Below is an article published by CPA Practice Advisor regarding year-end services to talk about with your CPA.
This is the time of year that lists are made (and checked twice). It’s also a great time for CPAs and clients to consult. Here’s a year-end checklist for critical end-of-year tasks to get your clients in top shape for 2019.
1—Review overall performance and objectives
Now is a great time to step back from the day to day operations of your business and look at setting some objectives for the future. Your CPA should be able to advise you beyond just helping with taxes to help you set and achieve some of these objectives.
Start by drawing insights from your performance over the past year. Map out your business goals for the next 12 months and then discuss long-term plans for the next three to five years. Talk to your CPA about these goals and they should be able to provide insights and advice related to any challenges that might restrict your ability in achieving these goals, such as a need to improve cash flow, profitability or change spending habits.
The Tax Cuts and Jobs Act (TCJA), passed in December 2017, made tax law changes that will affect every business and individual in 2018 and the years ahead. As a business owner you need to be aware of tax rate changes for pass-through entities, changes to the cash accounting method for some, limits on certain deductions and more. Two changes affecting the end of this year include Section 179 expensing changes and the new 100%, first-year bonus depreciation.
- Section 179 refers to the amount a taxpayer may elect to expense in the year the property is placed in service. The new law increased the maximum deduction from $500,000 to $1 million. It also increased the phase-out threshold from $2 million to $2.5 million.
- The 100% depreciation deduction applies to depreciable business assets with a recovery period of 20 years or less and certain other property. Machinery, equipment, computers, appliances and furniture generally qualify.
Talk to your CPA about these changes and ensure you are maximizing the tax benefits available to your business.
3—Closing an inactive business
If you are closing a business or closed a business this year, make sure you understand the proper procedures to legally shut down a business, otherwise you could be personally responsible for filing annual reports, filing state/federal tax returns, and maintaining miscellaneous business licenses and other filings for a business that no longer exists.
If you have been operating as a corporation, LLC, or partnership, all members need to vote on closing the business and the final vote should be recorded in the meeting minutes. If shares are involved, two-thirds of the voting shares must also vote on the dissolution. For a corporation where no shares were issued, the Board of Directors must approve to dissolve the company (similar rules apply to LLCs).
Next, the business needs to file an Articles of Dissolution form with the Secretary of State’s office and close the business’s federal and state tax accounts by notifying the IRS and closing the Employer Identification Number (EIN). Finally, the company needs to pay off any debts and contact the county where the business is located to cancel the business license, seller’s permit and any other permits.
If you plan to incorporate in the new year, most states offer the option of “delayed filing,” which allows business owners to set the date when they want their company to be officially recognized. Delayed filing is extremely beneficial for businesses changing their entity type and an effective date of January 1 means your client doesn’t have to file two separate tax filings with the different entity types. In addition, you can avoid paying state franchise taxes for the year the registration forms were submitted. When you can submit a delayed filing varies from state to state.
In addition to making sure you are in compliance with your financial document and tax sales tax regulations, corporations should be aware they may have several other filings to take care of before the end of the year. Some annual filings to note are:
- Annual Report: an update on officers, shareholders, and business direction.
- Articles of Amendment: changes to your company name, your address, or your share distribution.
- Articles of Conversion: if your client as changed business structure (from a corporation to an LLC or another switch)
- Trademark renewals
- Business license updates
Be sure to connect with your CPA who should be able to assist in getting through the end of 2018 and start off the new year on the right foot.
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