What Your CPA Wants You to Know
A podcast for entrepreneurs! We are a husband and wife team running our CPA firm together. We know just how difficult it can be to take your business dream to a reality. Our mission for this podcast is to guide, empower, and educate entrepreneurs in an easy-to-understand way! We want business owners to have the information that they need when they need it, AND without the hefty accounting invoices from a CPA! Follow along for practical advice, tips, and tricks from a CPA who knows what it is like to run a business, and strategies to keep your business thriving from an MBA! We will also show you how to run a business while keeping your family and sanity intact along the way!
What are you waiting for???
What Your CPA Wants You to Know
86. Year-End To-Do List For Business Owners!
There are SO many things for business owners to do at the end of the year + the first month of the new year! It's a LOT!
This episodes guides you through what you should check off your list before the end of 2024. We help you get organized for tax time and explain what you can do before the year ends to reduce your taxes!
With these actionable insights, equip yourself to minimize tax liabilities, align with your business needs, and confidently step into the new year penalty-free.
Create a STAN Store - Click here to try it out!
Here's where you can find us! Follow along on Instagram for lots of free content for business owners daily!
Shop our business guides!
Our Instagram Page
Our family page
If you are somebody that typically does Christmas bonuses or year-end bonuses for your employees, you need to know about what that's going to be. It's going to make your tax projection much more accurate, because we usually look at the salaries of every month and that's part of our tax projection. But if in December the salaries are going to be much higher, well then your profit's going to be lower and you won't have quite as much tax, so we need to factor that in. You won't have quite as much tax, so we need to factor that in. Welcome to what your CPA Wants you To Know.
Speaker 2:Tax and accounting help can be expensive, so we've created this podcast to help guide you through it all and make you feel like you have a CPA in your back pocket.
Speaker 1:I'm Carson Sands.
Speaker 2:And I'm Taryn Sands.
Speaker 1:CPA in your back pocket. I'm Carson Sands and I'm Taryn Sands. I'm a CPA with over 10 years of experience helping people start and grow their businesses.
Speaker 2:And I'm an MBA with a specialization in marketing and entrepreneurship. Taxes suck and we want to make sure you don't pay more than your fair share.
Speaker 1:We're here to share everything your CPA wants you to know in a fun and easy to understand way. Let's get started.
Speaker 2:Let's do it Today. We are going to help you get organized for the end of the tax year.
Speaker 1:Just what you always wanted to do with your time.
Speaker 2:Just what you always wanted to do with your time. So exciting, I know, but if you're a business owner, you know how many things are on your list for the end of the year, but then ramping into January, If you get a head start on it, not only will you feel so much better, but your accountant might give you a gold star.
Speaker 2:That's true. We do give out gold stars to anyone that is ready to go in January so we can file their tax return, because we need to get on top of it. We got to start in January.
Speaker 1:Alexa add gold stars to my Amazon shopping list.
Speaker 2:If you are a client and you're listening, please get us your stuff as soon as possible, because we have a lot of returns on the list. It's so nice to get started in January and it's very possible for business tax returns if you do everything that we share today.
Speaker 1:Yeah, and if you have a refund coming, then the sooner you file, the faster you'll get it, and if you're going to owe, the sooner you file, the longer you have to make plans to make that payment, because it's due April 15th. So if you have three months to figure that out, that's very helpful.
Speaker 2:And did you know that most people aren't aware that they do have to pay their taxes by April 15th, even though, even if they file an extension because I pulled everyone and most people don't know that?
Speaker 1:Which everyone's like. But how do we know how much to pay? I'm like you don't, you have to guess, so it's better to fall on time. Now, some people they don't have a choice. They have to extend for different reasons and we can always come up with an estimate for you. In that case, we do it all the time. But it's better to fall on time if you can, because then you know exactly how much to pay.
Speaker 2:Yeah, and as a business owner Like there's not going to be things we're waiting on specifically like a K-1 or something like that it's best just to get it done with, because you know there's all of these things you have to start doing for the next year, and so to get the previous year wrapped up is really important, because then you get just bombarded with all this other crap you have to do as a business owner. So the best thing to do is try to focus on it now, get everything wrapped up and knock it out in January.
Speaker 1:Sure.
Speaker 2:So, the very first thing, we just set down a mail list of all the things that we do and we recommend that our clients do, and this is just getting you organized for the end of the year so that you can do all the filings and you don't miss anything. And the first thing on our list is to finish your bookkeeping and reconcile.
Speaker 1:There's so many reasons why that's number one important and very first thing you need to do. First of all, as you get into tax season in February and March and start discovering issues in your books, then it's going to be really difficult for your accountant to take time to fix that. But at this time of the year we have so much more time available to fix any problems that come up like that.
Speaker 2:We're happy to help with bookkeeping now. We do not want you to be confused in March or April saying, oh, these numbers don't look right, I have no idea. And then we have to go digging through to see what happened.
Speaker 1:Well, no, then we have to file an extension.
Speaker 2:Yeah because we just have to say I'm sorry, we cannot deal with bookkeeping issues right now. We have to extend you and do it in the summer, now. So if you're listening right now and you're thinking, oh yeah, like I know, there's a few issues in my QuickBooks and I need to get that fixed so that I can get my numbers together, do it now. Now is your sign to book that appointment or get with your bookkeeper so that you get that done now. All bookkeeping issues, number one step.
Speaker 1:And that means categorize and reconcile both.
Speaker 2:Okay, explain what categorizing is and explain what reconciling is, because most people, when they say they're doing their bookkeeping, are categorizing but they're not reconciling.
Speaker 1:Okay, so categorizing if you're in, let's say, quickbooks, you just go down the list of transactions that come in from your bank statement, or they come in from your bank auto flow and you just say, all right, that was Bucky's, that was fuel expense, this was, you know, walmart, that was supplies. You just go down the list and you categorize those into the right expense account.
Speaker 2:And you do all of them until there's none in QuickBooks and you're like, oh, I'm good to go.
Speaker 1:Right.
Speaker 2:But what's the next part of it?
Speaker 1:Then you reconcile. There is a feature in QuickBooks or any accounting software where you actually go in and you get the bank statement from your online banking and you get the ending balance for each month and you put that into QuickBooks and then QuickBooks will help you do that reconciliation. It will make sure that all of the transactions that came into QuickBooks, plus whatever the beginning bank balance was, matches what the ending bank balance is, and all that does is really make sure that every transaction actually came through, because technical glitches happen all the time and if you don't reconcile, you would never notice. If you're missing three days of data from your bank account and I promise it happens a lot but if you do a bank reconciliation, you'll know very quickly hey, something's wrong, it doesn't match, I'm probably missing some data.
Speaker 2:And sometimes duplicate transactions pull in. There's a lot of issues and QuickBooks does get disconnected more times than we would like. So if you're using QuickBooks, absolutely make sure you're reconciling. So you want to make sure you've reconciled all the way through October, right now, and then make sure you finish it up for the end of the year. But if you are using some other software, like Carson said, they should have that capability. But if you're using a spreadsheet, you can still do the same thing. What you would want to do is just make sure that the income for that month matches your deposits on your bank statements and the money and your expenses match. So you can still do those double checks. That's what reconciling does, is it makes sure that your numbers are correct. So you can still do that if you're not using QuickBooks.
Speaker 1:And it's a really good idea. So this kind of goes along with the bookkeeping. But another thing you should do early on is make sure this is step two right, yes, we're going to step two.
Speaker 2:Okay, step two. This has to be actionable steps for all the listeners. Oh, actionable, step number two.
Speaker 1:Number two Is gather up all your asset purchase documentation and either add that into your bookkeeping whether it's a spreadsheet or a software like QuickBooks or get it to your accountant so that they can do it for you. Now, a lot of people they do the day-to-day bookkeeping, but when it comes to a large purchase, like a vehicle or some heavy equipment, it's not treated the exact same way as just buying office supplies is, and so you might need a little help with that. This is a great time of the year to get that done and make sure that it's added into your bookkeeping software so that it's being accounted for properly.
Speaker 2:And for example, just because that was kind of accounting, just if you bought a car and you have that, you know two pages that shows what you bought, the date you bought it, how much it was all that stuff.
Speaker 1:Any trade-ins?
Speaker 2:Yeah, that's what we're going to need to be able to add that to your QuickBooks, for example. Or if you bought a trailer, anything like that, any large purchases over $2,500, we need to add that into your bookkeeping. So now is the time to get all that paperwork together if you don't have it nice and organized so that that is included in your books.
Speaker 1:And the reason that's so often not included is that, unlike office supplies, for example, which you spent $200 on office supplies that comes in from the bank, you categorize it in QuickBooks. It's easy. Well, usually when you go buy a car, you don't just write a check for $60,000. So there's no $60,000 transaction coming through the bank, but you still have a $60,000 expense. It's just that you financed it or you had some trade in or something like that. We want to make sure you get credit for that deduction and you're not going to, unless if you somehow adjust that into your books properly, because you're not going to see that $60,000 line item come across your bank account.
Speaker 2:Exactly, and you want to make sure that you are taking depreciation to account when you're making sure that you've paid in enough taxes and that depreciation isn't going to be on your books.
Speaker 1:So that brings us to the reason why the assets and getting your books caught up step one and two are so important is because of step three.
Speaker 2:Are you ready to feel confident with your personal finances?
Speaker 2:Have you planned your retirement savings or looked into life insurance for you and your family?
Speaker 2:We meet with clients all the time to talk about their financial goals and their personal finances, and we kept getting the same questions over and over again. For that reason, we compiled everything that we want you to know into a workbook. In the personal finance workbook, we help you focus on your short and long-term financial goals and create a plan to stick to them. We walk you through the advice that we give on budgeting, paying down debt, building up your savings for those unexpected events, calculating what you should be saving for monthly retirement based on your goals, getting life insurance to protect your family, and you get one month of email support from us and monthly financial templates to help you use and track your progress all year long. This workbook is priced at $37, which is so much cheaper than sitting down with your CPA, and it has everything we want you to know in there. If you're interested in checking it out and ready to meet your financial goals, check the show notes for the link to purchase.
Speaker 1:Step three is to get a tax projection. You can't get a tax projection unless if you've done steps one and two, or you can, but it won't be worth anything because-.
Speaker 2:We won't do one. We won't do a tax projection if your books aren't together and you don't have your assets to us.
Speaker 1:Because it won't mean anything, because the data won't be accurate. But if you have everything up through October in your bookkeeping software and you have all of your assets added in, we're going to have a really good picture of what your profit for the year should look like.
Speaker 2:And in case anyone doesn't know what is a tax projection.
Speaker 1:A tax projection is just where we take the income and expenses that you have for the year so far and we use an estimate of what your income and expenses will be for the rest of the year to kind of make a guess of what your total income and your total taxes will be for this tax year.
Speaker 2:And we'll see what you've already paid in, and then that will give us a really good estimate whether you are going to owe a lot or you did a good job of estimating, or what you need to do so that there are no surprises whenever you have to file your tax return in April.
Speaker 1:That's right. It can really save you a lot in penalties for not getting paid in on time. It can also make sure you set aside some money so you don't have that heartache of oh I spent all my money and now I still owe taxes.
Speaker 2:Yeah, I mean. A lot of times we might do a projection and we're like, okay, you're going to owe $30,000. And someone's like, oh, wow, you know I'm surprised, I didn't even realize that I had made that much money. But yeah, you're right and at the very least, that's a bad feeling. But you do have a few months to plan for that, instead of it being, you know, april 1st and us telling you that you owe thirty thousand dollars in 15 days. Yeah.
Speaker 1:Right. So that's the tax projection and that's step number three.
Speaker 2:And you can do, and should do, a tax projection with your CPA at least once a year at this time Now you could also, if you're really good at it and you've been in business a long time, you could just do a tax projection yourself and just make sure you've set aside a certain amount of percentage and whatever. I don't think a lot of people are very good at that, but some business owners can do that. Either way, you should be estimating how much in taxes you're going to owe and make sure you've either set aside that or paid in what you should pay in.
Speaker 1:Right and Taryn's right. I mean, you know you might not be able to get as accurate as us on things, but if you maybe you're not a client of ours and your CPA doesn't do this, or you don't even use a CPA or whatever it is If your business doesn't change that much from year to year, you might be able to just easily look and say all right, we made $20,000 more than last year. That's a 10% increase. This was what my tax was last year. I probably owe about 10% more and that's going to get you pretty close.
Speaker 2:Yeah, I think it's a good thing to do for small businesses like sole proprietors, who are very comfortable with what they've been paying in taxes every year and what their general profit is. So totally can be done. This is just a great time of the year that you need to look at it and make sure there's no surprises. So that was step three.
Speaker 1:Right, right, okay, now step four Steps four, five and six all kind of go along with step three, so I'm just going to list them real quick and then I'll go into more detail on each one. Step four gather up ideas for potential purchases. So these are large asset purchases that you haven't made yet but you're considering Make a plan for year-end bonuses.
Speaker 1:If you are somebody that typically does Christmas bonuses or year-end bonuses for your employees, you need to know about what that's going to be. It's going to make your tax projection much more accurate, because we usually look at the salaries of every month and that's part of our tax projection. But if in December the salaries are going to be much higher, well then your profit's going to be lower and you won't have quite as much tax. So we need to factor that in. And then number six retirement options. Whether that's contributing to your employee's retirement as a nice little bonus or whether you're a sole proprietor and you're just going to set aside money in your own retirement account. That will factor in to how much you owe in taxes and that needs to be factored into a tax projection.
Speaker 2:And all of this is basically the tax planning part of the projection. So not only will a projection tell you like this is kind of where you stand, but it is done at a time where you still have enough time left for the year to do something different. If you do want to reduce your taxes, if you're going okay, this is what we've been thinking, and you've been needing to make a purchase, this is a good time to do it. It would help lower your taxes. But basically it's a time to start thinking outside of the box Is just to save on taxes. It's silly.
Speaker 1:You know you're going to save $24, but you're going to spend a hundred to do it and just to have something that sits there and doesn't get used and depreciates probably. But if, let's say, you're thinking about buying a vehicle anyway, you need a new one. You were going to get it in January or February, but hey, the taxes are going to be higher than this year, than I was thinking they would be, and we need this new truck anyway, and there's always really good deals at the end of the year on vehicles. So I'm just going to go ahead and buy it in December and that will offset some taxes for this year. You know, that's something that you could do and a lot of times this would surprise you. But people have an idea that there's some things they want to buy, but they have no idea what the cost of these things are. So maybe, before your tax projection, gather up some ideas of, okay, this truck costs that much or that equipment costs this much, so that we can properly factor that into the tax projection.
Speaker 2:And sometimes this surprises people because they're telling us, oh, in January or February we're thinking of buying a new van for the business and this is how much it's going to be. And we're like, really, it's best that you buy it before the year, before the end of the year, and that will help you with your taxes, and that's just something that they didn't think of. So this is a good time to review all of those and, like Carson said, if you're thinking, oh, we really need a new trailer, that might be something we want to purchase, at least look into how much they would be or how much you would be spending on that item, so you can do a tax projection.
Speaker 1:The reason. I think a lot of times that people aren't aware, because some people might think that sounds surprising, that they want to buy these assets and they don't know what it is. But you know, a lot of times you have, let's say, the husband does a certain job and the wife is doing all the bookkeeping and the things like that, and then he's like, oh, we want to buy this, we want to buy that, we want to buy that, and then she's not really aware of how much those things cost. He has an idea in his head, or vice versa. This does happen a lot where the person that's operating the business and the person that's doing the financial side are not often the same person.
Speaker 2:Yeah, that happens all the time and I think if it's something you've never purchased, you have no idea. It could be $10,000 or $30,000. You have no idea. So a little research if it's something that you're already thinking of purchasing is much needed before you do your projection.
Speaker 1:And October and November are a great time to do that, because people close in December. It's really hard to get stuff. So I'm not saying you can't go buy something in December, but already knowing what you want, at least by December, is a really good idea. Or else you could end up not getting what you need until the next year and then it's too late to help you for taxes. So just going back down the list, I don't think we need a lot more detail on number five and six, the uh, the yearend bonuses and the retirement options, I think I kind of already explained how that works and why you need to have an idea of what you might do on that for tax projection purposes.
Speaker 2:And just getting organized. It's the time for year-end bonuses. Figure out what they're going to be, figure out when you're going to send them out. All of that that's just some part of your job as a business owner, and making sure that gets done should be on your list. So number six was the retirement options looking into if you're going to do that or not, what you're going to do there. Number seven is getting organized to send out W-2s and 1099s. So those aren't due until January. But there actually is a lot to do with all of that, and now is a good time to make sure that you have all your paperwork together so that you can send those out. And where we see people just kind of miss the mark on this is where they're hiring contractors and they want to go ahead and send out their 1099, but they don't have their information. So that happens a lot. If that's you you're like I hired somebody and I didn't get them to fill out the paperwork then now is the time to start tracking them down.
Speaker 1:And if you've been listening to our podcast, you know that we hope that you've already got a W-9 filled out, which is where you get the information for 1099s before anybody did any work for you. That's the best time. You have the most leverage. You're like they really want the work, they really want the job, they want to get paid. So all they have to do is fill out this paperwork and that's great. Now, if they've done the job and they're not doing any more work for you and six months later you're asking them to fill out this paperwork, they don't really have a lot of incentives to do it. Whether it's just because it's just an extra step and they're being lazy, or whether it's because they don't want it to 99 because they weren't planning to pay taxes. Whatever the reasoning is, you have so much more leverage to get that information in the beginning. But if you don't have it, then now's the time. Ask for those W-9s. Start sending emails now so that you don't get caught up and miss the deadline in January.
Speaker 2:And that happens so much. I do the majority of the 1099 filings for our clients. So they'd say here's all my contractors and, in case we didn't mention this, it's anyone you paid over $600 for in the year that did contract work for you. You have to send a 1099 out for them, and so they'll give me their list. And, lo and behold, there's multiple people that they did not get a W-9 for. So then we're stuck trying to get everybody's information in January, and we've been late on a lot of them because they didn't have it. So a little reminder to do that right now. Yeah, now's the time.
Speaker 2:All right, moving on to number eight.
Speaker 1:This one only applies to our S-corp owners, so if you're not an S-corp owner yet, then you might be soon, so this could still be important.
Speaker 2:And it's still good information to know because, I mean, I think I only learned this a couple of years ago and I was like, wow, I actually didn't know that. That's awesome, so explain what it is and we use it and I think a lot of people don't know.
Speaker 1:This is doing additional payroll or a bonus for yourself at the end of the year. This is very different from year-end bonuses for your employees and planning for that, because what happens is you have to pay in estimated payments quarterly through the year or you get penalized if you have business income. Well, if you have an S-corp, you know that you have to be on salary through your own company and so you have a W-2 with withholding. Well, any withholding you have, no matter when it's paid in, is treated as if it was paid equally throughout the year. So all that to say that doing a lot of withholding at the end of the year can help you avoid some estimated tax penalties. And the way that you might do that is you pay yourself a bonus at the end of the year of whatever amount.
Speaker 1:It could be anything. It's your company and you withhold all of it, even if you want to. You don't have to, but you can withhold the whole thing. So let's say my normal salary is I don't know $10,000 a month and in December I give myself an extra $10,000 salary or check as a bonus, and of course, there will be some payroll taxes. But after the payroll taxes are taken out, I withhold all the rest, so I actually don't get any of that money. All of the rest of that difference goes to the IRS and that's going to be like what?
Speaker 2:$9,235 or something like that I have no idea, sure.
Speaker 1:So that's extra withholding and it's treated as if it was paid equally throughout the year, unlike an estimated payment, which would be treated as if you made it in December and then you could still have some penalties and interest on that. So that's a really good time of the year to do that, to catch up on any taxes that maybe you didn't pay. But you have the money to pay now and it could really save you on penalties in the future.
Speaker 2:Yeah, it's a great way to avoid penalties and we've done it before. Where we're like, oh we really need to add an extra $5,000. And we just do it at the last paycheck of the year gets us caught up and we don't have any penalties.
Speaker 1:So just remember, it's really only worth it if you needed to increase your salary anyway, because maybe it was a little low for S-corp standards, for what somebody in your field makes. Because you will be increasing your payroll taxes by, you know, 15.3% of whatever your bonus is and the penalties that you're avoiding you know they may or may not be higher than that, so it's good to weigh those against it. At least you know. Calculate it both ways and see what is that additional payroll tax, what's the estimated tax penalties that you're saving, and it may or may not be worth it, but it's just something to consider.
Speaker 2:And this last number, nine, is basically on that same thought is making sure that you make that last quarter estimated tax payment, which is due January 15th. So that's the last one for this year, and then you'll be all set.
Speaker 1:Yeah, and there's a reason why it's the last one, because all of those other things need to be done first. You need to have a projection, or you can't know what your estimated quarterly tax payment needs to be. And you need to have all the other things done so that you can get the projection. And you need to know all the ways that you're going to save money through retirement, through buying assets, and you need to know what you're going to do with our little withholding trick. That was number eight, because you might not need to make an estimated tax payment at all. But after you do all that, if you're still going to owe, then this is the time. Pay it by January 15th, if you can, and then you're good to go.
Speaker 2:Exactly. Do all of these things and then adjust accordingly. But there is our all-encompassing list for end-of-the-year organization for business owners. It's what we will be doing and it's what we will be sharing with our clients to do, and hopefully you listen to this and you get it done quickly and you're not playing catch-up in January, hopefully so. Until next time. Thank you so much for listening to what your CPA Wants you To Know. Podcast of a tax professional.