The New Year of 2020 has come, signaling the beginning of a new decade. For most people this would be a time to celebrate the various accomplishments and milestones they’ve achieved to date and make plans on what to do going forward. But for business owner and self-employed individuals, the end of the previous year begets the beginning of a new fiscal year and, before they can join in to celebrate, they’ve got to make sure that their business’ financials are in order. So, here is our quick checklist of things to do in order to make sure the transition into 2020 goes smoothly:
Reconcile Your Balance Sheet Accounts
As it is the beginning of the new year, you should start fresh by reconciling your balance sheet accounts and ensuring that they are accurate. Your balance sheet serves to give an inside view of your business’ financial condition by listing how the assets that make it up are divided between liabilities and equities. Therefore, it is important to make sure they are all accurate and nothing is unaccounted for.
For bank and credit card accounts, this is as simple as comparing the transactions and values to the credit card and bank statements that you should receive on a monthly basis. For other factors like fixed asset depreciation, receivables, and so on, you’ll often need reports that showcase both the ending balance account value as well as the details of what makes up those accounts. If you find any discrepancies, find out why they are present as it can be a sign of a mistake or some unscrupulous activity.
Review Your Income Statement Accounts
Once you’ve ensured that your balance sheet accounts are accurate, you can move onto the income statement accounts. These accounts monitor how successful the profit-making activities of the business have been by recording the revenue and expenses of the business. All together these allow you to determine via the bottom-line if your business has made a profit or suffered a loss over the course of the year.
Be as thorough as possible here as this information is crucial for the long-term survival of the business. Not only do you need to make sure that there were no unexpected or unaccounted for transactions, but you need to make sure that they have all been properly categorized. There should be no miscellaneous or uncategorized expenses as GAAP requires all expenses to be accounted for.
Review Accounts Receivable and Accounts Payable Accounts
Check for past-due receivables belonging to clients who haven’t yet paid for work that had been carried out or a product being sold on credit. For clients who are only slightly overdue, it could be that they’ve simply forgotten that they have a bill due and a reminder will need to be issued to notify them. But depending on the age of the account you may be forced to either contact a collections agency or record the unpaid invoice as a Bad Debt Expense if collecting upon it has been made unlikely.
Likewise, you should ensure that your business has documented and recorded all the bills for purchases and services received. Check for any that have been left unpaid or if there were any cases of duplicate payments that need to be addressed. This will help avoid any mishaps with your vendors.
Prepare and Send 1099s and W-2s
As of 2020, it is mandatory in the United States that 1099s be issued to Independent Contractors and the Internal Revenue Services, while W-2s be issued to Employees and the Social Security Administration, no later than January 31st. However, in order to handle the growing number of submissions, the federal agencies responsible for receiving these forms from the Employers will be transitioning to e-filing systems over the course of the next three years. These systems are:
As of 2020, you must submit W-2s to the Social Security Administration and 1099s to the Internal Revenue Services through these online filing systems if the total number of either form to be issued for the year reaches or exceeds 250. In 2021, this number will be lowered to 100 of each type of form. And for the tax years that follow, it will be mandatory to submit it through e-filing if the number reaches or exceeds 10 of either form.
While smaller businesses who do not meet the number requirement to mandate the use of e-filing can still submit their forms through mail, it is recommended that you register for these services as soon as possible. If you choose to submit through the mail, remember that you must also submit a 1096 to the Internal Revenue Services and W-3 to the Social Security Administration as well. Failure to issue and submit these forms by the deadline (or issuing the improper form) can result in penalties from the IRS.
These are the more essential duties that need to be fulfilled before you can ring in the new year and its better to get them done as soon as possible before you close your books to start the year fresh. Once again, don’t hesitate to Contact Us for a free consultation. We at From Red To Black LLC will be more than happy to help you start the new year off right.
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