Accrual based businesses typically need to make some adjustments before closing their books at year-end. Different businesses make different decisions regarding exactly what to accrue, but whenever an expense is incurred in one year for which the benefit won't be received until the next year, or revenue is received in one year for products or services that won't be delivered until the next year, then it is worth considing whether or not to make an accrual adjustment.
Businesses and individuals that pay an independent contractor $600 or more are required to provide that independent contractor with a FORM 1099-MISC reporting the income paid. They are not, however, required to provide a FORM 1099-MISC when they pay the independent contractor less than $600. Because of this, many independent contractors falsely assume that this income is not reportable.
Remember to write off your bad debt at year end as a means of reducing your taxable income. I recommend going through all open invoices annually in January to see if there are any you don't expect to be paid on. Simply run an Accounts Receivable Aging Detail report (in QuickBooks, select Customers & Receivables from the Reports menu, and then select A/R Aging Detail) and look at all old invoices.
The following list of January tax dates is intended to be useful for accountants, bookkeepers and small business owners:
Year-end is a busy time from a payroll perspective. Following is a list of payroll-related things to remember to do:
Occasional parties for the purpose of employee welfare are fully deductible to the business. They are not subject to the 50% limit on meals and entertainment. In addition, they are considered to be de minimis fringe benefits and, therefore, are nontaxable to employees. Therefore, have an office holiday party in December, an office golf outing in the summer, or an office cocktail party to celebrate spring. Better yet, have all three. The odds are that if you can justify the expense as being good for the business, then you can probably justify the deduction as well.
When setting up independent contractors in QuickBooks, set them up as vendors, not as employees. This is an important distinction. If you aren't certain whether the individual is an employee or independent contractor (and hence a vendor), see my prior blog titled "Independent Contractor or Employee?".
Many companies give small gifts to their employees at Christmas time. Gifts such as fruit baskets, entertainment tickets, and other small items are generally considered de minimis fringe benefits and are nontaxable. Cash gifts, on the other hand, are considered wages and are subject to all taxes and withholdings. In addition, gift certificates are treated as cash. Therefore, if you want to give your employees turkeys at Christmas time, give them the actual turkeys (or a certificate to pick up a turkey). Do not give them a $15 gift certificate to the grocery store.
The following list of December tax dates is intended to be useful for accountants, bookkeepers and small business owners:
The IRS announced the 2009 standard mileage rates today. The rate for business miles driven is down slightly from the second half of 2008, but still considerably higher than the first half of 2008 and prior years. Effective July 1, 2008, the standard mileage rates are as follows: