
DISCLAIMER: This article is for informational purposes only and is not tax or legal advice, nor can be relied upon as such. The author is not liable for any losses related to actions or failure to act related to the content of this article. If you need specific tax advice consult with a CPA who specializes in your subject matter and taxing jurisdiction.
Here we are at December again. Each year it seems like this month comes way sooner than I’m ready for. Although December is often filled with the busyness of holiday parties and gatherings; it is also the time to put in the effort of wrapping up your business for the year. I’ve made the process easy this year with my 8 Year-End Action Steps for your small business. And as a bonus I’ve included a printable checklist with all the action steps available for download.
Action Step #1: Record Estimated Federal & State Payments
If you have been making tax payments on a quarterly basis to the IRS and/or your state tax department then make sure you have a record prepared of your payments. Your log should indicate following:
Date of the payment
Amount of the payment
Check number
If you didn’t keep a record of these payments during the year then now is the time to get out the check register and search for these payments. Alternatively you can also log into your bank account and search for the transactions that way.
Typically the first 3 quarterly estimated payments are paid April 15th, June 15th, and September 15th. You can use these dates as a guideline when looking for your payments. If you make your payments on the EFTPS system, go ahead and log in to your account and print off a record of your tax payments for the year.
If you have not made any payments for the year and you suspect that you owe taxes or you know you owe taxes then it’s not too late to make a payment. You can actually make your 4th quarter payment for 2021 all the way up to January 15, 2022.
It’s also wise to visit with your CPA before the end of year to get their take on your potential tax balance due for the year.

Action Step #2: Log your Odometer Reading on December 31st
Business owners who use their vehicle for business purposes will be required to provide a log of their business mileage.
The log needs the following:
Date of Travel
Location traveled to
Purpose of the travel
Total miles traveled round-trip.
If you keep a paper log in your vehicle make a copy of this for your tax preparer. Or if you use a mileage app access the reports in your app to print off a log for this tax year.
One of my favorite mileage apps to use for business owners is MileIQ.
I love MileIQ because it captures all your drives automatically. This allows you to go back later when you have time to classify each trip as business or personal.
In addition to tracking the mileage of your business trips you also need to track the total mileage used by your vehicle for the year, regardless if the trips are for business or personal. This is done by taking an annual odometer reading. So before you head out for that New Year’s Eve party go ahead and write down the ending odometer reading from your vehicle. Enter the reading right on your mileage log for easier record keeping.
Action Step #3: Count Inventory after last sale of the year
(Note: This step can be skipped for service-based businesses)

If your small business sells products you are going to need to take a year-end inventory count. The reason we take a year-end inventory count is because the number is used as a part of the Cost of Goods Sold calculation on your tax return. Inventory still in on hand at year-end is actually not a deduction on your tax return until it is sold.
The inventory count does not need to happen on December 31st. You can complete this count as soon as you know you have completed your last sale for the year.
When doing your count make sure to have an inventory tracker sheet available. The tracker sheet should contain the following:
Item Number (if applicable)
Item description
Purchase price per unit
Quantity on hand
Action Step #4: Review for 1099 Vendors paid over $600

The IRS requires taxpayers to file a 1099-NEC for anyone who they paid over $600 to during the year, not including corporations. 1099s do not need to be filed for merchandise you purchased for resale. Often times the 1099 is going to be filed to private vendors that were hired to do work for your business.
Private vendors include such people as the sole proprietor hired to design your website; or a handyman hired to put a safety railing on your deck for your daycare. They could also include a bookkeeper paid to do payroll processing for your business.
Utilize your accounting software to assist you with this step. If you use QuickBooks go ahead and print the report “Expenses by Vendor Summary”. You can use this report to look for vendors over $600.
You will need to obtain a Form W-9 for each 1099 vendor that you will be filing for. The Form W-9 is a simple form you provide to the vendor which indicates their tax identification number, business name, and address.
I recommend as soon as you hire someone you get a copy of the W-9 from them before you issue payment for their services. Now if you didn’t do that, it’s not too late to go ahead and contact these vendors before the end of the year to obtain a W9. Click the link below to access IRS Form W9.
If you are going to be filing 1099s you will want to make sure that you have paper forms on hand in January for preparing these documents. You can order printable 1099s forms on Amazon, at your local office supply store, or through your accounting software. Your accounting software oftentimes can also prepare and efile the 1099s for you.
Action Step #5: Review Employee Records for Current Addresses
(Note: This step can be skipped for businesses without employees)
This step is done to verify correct addresses are on record at year-end for your employees. When employees are hired they fill out Form W-4 in addition to the I9. Double check with all your employees before the holidays that their address listed on their W-4 is still correct. If not, make any corrections in your system so that you are ready to print W-2s after the New Year.

Now is also the time to place the order for your W-2 and W-3 forms if you will be preparing these yourself. Again you can get these on Amazon, at your local office store, or through your accounting software provider. Depending on your accounting software these forms may also be available for automatic preparation and efile.
Action Step #6: Gather Receipts of Depreciable Property
Large purchases made during the year for equipment used in your business are eligible for a depreciation deduction on your tax return. Documentation will be required at time in order to take the deduction. If possible try to locate the actual receipt of the item purchased.

The receipt should indicate the date purchased, the purchase price, and the item purchased. It is also important to note if the item is used or new.
If you are unsure if an item should be depreciated begin by pulling receipts for equipment purchases over $500. Purchases of equipment that is to be used in the business for multiple years should be considered for depreciation.
Action Step #7: Consider making any purchases before year-end
It’s not late to reduce your tax liability for the year. If your profit appears higher than anticipated this year consider making a needed purchase before year-end to reduce income.

I never like to encourage business owners to make a large purchase at year-end just to save a minimal amount on taxes. However if you know your business is going to need an equipment upgrade or a new vehicle soon, then now may be the time to make the purchase. In fact anything that you anticipated purchasing in the next 18 months is suitable to be moved into this year to optimize your taxes. Don’t just come up with something to purchase at year-end to reduce taxes. Make sure the purchase is needed and planned for.
If you are looking for additional ways to reduce your tax liability beyond business purchases consider contributing to your retirement account. Contributions for the 2021 tax year can be made all the way up to April 15, 2022
Action Step #8: Make a plan for Next Year
You made to Step 8! You are prepared to end your business year. But before you go out and celebrate take this opportunity to review through the action steps you just completed. Make note of those things that didn't go as planned this year.
For example maybe you couldn’t take a mileage deduction this year because you failed to document it. This is one area you need to make a plan for next year. Go ahead and download a mileage app. If apps aren’t you for you then purchase a small notebook and place it in your vehicle so you can begin tracking your mileage.
You may have noted that when you went to count your inventory you spent more time organizing it then you did counting it. You inventory items were all mixed up. Possibly, you had cases with items missing or wrong items in the wrong cases. Whatever the mix-up was go ahead and remedy it now. Find a better way to organize your inventory. Consider purchasing shelving for your inventory and then labeling spots for each item. Whatever it takes, make a plan to get it organized.
Perhaps you were only at Action Step #1 and you realized you forgot to make estimated tax payments all year long! Then make it point for this not to happen in 2022. Set reminders 10 days before the tax estimate due dates in your calendar so that you remember to get those payments out. Remember the due dates are 4/15, 6/15, 9/15, and 1/15.
As you can see, utilizing the Year-End Action Steps as a tool for planning for your next year can be extremely beneficial for your business.
If you need an easier way to remember all the actions steps, I’ve made available below a printable checklist that you can download.
The whole month of December is ahead of you to complete these action steps. Don’t delay and get these steps taken care of. Not only will it make preparing your taxes easier, but it will assist you in putting processes in place that can make your business more efficient.
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