Four Tasks Small Business Owners Need to Do Now

Owning a small business can be intimidating, even for someone with extensive management experience. Finding yourself suddenly “here goes the responsibility” can be anxiety-inducing. The consequences of certain wrong failures not only affect you (e.g., your employees or even your family), but can be expensive and time-consuming to fix. Whether you’re a brand new business owner, or someone who’s been in business for a while but is constantly overwhelmed by the administrative workload that piles up while juggling other tasks, Ronnie Goode – CPA owner of Rhythm Accounting in Richmond, Virginia – says Taking some time in January to cross the following four items off your “to do” list will pay off when you file your tax return.

1) Close the books for 2022

One of the first things small business owners (especially those who manage their own books) should do is close their business books:

• Transaction classification: Sort expenses into appropriate accounts. It’s okay if you’re not sure whether to use the “Ask my accountant” option, but try not to overuse it. If you have more than one source of income, make sure that bank deposits are also coded by source of income so that you can identify the most profitable source of income for your business.
• Coordinate bank accounts: This task is often skipped by business owners without outside bookkeeping or accounting help, but it’s one of the most important year-end tasks for ensuring balance sheets and other financial reports are accurate.
• Generate financial reports: At the very least your tax preparer (and even you) will need a detailed profit and loss (P&L), preferably a balance sheet. If you have a CPA, they will help you interpret your financial results. They can even help you with year-end tax planning at the last minute if you give them the necessary information early enough in tax season.

2) Issue Form 1099-NEC to contractors and subcontractors

If you paid contractors or subcontractors more than $600, you have until January 31, 2023 to issue them a Form 1099-NEC. If you have not received a W9 form from your contractor, you will need to contact them to have them provide you with the form or the necessary information. Adopt the best practice of having new contractors complete W9 before starting work. Make it a condition of accepting the contract! It might even be a good idea to have your regular contractors fill out a new W9 form at the beginning of each calendar year to ensure their business and contact information is up to date. Goode reminds business owners that a W9 (real, your big box store for office supplies).

3) Issue W2 forms to employees

If you have any employees in 2022, you must issue their W2s on or before January 31, 2023. Goode points out that the easiest way to do this is to use payroll-specific software or a payroll provider. Now is also a good time to check to make sure that all payroll tax forms (941 and 940) have been or will be filed in a timely manner and that all payroll taxes have been or will be paid.

4) Make the final estimated tax payment

Goode reminded business owners that their final estimated tax payments for 2022 are due on January 17, 2023. He points out that the estimated tax amount you’ll need to pay is based on last year’s figures. However, sometimes these numbers are not accurate. Adjusting quarterly estimates is one area where hiring outside tax and accounting professionals can really help taxpayers avoid problems. For example, if a taxpayer had a poor quarter, a professional can help determine a lower estimate, or if a business had a particularly good quarter, a professional can determine whether making a larger estimated payment would help avoid delays at filing time. A nasty surprise occurred. Even if you’re managing your own books, make up your mind to understand how estimated payments are calculated, and review your profit and loss quarterly to make sure you’re not overpaying or significantly underpaying estimated taxes.

Finally, Goode reminds small business owners that “from a financial standpoint, the cycle of the business not only determines how to act, but when move.Knowing these cycles helps [business owners] Create a routine and a [financial] Their Business System”, helps businesses maximize profits while planning their taxes. Remember, spending money to save taxes is never a good idea. Spend money to make more money, and plan taxes as you go!