It’s almost the end of the year! Is your small business on track with its accounting? You might be surprised…
(Before I get started, I’ll admit: Most of this comes down to procrastination and not meeting with an accountant before it’s too late to make changes.) But let’s talk in detail about the top four accounting mistakes made in December!
At CSI Accounting & Payroll, we’ve provided monthly accounting services for 60 years. That means we’ve heard about these four mistakes from prospective clients thousands of times:
- Not keeping bookkeeping on track.
- Not meeting with an accountant before year-end.
- Not proactively reducing taxable income.
- Missing out on tax credits.
1.) Falling Behind on Bookkeeping
Let’s start with the obvious. By year-end, it’s not possible to have December’s books fully closed. However, if your books are not completed through November at that point, then they’re behind.
What does that mean for your business? If you don’t have the right accountant handling the catch-up process in time, it could delay tax filing, causing higher stress, more room for error, and even interest and penalties if your taxes are paid late.
Don’t treat year-end as a one-time bookkeeping cleanup instead of an ongoing process. And don’t just talk to your accountant once a year, either! I’ll talk about that next.
2.) Not Seeing Your Accountant
If you just outsource your taxes to an annual tax preparer, then you’re not meeting with an accountant before year-end. That’s a HUGE mistake.
This eliminates any chances to fix bookkeeping issues before year-end, and you don’t get any professional guidance on ways to reduce your tax liability… which brings me to the next section.
3.) Not Reducing Taxable Income
If you’re not meeting with your accountant before year-end, chances are, you aren’t proactively reducing your taxable income. This is one of the biggest missed opportunities.
There are three common mistakes in reducing your taxable income. They include:
- Failing to max out your retirement contributions. You should contribute the maximum allowable amount for your age before year-end. That means paying yourself enough to support this.
- Missing the deadline to distribute bonuses. Paying out bonuses to employees or yourself (the owner) can adjust your taxable income if done before year-end.
- Taking the wrong mix of salary and distributions. If you (the owner) take too high of a bonus or salary, you will pay more in Social Security tax. And not paying yourself enough can raise red flags with the IRS. Finding the right balance of wages and distributions can’t just be done at the end of the year.
There are other ways to reduce or defer your taxes, too! An accountant can guide you through your options, as well as let you know when you need to take these steps.
4.) Missing Out on Tax Credits
Fortunately, complex, year-round tracking isn’t necessary to claim most tax credits. However, you need to be aware of which credits you could claim, plus when you need to take certain actions.
Often, business owners don’t know what credits they could be eligible for until it’s too late, but if you meet with your accountant before year-end, you could have enough time to take action!
Get Timely Bookkeeping & Unlimited Tax Advice!
Remember, much of what I addressed can be handled throughout the year, so waiting until year-end is too late.
Now that you know about the top four year-end accounting mistakes that small businesses make (not keeping bookkeeping on track, not meeting with an accountant before year-end, not proactively reducing taxable income, and missing out on tax credits), are you ready to check out monthly accounting services?
If so, please consider CSI Accounting & Payroll! We handle your books year-round and implement a complete tax strategy so tax season goes smoothly. To see if we can be a good fit for your business, click the button below for a free consultation:
Not ready to talk? That’s okay! First, learn more about what your monthly accounting fee might look like by clicking the image below:
