Year-End Accounting Checklist for Small Business Owners: Accounting, Taxes, Payroll & 1099s

As we wrap up the year, it is good to take the time to reflect on the year that just passed.  It is also a good time to prepare for the new year coming.  Preparing ahead will help you reduce stress, prevent last-minute headaches with your accountant, and may even save you money.  For a small business working on its own or with an accountant, here are some tips to help you prepare for year-end and address the business's financial and compliance tasks. Although every business is different, not all items below may apply to every company.

1. Financial planning for the new year

   • Review the financial budgets and forecasts compared with actuals for the year, and analyze any variances to better understand what happened during the year

   • If you haven't already prepared a budget or forecast for the new year, now is the time to do so

   • It is also a good time to review the business's product/service pricing to see if it may need to be increased

     
     

2. Catching up and reviewing the accounting

   • On the accounting side, it is good to catch up on the year-to-date before the year ends to prepare for when January comes; the month-end close for January can be as smooth as possible.  To avoid any delays for the timely filing of Forms 1099s or the income tax returns. 

   • By catching up through year-to-date, you may need to

     • Prepare any year-end accruals,

     • Perform inventory counts,

     • Review intercompany transactions,

     • Review accounts receivable and accounts payable balances,

     • Review and reconcile all other balance sheet accounts, and

     • Resolve any outstanding accounting issues

       
       

3. Checking for contractor form 1099 reporting

   • On the vendors and accounts payable side, it is essential to review any contractors paid for the year to see if you may be required to send them a Form 1099 for the year, unless they meet the IRS exceptions.  Form 1099s are IRS-required forms that must be sent to the recipient by January 31, unless they meet IRS exceptions

   • When reviewing any vendors paid for the year, check whether you collected a Form W-9 from the contractor.  This will give you their name, address, and tax ID, which you will need to fill out the Form 1099

   • For any other contractors you already have W-9s for, it is good to confirm whether the addresses have stayed the same

     
     

4. Preparing payroll for year-end

   • On the payroll side, it is essential to do the following:

     • Double-check for any new local, state, and federal labor laws that are changing if they apply to your company

     • Double-check whether your local and state minimum wage rules are changing for the new year to ensure your employees are paid at or above the minimum wage

     • Confirm your employee addresses so that the Form W-2s are sent to the correct addresses.  Form W-2s must be sent to the recipient by January 31

     • Update your State Unemployment Insurance tax rates for the new year, if there are any changes, to make sure you are paying the correct tax amounts

       
       

5. Revising estimated income taxes

   • Work with your tax preparer to review the corporate and/or personal estimated income taxes to make sure you are paying enough for the year.  4th quarter corporate estimated income taxes are typically due on December 15, and personal estimated income taxes are due on January 15. Although this may not apply to every entity type, but it is good to double-check with your tax preparer on this

In summary, year-end doesn't have to be painful if you take the time to plan and prepare.  By taking the proactive steps above, you and your accountant can ensure that the business runs smoothly and files everything correctly and on time.