By: Susan Johnston, PayScale.com
As the year draws to a close, you may be looking forward to holiday parties, jetting off to some warm, exotic locale, or simply enjoying a few days of R & R at home.
But before you ring in another year, you’ll need to tie up payroll, organize tax documents, and otherwise ready your small business for the coming months. That’s why we created this checklist of things to do before the end of the year.
1. Gather your paperwork.
Hopefully you’ve been keeping records for tax purposes throughout the year, but if not, now’s the time to get all your paperwork organized.
According to Julian Block, a Larchmont, N.Y.-based tax attorney and author of Tax Tips for Small Businesses, the general rule is that for tax purposes, you should hold onto supporting documents like canceled checks, credit card slips, invoices for equipment purchased, and receipts for three years.
“For your 2009 return, the filing deadline was in 2010, so the deadline for the IRS to start an audit would be April 15, 2013,” says Block. However, the IRS has six years to start an audit if you’ve under-reported your income by more than 25 percent.
2. Make an appointment with your tax professional (or use tax software).
If you have a simple Schedule C and know what your receipts are, then Block says you may be fine on your own using the same software that a tax preparer would use. But if your return is more complex and you want to consult a professional, then you have a few options, according to Block: tax attorneys, CPAs, and enrolled agents.
Block says the latter is often your most affordable option. Locate an enrolled agent in your area through the National Association of Enrolled Agents. Another way to save money? Prepare the return yourself and hire an enrolled agent to review it, rather than hiring someone to do the entire return.
3. Double-check your payroll and benefits.
According to Karen Cunningham, HR Director at AmeriFlex, a benefits administration company that works with small businesses, it’s cheaper to correct payroll issues in December than it is next year.
She says some small businesses forget to include taxable fringe benefits like third-party sick pay or a car provided for personal use. “It’s compensation, just not in the form of cash, so it should be posted to payroll,” she adds.
Now is also a good time to make sure you’ve communicated any changes to benefit plans or retirement options. “December is the time of year I go back and run a report to make sure that money really is in [employees’ 401(k) accounts],” she says.
4. Show appreciation for your employees.
Many companies do performance reviews in December or January, which Cunningham describes as “a great time to reflect back on the successes of the employees as well as the opportunities for development.”
In addition to announcing merit increases or bonuses (if you’re able to offer them), Cunningham says it’s also important to give employee recognition, a gesture that recognizes your employees as people, not just worker bees.
If your budget doesn’t allow for a holiday party, then consider hosting a potluck or letting employees leave early one afternoon for holiday shopping, she adds.
5. Assess your staffing needs for the coming year.
In looking ahead to the New Year and planning your budget, consider your business goals and whether you’ll need to recruit new hires to achieve those goals. Cunningham says staffing your business in tough economic times may require creativity.
For instance, you might bring in contractors for a short-term project or hire people with multiple skill sets. Also, consider “hiring someone at a lower level and providing them with the opportunity to grow,” adds Cunningham.
“That requires nurturing and some additional investment from the business owner, but there are a lot of eager people out there who would love to work and would love to learn new job skills or perfect an existing skill set.”