Year-end is almost here, which means there are several action items you can complete today to ensure a head start on closing out your 2021 business financials.
Start with a quick review of your staff’s personnel files. Make sure each employee’s address, phone number, and emergency contacts are up to date. Send a message to employees reminding them to update their W4 to ensure they have the proper withholding to avoid penalties. Also, employees who participate in a flexible spending account should check their account for remaining fund balances and turn in receipts for reimbursement through the plan.
For terminated employees, verify group insurance carriers have removed benefits. Review each employee’s payroll deductions against the current premium invoice(s) to confirm deductions are correct. Make sure employees have a beneficiary on file for their employer’s life insurance plan. For S-Corporations, health insurance premiums paid for 2% or more business shareholders must be recorded as income and reported on Form 941 and the shareholder’s Form W2.
Review the current census report and account balances to determine if any terminated participants qualify for a small balance force out (if your plan allows). Ensure you have provided termination dates to your third-party administrator on participants who no longer work for the company. Determine if there are forfeited funds to apply to future employer contributions.
Verify your employees’ 401K participant elective deferrals for the year will not exceed the IRC 402(g) 2021 limit of $19,500 – $26,000 for participants aged 50 or older. Verify participants have received their employer match contribution. Too often, a participant who elects to contribute to a ROTH 401K account (post-tax) does not receive their employer match. Typically this indicates improper set up of a payroll system to include ROTH post-tax employee deferrals in the match contribution calculation.
If the plan allows for participant loans, verify repayment of all loans according to your plan’s loan policy and the participant’s promissory note. Ensure plan participants receive all applicable notices, such as safe harbor, Qualified Default Investment Alternative (QDIA), participant fee disclosure, and automatic enrollment program. Review all 401K plan amendments and execute needed implementations in early 2022.
Frequently, improper recording of PPP Loan proceeds is the cause of PPP loan inquires made by clients. PPP Loan proceeds should be recorded as a long-term liability. Once forgiven, post a journal entry to move the loan amount to an “other income” account, using the date the loan was forgiven. If two loans are received, set up a separate long-term liability account for tracking. Copies of loan documents, forgiveness applications, and forgiveness letters should be saved in your permanent files.
In 2020, the IRS created 1099-NEC to report nonemployee compensation for services performed by an independent contractor. QuickBooks contains a 1099 Wizard that allows businesses to develop the 1099-NEC and 1099-Misc forms within the software. With proper setup, this process can save a company time and money.
Review 1099 vendor files to ensure they contain correct names, addresses, EIN, or SSNs and feature their 1099 vendor status. Review your general ledger to ensure vendors were assigned to each expense and are in the correct account.
If you use QuickBooks to process 1099s, ensure the 1099 Wizard is turned on and updated. Login in as Admin, switch to single-user mode, and complete these steps:
Follow the same process to create your 1099-MISC forms.
With all the new Intuit security updates, some clients experience the need for the Admin to enter their Intuit account information for verification before initiating the Wizard. It is not uncommon for companies to not have this information. Employees come and go, and with them often goes the Admin rights if they set up the Intuit account with their employee email. Changing the Admin role can be a tedious task, but one that must occur. It requires a phone call with Intuit and a possible conversation with the owner of the company.
W-2, 1099-NEC, and 1099-MISC forms are hard to find toward the end of January, so ensure you have the proper forms.
Preparing now helps ensure closing your year-end books runs smoothly! As always, ATKG is here to assist you in preparing for year-end with insightful guidance for the prosperity of your business and family. However, if you have questions or need clarification on any topics discussed, don’t hesitate to contact your ATKG advisor.
Dina Petrutsas is a CPA and the Director of ATKG’s Client Advisory Services. She brings a wealth of expertise, having owned a public accounting practice specializing in financial accounting and taxation. Her industry expertise is predominant in the healthcare industry. Dina served as Chief Financial Officer for San Antonio Surgical Arts. She went on to own Concordis Practice Management, serving as its Managing Partner.
Please don’t hesitate to contact Dina at firstname.lastname@example.org or 210.733.6611.
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