Year-End Tax Return Checklist

It is certainly that time of year again. Please be reminded that corporate returns are due March 15. If we want to file by the due date, I will need to receive your soon so that I will have an ample amount of time to file. As always, I will file for the automatic six-month extension in the event I do not get the data in time. Please be reminded that an extension to file is not an extension to pay and that both the IRS and the state expect you to pay your taxes as you earn the monies. Please be reminded there are no valid extensions after the September 15 final due date lapses. Please be sure to allow ten days for me to complete your returns after I get all of the information needed.

To process your corporate return, please forward your balance sheet and your profit and loss and copies of any W-2’s and the W-3 the corporation issued. If you have not yet done so, please be reminded that 1099’s should be issued by the end of January; your payroll service will handle this if you get them the information. Please confirm when you forward your data that you have issued all required 1099’s. Before you send the current year’s financial please be sure to always review the prior year’s balance sheet on the tax return and ensure that your internal books equals the return while being sure to make any appropriate adjustments. Be sure you close out the prior year Distributions account to zero by moving the prior year Distributions total to Retained Earnings. That way you will be assured of starting the year off with a clean set of records which will otherwise distort your current year’s operating results.

Keeping your business legal in all states where your company transacts business is essential. There are several criteria to evaluate when considering where to originally incorporate/domicile your business. All the criteria should be looked at in aggregation to consider including where your business has its core business operations, employees and physical locations.

Be sure you work with your financial adviser to determine your corporate responsibility to file an annual tax return for your retirement account even if you have a one plan participant. The returns required to be filed are IRS Form 5500 & Form 5500EZ. You are required to file IRS Form 500EZ if your year-end balance exceeds $250,000. Though there are exceptions to the need to file the return there are also substantial penalties for late filing. If your company is on a calendar year the Form will be due July 31. If your business is on fiscal year, the Form will be due the last day of the seventh month after the plan year ends.

Be sure to keep all of your documentation for your PPP (Payroll Protection Program) for at least six years.

To complete your corporate return, please forward:

  • Your year to date Balance sheet, Profit & Loss
  • Year end Bank Statements (first page showing the balance in the account is only page requested) and Bank reconciliations
  • Aged Accounts Receivable
  • Year-end Inventory if any
  • Aged Accounts Payable
  • Year to Date Payroll Records by Employee including copies of all W-2’s issued and the W-3 (please note there is no need to send any other payroll reports unless you have specific questions)
  • Notes Receivable and Payable Balances at Year end
  • Copies of new Notes Payable/Promissory notes
  • The amount of medical insurance paid for each shareholder
  • If your company is new, please forward copies of the incorporation papers, the corporate EIN and S Corporation acceptance letter from the IRS. Please be sure to advise of all states where your corporation is transacting business and to forward for the state returns the below information by state (sales, inventory, fixed assets, rent and payroll)
  • Did you pay any independent contractors over $600 this year and therefore required to issue an IRS Form 1099 to them? Did you issue the IRS Form 1099 to them?

Before you send your Year-End Financial please be sure that:

  • You ensure that all of the business expenses of your business have been reimbursed and reflected on your year to date Profit and Loss.
  • If you are using QuickBooks that you send the Standard Balance Sheet and Standard Profit and Loss.
  • Please review your internal financial statements/QuickBooks and be sure that Shareholder/Member Distributions reflect only current year Distributions and that Shareholder/Member distributions for the prior filed tax year have been closed to Retained Earnings (journal entry will be to credit Shareholder/Member Distributions and debit Retained Earnings) and that the beginning of the year retained earnings agrees either to your cash based tax return or your internal accrual statements.
  • Balances in an account called Opening Balance Equity (an account QuickBooks uses when setting up cash/checkbook balances) are zeroed out to Retained Earnings if for a prior year and to Due to Shareholder if for a current year.
  • That you have only one retained earnings account.
  • That as of January 1st of the prior year that you closed the shareholder distributions account to retained earnings.
  • That the retained earnings account on your internal books equals or is reconcilable to the retained earnings to the last corporate tax return filed.
  • The general ledger balance agrees to your checkbook and your bank reconciliation and that there are no monies in the QuickBooks Deposits on Hand account.
  • The Accounts Receivable balance agrees to your internal aging reports.
  • The Accounts Payable balance agrees to your internal aging reports.
  • Any fixed assets over $2,500 that have been acquired or disposed of during the year.
  • That ALL of the balance sheet and profit and loss accounts are correct.

This is to confirm that you are handling all of your payroll and independent contractor/1099 needs, of the need to have a business license, to pay the annual registration fee to the Secretary of State in all states you transact business, to have your annual Board of Directors and Shareholders Meeting, and to file the county property tax report by March 1st for the preceding year (please be sure to claim the Freeport Exemption on your inventory if you qualify as this can substantially reduce the amount owed).  Please note that if you have not yet set up a retirement plan or have a formal financial plan, that  I suggest that we sit down together soon to get the right plans in place to help ensure your long-term financial success!  Please be reminded that if you have a corporate 401K plan, you may/will likely need to file IRS Form 5500 for the plan.

This is to confirm that I suggest that you formally tax plan at least twice annually.

If you do not have an accounting package such as QuickBooks to recap your corporate/business data please use this form being sure to list your beginning and ending cash while ensuring that the schedule adds up, while adjusting the chart of accounts to your business needs.

Multi-State Corporate & Personal Income Taxes

You should file corporate and personal income tax returns, business registrations and licenses in all states where you conduct business, have employees and/or a physical location. This includes tax law requirements that your reflect and show your wages and withholding in the state where your/the W-2 wages were actually earned (i.e., if earned in AL, should show as AL wages and withholding), where your business actually “transacts business,” has employees or has a physical location.

To prepare multi-state returns I will need salaries by state, revenue by state  and rent by state that equal the amount of the W-2’s/W-3, total revenue  and rent respectively. Will also need the amount of fixed assets by state.

To process your personal income tax return, please forward:

  • Copies of all reported income forms, i.e. Forms W-2, 1099, brokerage statements, interest, dividends, capital gains, stock sales, normal or premature distributions from a 401K/Pension/IRA plan, disability income, K-1s from S Corporations or partnerships, Social Security etc. Copies of IRS Forms detailing 2020 Stimulus monies received.
  • Summary of all medical expenses with copies of all individual items over $2,500.
  • Summary of property taxes with copies of all individual items over $2,500.
  • Summary of Mortgage Interest with copies of all individual items and year-end receipts over $2,500.
  • Summary of cash and property contributions with copies of all individual items over $2,500.
  • Be sure to include any changes in address, dependents, filing status, or any other substantive changes from the prior year which would have impact on this year’s return.
  • Please forward student loan interest, child care expenses net of any dollars already reimbursed via a Dependent Care/Section 125 plan, and any other miscellaneous deductions/income.
  • For all your family members in college, please forward the IRS Form 1098-T from the college. Your child will need to request this form directly from the school. Be sure that your children in college do not also claim themselves if they do file a return.
  • Any dollars invested in a Georgia 529 Plan, dollars paid for Educator Expenses, or Other Tax Credits and Deductions. If you used a 529 plan, please be sure to forward me a copy of the 1099-Q you will receive directly from investment adviser or financial broker reporting current year distributions you used to pay for qualified tuition expenses.
  • Please forward any Childcare Credit Expenses if this allowed you/both spouses to work being sure to exclude any amounts that you set aside pretax out of your company Section 125 Cafeteria Plan at work.
  • If you are a new client please forward a copy of your corporate and personal prior year returns. If a personal return, make sure I have everyone in your family’s birth-date and middle initial. If a brand new corporation, please forward along a copy of your incorporation papers, Federal ID #, and your S Corporation acceptance.
  • If you have had any independent contractor/proprietorship income you have earned, whether you have received a Form 1099 or not, please use this form (PDF) (Excel) or an accounting package such as QuickBooks to recap all revenue received / reported and expenses. As an example of how a completed cash recap would look, please see a sample of ABC Company, Inc.
  • All K-1’s where you and an investment interest including an acknowledgment if you have sufficient basis to take any losses listed.
  • If you lived in multiple states during the year or had income allocated to different states please be sure to denote that information for the varying state returns and the dates moved and details on any moving expenses.
  • If you have rental property I suggest you use this link to recap your rental income and expenses while being sure to forward the two page settlement statement for any new purchases or current sales. If you are a new client please note that we will need the date you originally purchased the rental property, the original purchase price and how much was assigned to land and the accumulated depreciation recorded by property in prior years. Please only send year to date totals.
  • If you have an HSA, please be sure to forward the year end IRS Form 1099-SA indicating the payouts/distributions of the plan, what you personally contributed to the plan, and the balance in the HSA at the end of the year.
  • To learn how the Affordable HealthCare Act Affects you personally as well as your taxes see this page. Please be sure to forward IRS Form 1095-C / Health Insurance Marketplace Statement if you purchased insurance through the Affordable Care Act/The Exchange.
  • If you/your spouse renewed your drivers license during the year or after year end please forward a copy of your drivers license.

The initial due date for personal returns is April 15. For returns not filed by that date both the IRS and GA allow for a six month extension. Please be reminded that there are no valid extensions for your personal returns after the October 15 final due date lapses. Please be reminded that an extension to file is not an extension to pay and that you are required by tax law to pay applicable taxes to the IRS and Georgia as the monies are earned or you will be subject to additional penalties and interest.

Please turn in an expense report monthly to get reimbursed for mileage and any other business expenses you might have paid personally prior to year-end. IRS tax rules require you to have a day by day log to support business miles.

Both the IRS and Georgia can add three types of penalties including a penalty for not paying your taxes as you earn money during the tax year, penalties for not paying your taxes in full by April 15 (the original due date of your personal return), and a failure to file penalty if you do not file an extension or then do not file by the final due date of October 15.

After you get your return please be sure to review for both correctness and to ensure you have a good understanding of its tax implications before it is filed. After you have completed this review please be sure to sign and date the IRS and GA/State E-File Authorization forms and return them to me so I can E File the returns.

I suggest that any time during the upcoming tax year that there are substantive changes in your business operations that you call immediately so we might discuss the most prudent business and tax options and that we tax plan at least twice annually. I suggest we utilize this information so that we can adjust your federal and state withholding accordingly so that you do not also have to make estimated tax payments or be exposed to late payment penalties and interest.

After your return is filed and you want to check your refund you can do so directly on the IRS and Georgia web sites. You will need your social security number, filing status and amount of your refund.  Check the status of your IRS refund here and check on your Georgia refund here.

Tax Filing Tips to Protect Your Return, Refund and Identity

  • File your return early! If an identity thief attempts to file a return to gain your refund they will be denied if a return was previously filed. Filing early will also protect someone else from falsely using your Social Security number of you, your spouse and claiming your dependents.
  • File out and file IRS Form 8821 for all active taxpayers as this will ensure you receive copies of all IRS communications even if someone else files or communicates with the IRS using your Social Security number.
  • Spam. The IRS will never contact you via e mail seeking your personal information.
  • Respond quickly to any notices you receive as the IRS will notify you if someone has filed more than one tax return, if you have a balance for a year you did not file or records indicate wages from an unknown employer.
  • Action. If you identity is stolen contact the police department immediately and file a police report, then the IRS Identity Protection Specialized Unit being sure to fill out an identity theft affidavit. Let’s ALL work together to take a BITE out of crime!

Affordable Care Act For employers

For Employers who are considered large (50 or more Full Time Equivalents/FTE) for the calendar year workforce are required to being reporting ESR information to the IRS, using IRS Form 1094-C (employer transmittal statement) and 1095-C (employee statement). IRS Form 1094-C and 1095-C must be filed with the IRS each year no later than February 28 (if filing electronically) following the end of calendar year for which the return applies. IRS Form 1095-C must be provided to full time employees by January 31 following the end of the calendar year for which the statements apply.

Be sure you work closely with your payroll service to ensure the number of FTE’s to help determine your responsibility under the IRS’s Employer Shared Responsibility Provision commonly called ESR. Be sure you payroll company is helping you ensure ESR compliance in determining minimum essential coverage, minimum actuarial value and coverage including filing requirement of ESR Provisions. To read more IRS’s Employer Shared Responsibility Provision commonly called ESR The ESR requirement is being monitored through W-2 filing with the Social Security Administration, so it is recommended that any business filing 50+ W-2’s work with their payroll company to track FTE’s throughout the year.

Employers with over 50 FTE’s (Full Time Equivalents) are required to provide medical insurance to all employees who quality in accordance with provisions ad detailed in the Affordable Care Act.

I am looking to grow my business by adding key accounts like you with goals and aspirations just like yours.  So if you know anyone looking for a Good CPA, please let me know and to check me out at www.HISCPA.com.

Please be sure to allow two weeks to complete your returns after I receive all of the required information.