We Are Here to Help

You may not need to hire a professional, but you still have an occasional question. We hope we can save you the cost of consulting with an accountant or other professional for these simple, intermittent issues.

Send us your question today - we would love to help.

The information is not meant as tax or legal advice. Please verify all information with your tax or legal professional.

Wednesday, December 30, 2009

Things To Do To End the Year

Time to start thinking about taxes.  Time to make those last minute contributions, and last minute spending decisions.  Are you showing a profit and need an additional expense to lower your tax bill?  If you bought major equipment during the year first check with your accountant to see what portion of that purchase can be deducted for this tax year.  If you have no major purchase but are showing a lot of profit, consider purchasing a large, high-dollar item for your business.  Even if it is financed you may still be able to claim a huge first year deduction under section 179.

Reconcile all of your accounts, checking, savings, credit cards, lines of credit, personal loans, 401k or insurance loans, etc.  Many people don't realize that they need to reconcile loan accounts as well as bank accounts.  Be sure that the interest portion of your loan payments has been properly recorded by showing a "book" principle balance that matches the year end loan balance statement provided by your bank or lender.  Do this for private loans as well.  If you receive a 1099 showing the interest paid on a loan for the year, verify this against your expense total for the year.  If you use Quickbooks, you can reconcile both asset and liability accounts the same way. 

Be sure that you have properly recorded all of your accountants changes for the prior tax year.  If they did not give you a list of journal entries to make, ask for it.  Most of the accountants my clients use do not automatically send journal entries, and some are surprised when we call and ask for them.  But they are not surprised when the tax return process goes smoothly because the book Balance Sheet matches the tax Balance Sheet for the prior year.

Most importantly, review your work.  I'm not suggesting that you read every single transaction line of every entry, but look at your Profit & Loss statement and your Balance Sheet diligently.  If you don't know what the numbers mean, pay a bookkeeper for a days worth of review work.  They may just save you a tremendous amount of money.

I remember when I first went to work for one of my current clients and I found out that they had recorded a deposit into their bank account as income, when the money had actually come from a personal loan.  (Yes, I used this as one of my examples in a previous blog)  Their accountant would have no way of knowing that money had been a loan and the loan was also not recorded on the books.  Had the error not been discovered they would have paid taxes on that $5000 and their financial statements would have been incorrectly elevated.

Don't be in a hurry.  Take the time to finish things, review things, and then consult with your tax adviser about possible tax deferred investments you should consider.  Give the government what is due, only what is due and on the date that it is due.

This material is for informational purposes only and not intended and financial, legal or tax advice. Please consult your finance, legal or tax professional to confirm the accuracy of all information. Quickbooks is a registered product of Intuit.

No comments:

Post a Comment