New Year Checklist for Business OwnersBondBeebe
Posting by Joel Susco, CPA
The beginning of the year is the perfect time to step back and get a 360-degree view of your company. Taking the time to plan ahead and think strategically will help you set the foundation for success in 2014. There are a number of essential tasks this time of year that can’t be overlooked – like preparing for your 2013 tax obligations – and quite a few strategic decisions and efforts you should consider undertaking, even if your schedule is already packed.
As you make your New Year to-do list, here are several tasks to make sure you tackle this month:
Send Forms 1099 and W-2. Per IRS regulations, you need to send out Forms W-2 and 1099 by 1/31.
Form 1099-MISC: If you have paid a person or vendor (in most cases other than a corporation) over $600 in a calendar year, you must file IRS Form 1099-MISC and indicate the amount paid, generally under Box 7: Nonemployee Compensation. You must furnish these forms by 1/31.
Unfortunately, while there are guidelines to help you determine whether or not you should classify someone as an employee or an independent contractor, there are no absolutes. The IRS is increasing scrutiny around this issue, so make sure you can use the guidelines to back up your classification.
W-2 Forms: You must provide a W-2 by 1/31 to any employee you paid within the previous tax year to report wages, income tax withholdings, FICA tax withholding, and other items. When filing, don’t forget to include taxable fringe benefits, which is any compensation you provide in addition to regular taxable wages. Examples include a corporate car, meals and lodging, club memberships, service or property discounts, cash awards, and moving expenses. Full details regarding taxable fringe benefits can be found in IRS Publication 15-B (PDF).
Organize Your Documents. You’ll need your receipts to substantiate your exemptions when you file your taxes. Start that process now in order to ensure a timely delivery of all necessary documents to your accountant. You can save yourself significant fees and headaches by having your documents in order.
It’s also important to organize your documents in case you are audited. The IRS can audit income tax returns up to 3 years from the due date of your tax return (including extensions) or 3 years after the date the return was actually filed, whichever is later. (That period is extended to six years if you understate income by more than 25% of gross income shown on your return.) Proper recordkeeping will make sure you are prepared for an audit, and will most likely make for a smoother process should you be audited.
Assess Your Vendors. Review your vendor costs and evaluate your level of satisfaction with your suppliers. The New Year is a great time to start a new vendor relationship and explore different options.
When performing this assessment, there are a couple of approaches to take. You will obviously want to look for cost savings and research different vendors or solutions that may be able to provide the necessary products or services for a lower cost without a decrease in the quality of the products or services. However, if you are growing and expanding, you may need to explore bringing on more or different vendors to help you manage increasing complexity. Your company may have more complicated tax filings than you did a few years ago, or you may be encountering more human resource compliance issues as your staff grows. A vendor assessment should take both cost and changing company needs into account.
Develop Your Goals. While you should be assessing your financial status on a regular basis, now is a great time to do a thorough review of your company’s growth and current financial situation in order to set goals for the upcoming year.
Some important financial goals can include increasing your profitability and margins, maintaining positive cash flow, raising additional capital or reducing overall debt. Look at your goals in other areas – do you want to expand staff, start a new product line, or open another location? Getting a 360-degree view of your strategy and your financial situation together will help you plan effectively for the upcoming year and set reasonable goals and timelines for achievement.
Yes, the year has only just begun, but Q1 will be over before we know it. Set aside some time to address these financial and strategic issues to build a firm foundation for your company’s success in the upcoming year.