Amy Langfelder

CPA | CK Principal

As a business owner, the first quarter of each year can be a blur. You work to finalize the prior year’s operating results and complete tax reporting in a timely manner so you can focus on the current year’s operations. As changes occur in tax legislation, this becomes increasingly difficult as different information is being requested from the outside accounting firm and more time is needed to comply. You feel the impact of staff shortages in your company, and you hear murmurs of this occurring at your accounting firm too. Before you know it, you are having a conversation about tax extensions. Which only means more uncertainty in the weeks ahead as you continue to wind down operating results from the prior year and continue to stay afloat in the current year. If this sounds familiar to you, read on. We will offer some considerations to make year-end more manageable and simultaneously allow you to have control of your financial reporting all year long.

Implementing the following tips throughout 2024 will help streamline your financial reporting, plan for tax obligations and bring a sense of “certainty” in uncertain times.

• Keep track of tax-significant items in a separate chart of accounts in your accounting software to minimize additional account analysis and reclassifications at year-end. A few accounts to consider:
  • Meals (employee reimbursed and company paid such as sales promotions)
  • Meals billed to customers (associated with travel billed to customers and recognized in income)
  • Entertainment
  • Small equipment purchases (individual purchases less than $2,500)
  • Officer compensation or guaranteed payments (separate from salaries and wages)
  • Salary and wages (separate from 1099 contractor payments)
• Maintain sales by state report in your accounting software. This is generally available in most accounting packages or can be easily tracked by adding a custom field. This report should be reviewed with your accountant during the year to determine whether you may have tax obligations outside of your home state. 
• Develop a capitalization policy for new purchases of property, plant and equipment (asset accounts). This policy will allow you to directly expense new purchases up to the threshold you select. Once you select the threshold, you need to monitor the postings in your chart of accounts, meaning you would only post items above the threshold into your property, plant and equipment accounts. We recommend you use the IRS safe harbor amounts in selecting your capitalization policy which would be $2,500 for unaudited financial statements.
• Attach key agreements, bank statements and invoices to the transactions if using QuickBooks Online. This feature will allow you, as well as your accountant, to quicky review the supporting documentation without having to pull documentation from other electronic or hard copy means. Please keep in mind if the documentation is confidential, you will need to decide who has access to the accounting software to determine whether that information should be attached and uploaded into the software.
• Consider a recurring accounting engagement (monthly, quarterly or semiannually) with your accountant. The purpose of this engagement is to review your accounting transactions, key reconciliations and provide a cursory computation for tax obligations. You can consider earmarking funds for tax obligations throughout the year so there are no surprises at the time of tax filing.
• Develop and document a monthly closing procedure and time schedule and then follow it.
  

As we embark on the second quarter of 2024, we have plenty of time to make some tweaks so that the year-end scramble is more manageable and will allow you to be confident as you approach 2025. Contact Cray Kaiser at 630-953-4900 to help you understand how you can implement some of these tips today.