. Before sending your information for tax preparation, if you’re having trouble, seek help.

Continue to Pay Quarterly Taxes

You should also include a reminder on your year-end checklist to pay your quarterly anticipated taxes on time. These tax payments are in advance of what you anticipate owing after a final accounting.

The due dates for the estimated quarterly taxes are as follows:

April 15 is the deadline for the first quarter, June 15 for the second, September 15 for the third, and January 15 for the fourth.

It’s preferable to overpay your projected taxes than to underpay them. If you underpay your tax obligations, you risk having a significant tax balance at the end of the year and incurring underpayment fines.

Calculate Your Liability up Front

Making an educated guess as to how much you will ultimately owe on your final return is a vital component of year-end closing accounting. You can get ready to file and pay by having an idea of how much you’ll owe in advance.

Calculate your overall gross receipts carefully. Understated income can result in penalties with the IRS down the line. While overstated receipts result in paying needless taxes. Both of these things are undesirable for you. To get started, you can use your tax records from prior years.

To make sure you are aware of all your revenue sources and potential deductions, schedule a year-end accountant consultation. And to determine your exact final responsibility, you’ll need all of that information.

Organize for the Upcoming Year

A year’s end is comparable to closing a chapter in your life or the life of your company. By keeping organized records, you may conclude that chapter and start a new one in a way that positions you for success.

To make sure you’re prepared for the new year, use your year-end accounting checklist. It’s the ideal moment to update your system with other current accounting trends. And try out new accounting software, or make big modifications to your procedure.

Consult With a Professional Accountant

A professional consultation should be scheduled as soon as possible in April. Now is the moment to talk to your accountant about how to handle year-end accounting for your company.

It’s a great chance to get ahead of the game and make sure your year-end accounting checklist has you as informed and ready as possible. For year-end planning, speaking with your accountant is a wise move to make sure you have everything covered. The financial health of your business is in your hands, no matter what course you take. There is no better time than the present to invest in future savings! This is all because it takes time to properly file your small business taxes.