Out with the Old and In with the New!
It’s a brand new year! As small business owners there are tasks that should be completed this month to get ready for the new year.
Below are some tips for starting off on the right foot and insuring all the proper forms are filed in a timely manner.
Small Business Taxes Due Dates
The due date for furnishing your employees and independent contractors with their W-2s and 1099s…
is the same it has been for years…
with the passing of the Protecting Americans from Tax Hikes (PATH) Act last year…
your transmittal form W-3 (cover page for all your W-2s) and the 1096 (transmittal form for 1099s) will be due by January 31st as well…even if you file electronically!
Note: The start of this year is the best time to determine if your worker should be classified as an employee or independent contractor.
Penalties for misclassifying a worker as an independent contractor are very stiff and strictly enforced so now is as good of time as any to make sure every one of your workers are properly classified.
See this article on the Misclassification of Workers.
More Due Dates
January 15: Estimated small business taxes due for the fourth quarter (Oct – Dec) of last year.
You can skip the final payment if you will file your return and pay all the tax due by February 1.
See this page for more information on how to file an IRS estimated tax form (1040-ES).
January 31: For those of you with employees…your Form 941 Employers Quarterly report is due.
Don’t forget your state’s employers quarterly report if applicable. Some state employers form are due earlier than the 941 such as Oklahoma’s WH 10001 which is due the 20th…so check with your state’s small business tax commission and see if and when your employers quarterly report is due.
January 31: Form 940 due. See this page for Federal and State Unemployment Taxes Explained.
Closing out the Books
You don’t want last year’s income or expenses carrying forward into this year and messing up this year’s small business taxes, so you may need to ensure everything is properly closed and ready for the new year.
If you keep your accounting in QuickBooks, closing the previous year is simple as QuickBooks automatically makes year-end adjustments and you can also set your QuickBooks to warn you before accidentally making changes to last year’s books.
As stated above, QuickBooks Online (QBO) and the desktop versions automatically zero out your income and expense accounts by rolling your net profit/loss into your Retained Earnings account. So you start out the new year with a zero net income.
You can “officially close the books” and ensure your transactions in the previous year are not accidentally deleted or changed by following the following steps:
- Choose the Gear icon > Company Settings/ Account and Settings.
- Choose Advanced.
- In the Accounting section, click on the Edit icon.
- Click to mark the Closing The Books checkbox.
- Enter a closing date. Transactions dated on or before the closing date cannot be changed without warning.Decide what you want users to see if they try to save a transaction that is dated prior to the closing date:
- Choose Allow changes after viewing a warning to make a warning message appear.
- Choose Allow changes after viewing a warning and entering a password to make the user also enter a password. Then enter the password in the two password fields below.
- Click Save then Done.
If you use other software, check your user’s manual for instructions on closing the year’s books.
If you do it by hand, here is a good article on How to Close Accounting Books.
Cleaning out the Files
Another important task for starting the year out right is cleaning out last years files and setting up new files for this year.
Everyone has their own system for doing this. I have a small plastic filing tote that I move all of my previous year’s files into.
I keep it where I can get to it easily as I am always having to refer back to last year’s files; especially when it comes time to file my small business taxes.
Then at the beginning of the next year, I file the files in that tote to my filing cabinet and begin another year.
Again everyone has their own special way of organizing so use the method that works best for you.
Because I am a very small business, I keep my current year’s files in a magazine file in expanding file jackets beside my desktop computer.
I use color coded filing tabs which I stick to the top of the file jackets. For example: I use green tabs for all IRS forms or any forms relating to my small business taxes, yellow tabs for my home office files such as utility bills, red tabs for contracts, blue tabs for bank and credit card statements, etc.
For more tips on organizing your files and how long to keep your small business files, see this page on Small Business Records Retention.