Thursday , 22 June 2017
As we approach the end of the calendar year, here are five things to remember before you overdose on eggnog and Christmas cookies!

Eggnog, Christmas Cookies, and 5 Year End Tax Reminders

Letter T

Letter T | bY:Marjji

5 Year End Tax Reminders From: JJMFinance

As we approach the end of the calendar year, here are five things to remember before you overdose on eggnog and Christmas cookies!

1.        Update your bookkeeping—If you have ignored your bookkeeping administrative tasks for months, it is time to start getting your sales, expenses, and profit numbers in order for tax time.  If you don’t have a bookkeeping system for your business yet, it is time to find one that you are comfortable with and start using it.  Good bookkeeping leads to clean and properly filed tax returns—without good bookkeeping, it is almost impossible to file taxes correctly.

2.       Consider an ‘expense surge’—Depending on your tax situation, some small business owners can benefit from purchasing certain items before the end of the year to count as an expense and reduce your taxable income for the year.  However, don’t use this as an excuse to buy things you don’t need!  This is often a good strategy if you plan to purchase a major expense within the first three months of the year—just fast forward the expense.  If you plan on implementing this, you must know where your taxable position currently lies to make sure it makes sense.

3.       Don’t forget about your “self”—First time small business owners often forget that they are required to pay self-employment tax.  Don’t let this significant tax sneak up on you when you file your taxes.  Prepare for it now.  Surprises are just about the last thing you want when filing your taxes.  Knowledge and preparation eliminate dreadful surprises!

4.       Line up your legal ducks—The end of a year is a natural time to make sure your business is legal.  Have you looked into your business ID, a local sales tax ID, paying state sales taxes, a federal tax identification number, and all the other legal ducks that are swimming around your business’ pond?  I suggest not putting this off as a New Year’s resolution—try to get legit this tax year.

5.       Substantiate now to rest later—Substantiation is a fancy accounting way to say, “proof that a transaction took place”.  Gather your receipts for the year and make sure you have proof that all your sales took place.  Telling the truth to the IRS requires more than you just telling the truth—it requires you to prove you are telling the truth.  A garbled mess of receipts in a shoe box does not count either—you must be able to find what you are looking for and have it integrated with your bookkeeping system.

JJMFinance is a CPA who is passionate about accounting and Etsy and has helped thousands of small business owners navigate the treacherous waters of bookkeeping, taxes, and making smart financial decisions.  

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9 comments

  1. Thanks for the reminders! I have to admit to being guilty of a thing or two here…This is great advice!

  2. Just mailed the IRS a big fat check today. Boo. :-)

  3. I do a last minute expense surge every year. I usually stock up on supplies as many are also often on sale this time of year so I can get more for less. I also usually purchase a new piece of equipment that I know will help my business grow. It’s also a good time to upgrade my old computer, purchase software, order business cards, and office supplies.

    I am guilty of placing all my receipts all in a box all year until the end of the year…something I will go through and remedy this week.

  4. Definitely keep all of your receipts and double check – even with an automatic accounting program glitches happen and I have caught quite a few mistakes already with mine.
    I did not know about the self employment tax. :( I guess I better figure that one out. Thanks for the heads up!

    • OH another thing- I did not account for my trips to the post office, wig shops, and supply trips. Oops- but a friend of mine reminded me that as long as I have the receipts I will know where I went that day. Now I am going to spend some time adding that up! With the receipts I know where I went every day and I can track miles by checking mileage to each place on Google maps and adding them all together. I think that will add quite a bit to the bottom line.

  5. unless something’s changed, self-employment tax is only required if you make over a certain amount (I think it’s $400) in the year. I was a bit panicky when I first heard of it ’cause almost no one ever mentions that detail, so I wish it was mentioned in this article. on the other hand my sister got a letter from the IRS about self-employment tax last year when she was an intern. she hadn’t known about it before; I think if the IRS is aware of you and you’re not paying a tax you’re supposed to be paying they should let you know.
    I probably need to do better with sales receipts. that expense tip is a good one too, I’ll definitely think about using it but I had a big advertizing expense at the beginning of the year so I think I’ll save the other stuff for next year.

  6. Just mailed the IRS a big fat check today. Boo. :-)

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