452: Last-Minute Reminders Before The New Year Countdown

This Podcast Is Episode Number 452, And It's About Last-Minute Reminders Before The New Year Countdown It’s been another excellent year for Fast Easy Accounting. We appreciate your support for those of you who have been with us through all these years; without our contractor clients, template customers, construction accounting academy students, email subscribers, podcast listeners, blog readers, and social media followers, we wouldn’t get to where we are today.   As we look back on our 2021, I hope your fondest memories will include the time you’ve spent with all the things you love and are passionate about. And because we love what we do and we are passionate about serving our contractor friends - for us, this year was all about empowering your contracting business by continually providing you with outstanding products, high-quality services, and dependable resources for your bookkeeping and accounting needs.  

Year-End Review: Time flies when everyone is busy.

Start now - review your records for the following items:

Missing Federal Tax ID’s and requesting the W-9. Have all your employees verify their pay stubs for the correct address. Check Apartment numbers and zip codes. Have any of the neighborhoods been annexed into the city?

Year-End Accounting Clean Up

Your Tax Accountant will be sending your booklet with what they want for records.  What are the loose odds and ends missing for this year? Do you have a formal Accounting System? Do you need to clean up the Accounting beyond the last couple of months?  Do you have bank statements?  Can you find all your receipts?

Tax Accountants do “workarounds” to file your annual taxes. At some point, the Tax Accountant may refuse to clean up and deal with the Lack of Good Records or Messy Records. As the economy improves, tax accountants will have more clients who want their taxes done. 

Helpful Reminders:

Be mindful of the paperwork that must be stamped on or before December 31st (today).

Payroll – Did you take any personal payroll (S-Corp)? If not, it may impact your personal deductions. 

IRA - 401K - Making those final payments before midnight on December 31. (Do not wait until 11:59 PM) Some plans allow you to make payments until April 15th (double-check the dates– do not assume)

Income – Getting one last customer invoice and receiving the payment - last-minute purchases to count on 2021 taxes (expenses or larger item which qualifies for depreciation)

Do not expect to be able to file your annual taxes on January 1st (tomorrow).

Visit https://www.irs.gov/ for the official 2022 Filing Season Start Date.

Prepare W-2s and pass them out as soon as possible - remember to keep a copy.

W-2’s and 1099’s have a deadline of January 31st to be mailed out to your employees and 1099 contractors. Be proactive and send out W-9’s as soon as possible, thereby asking for a Federal Tax ID or Social Security Number now.

Think about your company tax filing status.

I recommend changing from a Sole Prop to an S-Corp. Setting up an S-Corp is done with the Secretary of State in your state. Note, a few states only accept forms from a third-party service.  If you are currently an LLC, I recommend becoming an S-Corp. If not, change your tax filing status to be treated as an S-Corp. The form needed from the IRS is Form 2553. Unlike many State Agencies, the IRS does not charge to file their forms. You are asking the IRS to change how your company is treated. Why is this important? Because the IRS will only accept the form for the current year in January – February (pushing the deadline to March 15th is risky), the approval will be for the next year (starting in January 2023) instead of January 2022.

Late Penalties to State and Federal Government Agencies are increasing, and they are looking back at filing dates of past returns for additional fees. It’s costly to borrow money from the government. If you need it, it never hurts to ask for a payment plan. 

Rule of Thumb When Asking: Be Nice, Be Polite. Ask for a payment plan to be extended for as long as possible and with as low as possible payments. Sometimes no matter how you ask – the person you are talking to is not helpful, but usually, if it is within the rules, they will help you out.

It all gets down to Time | Scope | Money

A good tax accountant can do Many Simple or Less Complicated Returns in the same amount of time it takes to do a Messy, Complex Business Return. More Tax Returns become more Complex than is necessary because the documents or lack of records make it messy and hard to deal with. 

Your Reason To Turn It All Over To The Tax Accountant

It’s cheaper to have the Tax Accountant do it than hire a Bookkeeping Service, and I don’t want to do it myself because it’s Hard. 

Yes - The Tax Accountant can and maybe will do a workaround that is just enough to do the taxes. If you are missing 5%, 10%, 15%, or even more, the tax accountant will use what you provided, and it will be by exception; your tax accountant will ask for missing documents or even notice they are missing.

A tax accountant will assume you gave them everything you had. In reality, you gave The Tax Accountant only what You thought The Tax Accountant needed versus all of the records that might save you additional money in taxes. 

A sound accounting system will help you make better decisions on what to buy and what type of jobs to accept. When did you afford to take payment plans from your clients? When is the need or ability to raise your prices? Only you can decide if the lack of good records was worth the low price.

Happy New Year – 2022 is just around the corner - Are you Ready?

About The Author:

Sharie DeHart, QPA is the co-founder of Business Consulting And Accounting in Lynnwood, Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on how to manage the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. Call 1-800-361-1770 or sharie@fasteasyaccounting.com