Here’s a what to do before December 31st checklist to help you prepare for upcoming tax return preparation.
REINFORCING THE BASICS.
Keep in mind that the standard deduction is still increased resulting from the 2017 TCJA; therefore, you may or may not get a tax benefit.
Change of address. If you’ve moved, submit to IRS Form 8822-B, Change of Address or Responsible Party-Business. Or inform your tax preparer of the change. Form 8822-B
Count Count Count. Schedule and staff your year end periodic inventory. Timely, accurate inventory counts provide comparability between periods and enhance the decision-making process regarding purchasing and pricing levels.
Fixed Assets. Review the fixed asset detail listing for assets no longer owned. Inform your tax preparer which assets were abandoned, sold, stolen, or thrown out. This could make accounting records and tax returns more accurate and could even lower tangible taxes.
Independent contractors. Ensure you have on file properly completed Form W-9s for each independent contractor you paid $600 or more in calendar year 2019. For more information about W-9s, Ask and You Better Receive. What To Know About Form W-9.
Meals. It is crucial for 2018 and beyond to separate Meals and Entertainment. One Account “Meals” and one account “Entertainment”. If you have Travel, separate it as well. Write good descriptions and fill in the memo lines for all expenditures. If you eat at an entertainment event, separate the food and entertainment cost portions. Within meals it would be beneficial from a tax perspective to distinguish between 50% deductible and 100% deductible or from a management perspective have an account for each:
1. 50% deductible. Meals provided for employer convenience.
2. 50% deductible. Business and employee travel meals.
3. 50% deductible. Meals with clients.
4. 100% deductible. Office snacks and beverages and office parties.
Ensure these costs are separated by either deductibility or meal type, preferably meal type, BEFORE submitting to your tax preparer. If you are claiming employer convenience be sure to have a company policy and data supporting the policy. Piling your workers into the back of the pick up truck for a Burger King trip is probably NOT employer convenience.
Phone use. Properly allocate business and personal use of cell phone to include purchases of apps and hardware. Paying from your business account does not make personal use a business expense.
S-Corp shareholders. Ensure you have reasonable compensation especially if you took loans and or distributions.
If you are a greater than two-percent shareholder: Any health, disability, or accident insurance premiums paid by the S-Corp on your behalf must be reported as taxable wages to you, subject to federal and state income tax withholdings.
If you have not been including in your paychecks the premiums paid throughout the calendar year 2019, be sure to add the whole amount to one of these last 2019 payroll checks.
Also, as a reminder – if you paid any of the premiums yourself, the corporation must reimburse you by December 31st, 2019.
Change of address. If you’ve moved, submit to IRS Form 8822, Change of Address. Or inform your tax preparer of the change. Form 8822
Donations. If you plan on itemizing, make your donation. Obtain written or digital receipts that include date and donee organization acknowledgement for amounts $250 and more. You’d be surprised how many Goodwill and Salvation Army receipts are missing this required information. If you received something in return, that something must be deducted from the amount contributed. Special rules apply to vehicles, inventory, and investments.
ITINs. ITINS expiring December 31st should be renewed before federal tax returns are filed: ITINs not used on a federal return in the last three years and ALL ITINs issued prior to 2013 with the middle numbers of 83, 84, 85, 86, and 87. How Do I Renew my ITIN?
Manage expectations. If you claim the Earned Income Tax or Additional Child Tax Credit, don’t expect a refund before mid-February 2020 and more than likely not until the end of the month. This is the 2015’s PATH Act attempt to reduce fraud.
Required Minimum Distributions. Taxpayers who are 70 and a 1/2 and over can still take a required minimum distribution from traditional IRA, SIMPLE IRA, SEP IRA, or retirement plan accounts. Taxpayers who reached 70 and a 1/2 in 2019 can wait until April 1, 2020, to receive their first required minimum distribution. If you do not take any distributions, or not enough distributions, you might have to pay a (punishment) 50% excise tax on the amount not distributed as required.
Salary deferrals. Maximize employee elective deferral to 401K: $19,000 in 2019 and $19,500 for 2020. Maximize employee elective deferral to SIMPLE 401K: $13,000 in 2019 and $13,500 in 2020.
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Our blog is intended for educational and awareness purposes. The general information provided about taxes, accounting, and business-related topics is by no means intended to provide or constitute professional advice. Reading our blog does not create a Client/CPA relationship between you and us. The blog, including all contents posted by the author(s) as well as comments posted by visitors, should not be used as a substitute for professional advice or as a substitute for communicating with a competent, human professional.
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