Are you ready for December 31? The New Year is right around the corner, and there are critical things you can be doing now to smooth the tax preparation that will soon be upon us.
The best way to reduce income taxes is with year-end tax planning. Don’t wait until next year to begin to prepare your tax return; that’s too late for many tax savings strategies. Reach out to your CPA to assure you’re on track for any year-end events that will have tax ramifications in the new year. Help your bookkeeper help you by checking on the following:
- Review your large purchases for the year, gather receipts, and make sure your bookkeeper has copies.
- Take stock of what your business owns. The Business Property Tax form (571-L) taxes the business property that you need to keep everything running. If you disposed of old equipment, tell your bookkeeper! We’ll get it removed from your return filing, so you won’t pay tax on it.
- If you pay your own bills, make sure you’ve been collecting W-9s for any service providers. Keep a stack of blanks by your computer and don’t pay a vendor until you’ve received a form. It’s a lot harder to collect the form once they’ve cashed the check.
- Evaluate your current tax situation. Schedule a quick call now with your CPA to make sure you don’t need to adjust payroll or estimated taxes.
- Review your Point of Sale system. Depending on the POS you use, you may need to make manual adjustments to sales tax rates. Confirm they are all up to date for 2022. There are Sales Tax rate adjustments for individual California counties and cities that happen every quarter. Visit the CDTFA website where you can search for current rates and double-check your systems.
- Request that your CPA send your 2021 tax return and adjusting journal entries to your bookkeeper. Now is the time to get your books ready for 2023, and last year’s tax returns (2021) contain information your bookkeeper will need.
A little planning and a few conversations with your financial advisors will go a long way in smoothing the path for 2023. Please reach out to your bookkeeper if you need assistance with any of these year-end tasks.