Welcome to December! Where has 2019 gone? Now is the time to start preparing for year end closing and the 2019 tax return. Here are a few steps to take now to be prepared to meet your tax professional. If you have competent accounting services, those numbers are part of the year end services.
Let’s start with accounts payables and receivables. Who do you owe and who owes you? Payables may or may not be due by the end of the year or the first part of 2020. If there is an option of when to make purchases or pay off existing bills, be sure to take into account the tax ramifications which is where an experienced tax professional can be critical.
Regarding receivables, there are always several considerations on how aggressively one attempts to collect. While we all want to have profitable years, if a business is cash based and the year has been otherwise profitable, it may be worthwhile to postpone the collection efforts. If a business is established as an accrual-based business, when collections occur becomes moot. The business has another consideration. Accrual based businesses claim as soon as it is earned. This business must consider whether an overdue account is collectable or if it should be written off as uncollectible. There are serious tax implications of when this is done. This is the place where an experienced tax professional will make all the difference.
I hinted above about purchases. Now is the month to look at new purchases and decide if they will be made now or after the New Year. Here is a very loose and basic rule. If this has been a slow year, buy the new equipment next year when the deduction will be more helpful. If this has been a good year, take the deduction this year. As I said, this is a very loose rule. There are exceptions to the rule.
This is also the time to start collecting your receipts and categorizing them. Don’t assume your tax pro will understand where to put each expense. If you use software like QuickBooks Online, and have set up, or had the Chart of Accounts set up properly, this should have been an ongoing process. If not or you are unsure, this is the time to review the year. When you meet with your tax professional, fully disclose everything. Never hold back from your tax accountant.
This is the time when planning for 2020 is very appropriate. Is an expansion possible? Will there be cutbacks or efficiencies put in place? Are there strategies that either worked or didn’t work?
At Books, Taxes & More, we are looking at marketing and are not happy. That means we will be doing something different in that area. We will also be examining other areas of the practice. We are prepared to help small businesses with the accounting aspects and tax ramifications of these decisions.
Whether 2019 was a good year, a great year or a terrible year, learn the lessons that are there. Once that is done, plan for a better 2020 and take what ever positive action that you can. We wish all a Merry Christmas and a prosperous New Year.