What tricks make the biggest impact during end of year tax credit processing?
End of year tax credit processing can be filled with stress and anxiety. Messing up now can mean massive fines and the difference between a thriving business and one that’s struggling to survive. Thankfully there are a handful of tricks you can use to safeguard against these risks, as well as get the most tax credits possible. Use these seven techniques when processing your end of year taxes, and breathe easy into the New Year:
1. Balance your books.
There’s no doubt you’ll be running countless reports at this time of year, but do you know how to balance them against one another? Which numbers need to match up? How do you go about changing things when they don’t? There are a few issues that need immediate attention before turning in your end of year information for tax process.
For instance, it’s imperative that your gross wages match year-to-date wages on your final report. Payroll tax payments should be triple-checked before they’re moved over to the new balance sheet and the profit and loss statement. The IRS will review your records closely to ensure that your numbers work out, so make sure they do—and do so in the right places.
2. Provide unemployment payments to payroll.
A common mistake business owners make is failing to consider payments into state unemployment funds in their end of year filings. However, if the reported amount is wrong, or if you’ve made a payment error, you could wind up in hot water.
3. In the same vein, don’t forget about healthcare plan costs.
Unless you’re working with a dedicated payroll service or onsite employee, benefits like healthcare plans can be forgotten on W-2s. Sending out bad W-2s is a logistics nightmare. Getting word out about the mistake, attempting to prevent people from filing with bad information and getting new forms out in a timely manner is more difficult now than ever. This is especially true for businesses that automatically give their employees access.
4. Process bonuses with the rest of payroll.
Bonuses aren’t considered free money by the IRS. They’re taxed, and you’re expected to contribute. This is true of cash payments or gift card and gift certificates. Other types of non-cash bonuses may carry tax obligations as well, though these typically need to cap a $100 value. When in doubt, double-check with a payroll or tax professional.
5. Put off payments (or pile them on).
If you’re trying to shrink your tax obligation, temporarily shrinking your earnings can help. Hold off sending out invoices until the very end of December when payments aren’t likely to start coming in until later. However, if you’re looking to write off as much as possible, paying as many of your own bills before December 31st can shrink your taxable earnings.
6. Similarly, you can streamline deductions on purchases.
While most equipment depreciation is spread out over a period of years, the cost of many items can be deducted in full during their first year of use.
7. Finally, reconsider your business structure.
If you started out as an LLC, but your business has grown, talk with a tax pro about the potential benefits of changing to a corporation. Often, you can tap into major tax savings with just a few simple changes.
End of year tax credit processing can be a tumultuous time. Without an expert to help keep things organized throughout the year, you may need until April 15th to get your affairs in order. Working with professionals can help at any stage. Additionally, hiring someone to help you in the New Year also carries big benefits.
If you’re interested in hiring a pro for help in end of year tax credit processing, get in touch with Einstein HR. Email your questions to sales@einsteinhr.com today.