In the Accounting Services Department at Stockman Kast Ryan + Co, we take a balance sheet approach when closing a set of books. This means each account on the balance sheet (assets/liabilities and equity) is reconciled to source documents (bank statements, amortization schedules, payroll and sales tax returns, etc.) before closing the net income for the year. We view all the transactions during the year to capture any reclassifications that may need to be reallocated to a different account as well as reconciling expenses such as payroll. 

There are many things to take into consideration when finalizing a Year End Closing.

Here are some tips for closing your books:
 

  1. Make sure all cash/bank/checking accounts are reconciled. Pay special attention to stale checks or old deposits that have not cleared the bank and investigate the problem.
  2. Reconcile your Accounts Receivable and Accounts Payable. Make sure all invoicing and bills are posted (especially if you’re on an accrual basis — income/expenses are recognized when they occur rather than when received/paid). Be sure all payments have been applied to open invoices.  
  3. Reconcile all credit card accounts and statements. Expenses charged to a credit card should be dated when charged NOT when the statement is paid. For example, if you charged expenses in December but the statement doesn’t come until January, you can still capture those expenses in the current year.
  4. Get ALL cash receipts to post. If there were payments paid from the owner that related to business, they would be applied to their “Owner Contribution” account. That would reduce their personal cash payments and increase expenses.
  5. If you have loans on your balance sheet, request a year-end report with the balance from the bank or lending institution to make sure they match. If they don’t balance each other, it is typically due to interest expenses. You can create a journal entry, posting the interest to your expense account, thus adjusting the amount of your loan amount to the actual balance on the bank records
  6. Prepare and file 1099s. Hopefully throughout the year you have collected the W9 information on all of the contractors. If you have not, they need to be finalized and postmarked to the contractor no later than January 31st.
  7. Prepare and file W2s. This may be done by your payroll service provider, but if you prepare your own payroll reports the W2s need to be finalized and postmarked to the employee by January 31st.
  8. Print out a YTD General Ledger. Go through each account and review everything in it. Make sure that each cash and loan account (checking, receivables, payables, notes, inventory and fixed assets) has backup documentation to prove that their balances are correct. Review your income and expense accounts and verify that all of the transactions are posted to the correct accounts. 

Common information we will require from you to prepare your tax return:

Generally, we will make the final year-end adjustments to the balance sheet to zero out the owners’ distributions/draws for the upcoming year as well as to record depreciation. Occasionally, we have additional tax adjustments that may also affect your books.

 

We know that closing out your books for the year can be a daunting task. But taking the time to prepare now will likely save you both time and money later. “Clean” books make the tax preparation process that much easier and efficient. If you have questions regarding any of the suggestions listed here, please let us know. 

 

 

As the end of 2016 approaches, it's time for employers to think about filing Forms W-2 and 1099. Forms W-2 are issued to employees to report compensation, withholding tax, and other items related to compensation. Forms 1099 are most commonly issued by businesses for payments in excess of $600 to vendors for services, rent, and other miscellaneous types of income. Forms 1099 do not need to be issued for purchases of inventory or other products.  
 

Filing Deadlines

 
For calendar year 2016, the due date for sending Forms W-2 and 1099 to employees and vendors remains January 31, 2017.  
 
In previous years, the due date for sending copies of these forms to the Social Security Administration (SSA) and to Internal Revenue Service (IRS) was the end of February. But for calendar year 2016, the due date for sending copies of the forms to SSA and IRS has been moved up to January 31, 2017.  
 
The IRS indicates that receiving the forms earlier will make it easier to verify income and withholding reported on individual income tax returns and to hopefully identify potentially fraudulent requests for refunds.   
 

Penalties

 
The IRS continues to impose strict penalties for late or non-filers as well as for those with incomplete or erroneous information. And it is important to note that separate penalties may apply: one for the filing and one for the payee statement. For example, if you fail to file a correct Form 1099-MISC with the IRS and  don't provide a correct Form 1099-MISC statement to the payee, you may be subject to two separate penalties.   
 
As in prior years, business owners are required to attest to having filed these forms on their business income tax returns.

Additional Notes on Forms 1099

In order to complete Form 1099, the business needs to obtain the name, address, tax entity type, and tax ID number for the vendor. If the vendor is an LLC, the business needs to know if the LLC is taxed as a single-member LLC, a partnership, or an S-corporation. Forms 1099 do not need to be issued to S-corporations or C-corporations unless the corporation is an attorney’s office.   
 
Form W-9, Request for Taxpayer Identification Number and Certification, can be used to gather this information. Ideally, the form should be completed prior to payment to the vendor. We recommend businesses have a policy that vendors must complete and return Form W-9 before the business issues payment to avoid the scenario of scrambling at year end to get information that may be difficult to gather.
 
If the vendor uses a “DBA” (doing business as), that should be indicated on the W-9 and this name also needs to be shown on the Form 1099. Forms 1099 must be filed with the name registered with the IRS tax return and EIN. You may not use a Social Security number along with a business name.
 
Once forms are received, the IRS matches the names and tax identification numbers with income tax returns. The business will receive a notice if the identification number reported on the 1099 doesn’t match IRS records. If incorrect information isn’t corrected, IRS will notify the business to withhold 25% from future payments and remit this to the IRS. This is referred to as “backup withholding” and can be a cumbersome process. 
 
Instructions and forms can be found on the IRS website at www.irs.gov.  We are happy to answer questions and can complete these forms for you or train you how prepare the forms using QuickBooks.   
 

Changes to Deadlines & Penalties at a Glance
Form Deadline
2016 Forms W-2, W-3,  and certain Forms 1096 and 1099-MISC  January 31, 2017
2016 Forms 1099-MISC, if reporting nonemployee compensation payments in box 7 January 31, 2017
Late Filing of Forms W-2, W-2G, 1098 and 1099 Penalty
2016 information returns filed less than 30 days late $50 per return with a maximum fine up to $186,000
2016 information returns filed over 30 days late, but filed before August 1, 2017 $60 per return with a maximum penalty of $532,000
2016 information returns filed after August 1 or not at all $260 per return with a maximum penalty of $500,000. 
2016 information returns not filed due to intentional disregard of the rules $530 per return with an unlimited maximum penalty!

 

As the end of 2016 approaches, it's time for employers to think about filing Forms W-2 and 1099. Forms W-2 are issued to employees to report compensation, withholding tax, and other items related to compensation. Forms 1099 are most commonly issued by businesses for payments in excess of $600 to vendors for services, rent, and other miscellaneous types of income. Forms 1099 do not need to be issued for purchases of inventory or other products.  
 

Filing Deadlines

 
For calendar year 2016, the due date for sending Forms W-2 and 1099 to employees and vendors remains January 31, 2017.  
 
In previous years, the due date for sending copies of these forms to the Social Security Administration (SSA) and to Internal Revenue Service (IRS) was the end of February. But for calendar year 2016, the due date for sending copies of the forms to SSA and IRS has been moved up to January 31, 2017.  
 
The IRS indicates that receiving the forms earlier will make it easier to verify income and withholding reported on individual income tax returns and to hopefully identify potentially fraudulent requests for refunds.   
 

Penalties

 
The IRS continues to impose strict penalties for late or non-filers as well as for those with incomplete or erroneous information. And it is important to note that separate penalties may apply: one for the filing and one for the payee statement. For example, if you fail to file a correct Form 1099-MISC with the IRS and  don't provide a correct Form 1099-MISC statement to the payee, you may be subject to two separate penalties.   
 
As in prior years, business owners are required to attest to having filed these forms on their business income tax returns.

Additional Notes on Forms 1099

In order to complete Form 1099, the business needs to obtain the name, address, tax entity type, and tax ID number for the vendor. If the vendor is an LLC, the business needs to know if the LLC is taxed as a single-member LLC, a partnership, or an S-corporation. Forms 1099 do not need to be issued to S-corporations or C-corporations unless the corporation is an attorney’s office.   
 
Form W-9, Request for Taxpayer Identification Number and Certification, can be used to gather this information. Ideally, the form should be completed prior to payment to the vendor. We recommend businesses have a policy that vendors must complete and return Form W-9 before the business issues payment to avoid the scenario of scrambling at year end to get information that may be difficult to gather.
 
If the vendor uses a “DBA” (doing business as), that should be indicated on the W-9 and this name also needs to be shown on the Form 1099. Forms 1099 must be filed with the name registered with the IRS tax return and EIN. You may not use a Social Security number along with a business name.
 
Once forms are received, the IRS matches the names and tax identification numbers with income tax returns. The business will receive a notice if the identification number reported on the 1099 doesn’t match IRS records. If incorrect information isn’t corrected, IRS will notify the business to withhold 25% from future payments and remit this to the IRS. This is referred to as “backup withholding” and can be a cumbersome process. 
 
Instructions and forms can be found on the IRS website at www.irs.gov.  We are happy to answer questions and can complete these forms for you or train you how prepare the forms using QuickBooks.   
 

Changes to Deadlines & Penalties at a Glance
Form Deadline
2016 Forms W-2, W-3,  and certain Forms 1096 and 1099-MISC  January 31, 2017
2016 Forms 1099-MISC, if reporting nonemployee compensation payments in box 7 January 31, 2017
Late Filing of Forms W-2, W-2G, 1098 and 1099 Penalty
2016 information returns filed less than 30 days late $50 per return with a maximum fine up to $186,000
2016 information returns filed over 30 days late, but filed before August 1, 2017 $60 per return with a maximum penalty of $532,000
2016 information returns filed after August 1 or not at all $260 per return with a maximum penalty of $500,000. 
2016 information returns not filed due to intentional disregard of the rules $530 per return with an unlimited maximum penalty!

 

In the Accounting Services Department at Stockman Kast Ryan + Co, we take a balance sheet approach when closing a set of books. This means each account on the balance sheet (assets/liabilities and equity) is reconciled to source documents (bank statements, amortization schedules, payroll and sales tax returns, etc.) before closing the net income for the year. We view all the transactions during the year to capture any reclassifications that may need to be reallocated to a different account as well as reconciling expenses such as payroll. 

There are many things to take into consideration when finalizing a Year End Closing.

Here is a guide to getting your books ready for us:
 

Common information we will require from you to prepare your tax return:

Generally, we will make the final year-end adjustments to the balance sheet to zero out the owners’ distributions/draws for the upcoming year as well as to record depreciation. Occasionally, we have additional tax adjustments that may also affect your books.

 

We know that closing out your books for the year can be a daunting task. But taking the time to prepare now will likely save you both time and money later. “Clean” books make the tax preparation process that much easier and efficient. If you have questions regarding any of the suggestions listed here, please let us know.