December 31 is right around the corner. With holidays coming up, here’s a list of what you can do now, to get your books in order and reduce the rush.
Gather information to prepare 1099s
Form 1099 is a tax document used to report income not subject to withholding. Businesses are required to file 1099s for any individuals and most entities who were paid $600 or more during the year.
There are several types of 1099 forms, and each reports a different kind of income. The most common types include Form 1099 NEC for payments of service and Form 1099-MISC, for royalties, rents, and prizes.
Action Items
- reconcile your bank accounts for the year to ensure all payments are included when you issue the forms.
- Identify who needs a 1099 – any entity, other than a corporation, that was paid or expected to be paid >$600 this year. Include rent payments.
- Gather their tax information by requesting a completed form W9.
The deadline for sending and filing 1099s is January 31. If you fail to file a required 1099, you may be subject to penalties from the IRS.
Review the use of vehicles in the business
The IRS has specific rules on vehicle deductions for business use.
- You can take a business deduction on the use of your personal vehicle by using the annual mileage rate of 65.5cents per business mile
- If there is personal use of a business vehicle this needs to be added to the employees’ wages.
- Depreciation has limitations, based on the type of vehicle. The vehicle needs to be used at least 50% to be considered a business asset.
- Keep documentation: record business mileage and total mileage on all vehicles used in business. Keep a log noting beginning odometer reading, ending odometer reading, where you went and the business reason.
- Leased vehicles – When leasing the IRS requires an addback to taxable income.
Action Items
- Review the use of vehicles in your business. Verify documentation is being kept. Verify that personal use is being recorded.
- If personal use of a business vehicle, contact our office to calculate what needs to be added to the employee’s wages.
Review payroll-related information
Whether you have just one or several employees, make sure your payroll records are up to date. Final payroll reports are due January 31 of the next year.
Action Items
- Verify employee information such as addresses are up to date.
- Verify Federal withholdings taken on employee’s paychecks are greater than Wisconsin withholdings. This may require a change going forward.
- If there is personal use of a company vehicle, the personal portion needs to be added to their wages prior to the final paycheck.
- If employee’s HSA contributions are taken pretax – verify that you have a written policy to allow it. Note that for tax purposes it is best HSA contributions for S corporation owners are recorded as draws.
- If the business is taxed as an S corporation – Calculate the health insurance premiums paid this year for the owners, plus family members, and include them on their W2.
It is time to get prepared now! Take action now and enjoy the holidays.
If you need assistance in closing your books, please contact our office now. Our time will be limited during January.
Mary Guldan-Lindstrom, CPA
