WOLF & CO Insights Tax Season for Businesses: How QuickBooks Can Help You Prepare

Tax Season for Businesses: How QuickBooks Can Help You Prepare

Written by: Kimberly Phillips

Tax season for businesses is quickly approaching and having your financials in order is vital to the success of your business. Ensuring your financial data is up to date now will help you avoid challenges after year end. Accurate financials not only keep you informed on your profits and losses, but they are also essential for reporting to the IRS. QuickBooks Online can help you and your accountant finalize the books for this year and begin preparation for the new one.

Here are QuickBooks tips to help you through the end-of-year process as tax season for businesses approaches.

Review Customer Account Balances

To kick off tax season preparation, it is good practice to check your customer account balances. Reviewing account balances will help to verify all transactions are up to date and recorded accurately. You’ll want to ensure that the customer is receiving invoices and that outstanding balances are correct. To find outstanding balances, you or your accountant can pull the accounts receivable aging summary and the accounts receivable aging detail reports. After you confirm the reports are correct, proceed with sending reminders to your customers.

Review Vendor Account Balances

Look over your vendor account balances so that you can pay any outstanding bills. If the vendor owes you credits, discounts, or products and services, you should address this as well. To find these balances, you or your accountant can pull the accounts payable aging summary and the accounts payable aging detail reports. Once you validate that the reports are accurate, identify any outstanding bills you need to pay before the end of the year and make payments.

Independent Contractors

As you continue tax season preparation, review your hiring data from the past year. Did you hire any independent contractors or subcontractors to whom you paid more than $600? If the answer is yes, confirm that you have a completed Form W-9 on file for each contractor. You will need their information to send out their required 1099 Forms by January 31 of the following year.

Clear Out Any Undeposited Funds

It’s important to ensure all pending bank deposits are cleared from your deposit list and the undeposited funds account is up to date. Any pending payments will not be included in your current year’s income.

Reconcile Accounts

In an ideal world, you should reconcile your accounts every month to validate all transactions are recorded correctly in QuickBooks Online. If you have not done this, reconcile all your accounts (banks, credit cards, petty cash, etc.) to the latest month end. Proactively reconciling accounts will support tax season preparation so that you can have confidence that your end-of-year data is complete.

Verify Asset and Debt Balances

Ensure you have all current information for assets and outstanding loans. This will ensure complete data for your accountant to create and/or update any depreciation and amortization schedules. It’s a good idea to review capital assets in your office, such as furniture, equipment, computers, etc. Note anything that is broken or needs repair so that you can plan for that next year. If you lease equipment like copiers, review the contracts associated with the items and verify the terms still fit your situation.

Check Inventory

If you sell products, perform an inventory assessment. After the assessment, check the results against your last inventory report and make any necessary adjustments.

End-of-Year Reporting

A key QuickBooks tip is to review financial reports to understand your overall financial performance. It allows you to know how much you’ve made, identify any issues, and check for discrepancies. To review these items, you or your accountant should run both the profit and loss and balance sheet reports.

Pro tip: Print these reports by month to quickly identify variances in activity month over month.

Profit Distribution

If you have profits that need to be divided among owners or partners, your accountant should assist with this. Setting up an owner’s equity and draws account can help you track payments or withdrawals throughout the year.

Work with Your Accountant to Prepare Your Tax Returns

Your outsourced accountant can provide suggestions to streamline your year-end process and forecast your company’s financials. If your accountant doesn’t have access to your books, send them an invite to log into your QuickBooks Online account. Granting your accountant access will give them permission to review and make any necessary changes to your books on your behalf. It will also provide them with all the financial data they need to prepare and file taxes for you.

Get Your Business Tax Season Ready with QuickBooks Tips

Organizations of all sizes can benefit from these QuickBooks tips as tax season for businesses approaches. Now that you see how easy it is to prep for your taxes using QuickBooks Online, start finalizing your data and get a jump start on tax season!