Here are the TOP 6 To-Do’s every business owner can do to get yourself ready for year-end:

1. Take care of your 1099s

The IRS has reintroduced Form 1099-NEC as the new way to report self-employment income instead of Form 1099-MISC as traditionally had been used. This was done to help clarify the various filing deadlines for Form 1099-MISC versus the 1099-NEC filing deadline. The IRS requires businesses to report payment of non-employee compensation of $600 or more on Form 1099-NEC instead of Form 1099-MISC

• Businesses also need to file Form 1099-NEC if the business withholds federal income tax from a non-employee’s compensation, regardless of the amount of the payment.

• If you are self-employed and a business paid you $600 or more for non-employee compensation, you should receive Form 1099-NEC by January 31 and use it to prepare your tax return.

• Non-employee compensation can include receipt of fees, benefits, commissions, prizes and awards for services by a non-employee

2. Prepare year-end payroll

What is Year-End Payroll Reporting?

Year-end payroll reporting is the process of reporting on an organization's payroll for a given tax year. Reports show a breakdown of wages, hours and tax liability. They usually include summary documents like Forms W-2 and Forms W-3, which are employees' individual wage and tax summaries, and the company's collective wage and tax summary, respectively. Other forms often included are Forms 940 and Forms 941, which detail federal income tax and unemployment tax. We know you probably just did a facepalm. Yes, it's a lot, but don't worry, we are going to walk you through where to get these reports and help you ensure they are accurate prior to year-end so you're not running around frantically during the last few days of the year.

Is there a big difference between year-end payroll reports & annual financial reports?

Yes, there is a big difference between year-end payroll reports and annual financial reports. The difference is that annual financial reports encompass the financial state of the business as a whole. This means they include things beyond the company's payroll, like financial statements. You can think of annual financial reports as a giant snapshot of how an organization is doing at the close of the fiscal year.

So, what is a year-end payroll report? Year-end payroll reports, on the other hand, are reports that are specific to payroll, and they detail the organization's payroll cost, wages paid out, as well as total tax liability on a local, state and federal level. This means you can take a deep breath, because if you are overseeing year-end payroll reports this year, that's a lot smaller task than overseeing annual financial reporting. Phew!

What should be included in year-end payroll reports?

Items to be included in year-end payroll reports are detailed files showing total wages paid out. Tax liability should also be shown on a local, state and federal level, as well as Medicare tax, Social Security tax, Federal Unemployment Tax and State Unemployment Tax if the organization is in a state that requires it. This information is detailed on the following forms:

• Form W-2; individual employee wage and tax information

• Form W-3; company totals wage and tax information

• Form 941 and Form 940; company tax withholdings throughout the year

• State and local tax and unemployment withholding forms

This may feel like a lot of documents, but the good news is, you are usually able to generate these reports on your payroll service provider's platform. For a full rundown of items to keep for employment tax record keeping, you can visit the IRS website's comprehensive list.

3. Account for Inventory in your Books

• Count inventory on the date you close your books.

• Include packaging and paper products in your inventory counts.

• Double check the inventory on your balance sheet.

• Don’t forget about spoilage, as well.

4. Get Necessary Documents for your Accountant

If you use an accountant in some shape or form for your business (e.g., accounting software in conjunction with a tax professional), you need to get documents ready to go for your accountant before year-end. 

Although it depends on what your accountant is handling for you, here is some information you may need to gather: 

• Financial statements

• Bank and credit card statements

• Petty Cash records

• Invoices and receipts

• Sales records

• Payroll records

• Loan information

If you use software, you should be able to easily grab the necessary documents for your accountant.

Check with your accountant to see what information they need from you to close your books at year-end and prepare for the upcoming year and tax season. 

5. Reconcile Bank Accounts and Credit Card Accounts

A major aspect of your accounting year-end procedures checklist is reconciling your bank accounts and credit cards. That way, you verify that your accounting records match your bank accounts. 

To reconcile your accounts, compare your bank and credit card statements to your accounting records. Your statements should match the balance listed in your books. If they don’t match, do a little digging to find the discrepancy. You may need to adjust one of your records for the balances to be equal (e.g., interest amounts).

6. Gather and Finalize Financial Statements

Your financial statements are a lifeline for your small business. They give you a glimpse of where your business stands financially. And, statements let you see past and current finances so you can forecast your business’s financial future and plan for the new year.

Financial statements help you understand your business’s financial standing and (hopefully) make tax season less of a burden on your company. You can access your financial records in your accounting books.

Use your accounting records to compile and analyze year-end statements. There are a few financial statements that you should have handy, including:

• Profit & Loss Statement

• Statement of Cash Flows

• Balance Sheet

Profit & Loss Statement

Your Profit and Loss (P&L) statement, summarizes your revenue and expenses. Your income statement lists all of the money you gained and lost throughout the year.

Here are some things you might see on your P&L statement:

• Revenue

• Tax expenses

• Operating expenses

• Cost of Goods Sold

• Depreciation

• Other financial costs and gains

You can find your business bottom line by looking at the difference between money gained and lost on your statement. Compare this year’s income statement to last year to analyze the differences in revenue and expenses from year to year. 

Cash flow statement

Your Statement of Cash Flows lists your business’s incoming and outgoing cash. Cash flow statements only record the actual cash you have, not credit.

Cash flow can be positive, meaning that your business has more incoming money than expenses. Negative cash flow occurs when you spend more money than what you’re bringing in.

Your cash flow statement can show you the timing in which money comes in or goes out of your business. For example, you can see which months have a higher cash flow and the months where your business’s cash flow is struggling.

Tracking your cash flow throughout the year and at year-end can also help you create a cash flow forecast and predict your future cash flow.

Balance sheet

Your Balance Sheet shows your assets, liabilities, and equity and tracks your company’s financial progress.

Here’s a snapshot of the different aspects of your balance sheet:

• Assets: What you own

• Liabilities: What you owe

• Equity: Money left over after you pay expenses

Your liabilities and equity should always be the same amount as your assets.

Use your balance sheet at year-end to ensure your accounts balance and everything is in order for the new year. If you find a discrepancy, make sure you find the accounting mistake and fix it.

We hope these 6 Year-End Bookkeeping Tips will help you be ready for your CPA! Have a successful year – end!

Thank you all for reading!