Are you a business owner feeling overwhelmed by the thought of tax day 2023? If so, you’re definitely not alone! Preparing your financials and filing your taxes can be a daunting task, especially if you’re not sure what you need to do to get everything in order.
But don’t worry – we’ve got you covered. In this blog post, we’ll walk you through everything you need to know to properly prepare for tax day. From verifying the accuracy of your balance sheet to issuing W2s and 1099s, we’ve got all the key areas covered.
By following this checklist, you can feel confident that you’ve done everything you need to do to get your financials in order and file your taxes on time. Let’s get started!
Your 2023 Tax Day Checklist
- Tie Out The Balance Sheet: Verify every number on your balance sheet for accuracy by gathering statements that correspond to each line item. For example, check that your checking account balance matches your bank statement, and adjust for any checks that haven’t cleared. If you have employees, make sure all payroll taxes have been paid and the amounts reported in your books match the statements.
- S-Corps and Benefits: If you are an S-Corp and the company pays for your benefits such as medical, dental, or life insurance, these benefits are considered taxable income and must be added to your W2 federal wage base. At the end of the year, we recommend doing a W2 941 check to ensure that what is reported on the quarterly 941 returns matches what is reported on the W-3 annual summary. If there is a discrepancy, you’ll need to figure out why, and correct it before filing your W3 or you may receive a letter from the Social Security Administration or other agencies.
- Cash vs. Accrual: Many businesses file on a cash basis, but QuickBooks defaults to accrual statements. It’s important to make sure you are using the correct method for your business. On a cash basis, Accounts Receivable and Accounts Payable account balances should be zero. Make sure to record any customer payments or overpayments accurately, as these must be reported as income in the year the cash was received.
- Credit Card Statements: Make sure the balance under your liabilities is accurate, and ensure that all transactions are recorded with the correct dates (not the date of payment, but the date of the transaction).
- Loans and Other Debt: Many banks won’t send a year-end statement showing the principal balance at the end of the year. Be sure to ask for this statement and that any interest paid throughout the year is recorded as an expense.
- Relationships Between Entities: If there is a movement of money between two entities, make sure that the balances between them are correct and that any money owed or paid is recorded accurately. The dollar amount on each entity’s balance sheet should be exactly the same – just that one is an asset and one is a liability.
- Accounts Without Statements: If you have owner distribution/loan/investment accounts, make sure these are accurate and align with your expectations for the year. Also review any activity in your fixed assets from January 1st to December 31st, as anything less than $2,500 is not considered a fixed asset and should be an expense.
- Income Statement: Once you have completed the balance sheet, review your income statement in detail, making sure that each account is reported in the correct expense category. Some expenses may not be fully deductible, so it’s important to ensure all expenses are captured in the correctly named expense account.
- S-Corps and Home Offices: If you are an S-Corp with a home office, make sure you have an accountable plan in place that allows you to deduct home expenses as business expenses. This plan falls under the Treas. Reg. Section 1.62-2 tax code. You’ll need proper documentation to do this including a corporate resolution. If you use a personal vehicle for business activities, the mileage can be a business expense as long as you keep appropriate records for the expense such as a mileage log.
- W2s, 1099s: Make sure you issue W2s and 1099s by January 31st and file your tax return by the deadline.
- Last Year’s Numbers: Once everything is completed and verified, it’s a good idea to review the prior year’s financial statements and compare them to your tax returns as filed with the IRS. If you are an S-Corp or Partnership, your returns should include a Schedule L that you can use to verify that the amounts filed on the returns still match your financial statement numbers. If you find any errors, they can be corrected in the current year.
- State Nexus: If you have employees working in a state that is different from the company’s legal address, you may be subject to state nexus – which means you may need to file a tax return in another state based on the income earned by the employee in that state. What’s required is different in each state. Here’s a link that explains what each state requires.
Preparing your business for tax day 2023 doesn’t have to be stressful. By following this checklist and taking care of the key areas outlined above, you can feel confident that you’ve done everything you need to ensure that the financials used to file your taxes are accurate.
And if you want to learn more about how to properly manage your finances and keep your business running smoothly, be sure to check out our other blog posts for more information! From tips on budgeting and financial planning to advice on managing employees and growing your business, we’ve got you covered. Call us at (303) 679- 6332 and learn more at Gemsbok Consulting.
So don’t wait – start exploring our blog today and get the knowledge and resources you need to succeed!