Most small businesses worry about their financial records when it’s time to prepare their taxes and many would scrabble to find their records to present them to the tax preparer. This 2020, with everything that is affecting your business from closing your doors, to re-opening with precautions and providing only take out services, many expenses were incurred to keep both your employees and customers safe.
Let’s end 2020 differently this year! Prepare your records early to be able to claim everything you are entitled to, especially with the possible reduction of your revenues. If this holiday time is slow for you, spend some time putting your records in order, with a proper filing system. Please understand that this information may not apply to all businesses, as each is different in their own way and each year is also different from the prior year. Running a business is no small feat, just know there is assistance at every turn to make your journey a little smoother. This is our token of appreciation for all you have done for the “City of Beauty and Progress.” Let’s do this!
Review everything you spent for 2020, it will make the process easier when you meet with your tax preparer. Accounting for all your losses will become important as you are to carry forward those losses to future years. Keeping proper record will ensure that your business is prepared for IRS scrutiny. Documentation, documentation, documentation!
1. Income information (i.e. receipts, bank statements, ledger records, etc.)
2. Inventory – beginning inventory dollar amount, purchases during the year, and ending inventory dollar amount (remember to remove all items used for personal purposes), materials and supplies on December 31, 2020 or the day you close your books and;
3. Expense information – this list will be exhaustive (advertising, traveling, insurance expenses, wages, office supplies, professional fees, rent expense, repair and maintenance costs, interest expense on loans, medical expense, depreciation and other business-related expenses. Also remember to keep any Information about 2020 COVID-19 related grants, economic injury disaster loans (EIDLs), or paycheck protection program (PPP) loans. See CARES Act Tax Information for Small Businesses.
Tax Preparation Checklist for Small Business.
- Know which tax forms you’ll need to fill out.
- Meet with your bookkeeper/accountant.
- Update your mileage log.
- Gather your financial records.
- Capture all expenses you have paid for out of pocket.
- Record all personal expenses paid for from your business accounts.
- Gather any 1099s you have received.
- Make sure you have issued 1099s as appropriate.
- Pull receipts for asset purchases.
- Ensure your loan balances match your balance sheet.
If you do not have a business plan, consider it a priority for 2021 to sit down with a professional or someone that can help you put a plan together. December is the best time to reflect on what happened, what worked, and what needs to be re-assessed and get realigned to your business. This pandemic has caused many small businesses to pivot, so let’s pivot right into a business plan if you don’t have one. I wish you much success with your businesses. Our hope is that 2021 be the year of endless prosperity as you continue to serve our community.