The year is finally winding down, but there are still some actions you should take to tie up loose ends, finish all legal requirements, and of course, get your business set for the coming new year. Some are obvious, such as reviewing your business plan to assess your successes and failures for 2021 and sitting down with your CPA or other tax adviser to do year-end tax planning. But that’s not all.
Consider the following things to do now before the end of the year:
1. Hold a Board Meeting
If you are a corporation—C or S—state law requires you to hold an annual board meeting. This is so even if you are the only shareholder. Obviously, in this case, it’s easy to hold the meeting. But check state law on notice requirements and be sure to document the actions at the meeting. This may include, for example, setting your own compensation for the coming year or adopting various employee benefits plans for your staff.
2. Renew Licenses & Permits
Many permits and licenses you use in your business run annually and require you to renew them. For example, tax return preparers are required to obtain a new Preparer Tax Identification Number (PTIN) from the IRS if they plan to prepare returns in 2022. Renewal dates may have occurred earlier in the year; be sure you didn’t overlook them. Get your licenses and permits in order now for the coming year.
If you work in your business, as the owner you may be allowed under state law to file for an exemption from workers’ compensation. This may be required on an annual or bi-annual basis. Again, check with your state for this option and when you need to file for it if desired.
3. Complete Changes to Benefits Plans
If you have employee benefits plans for your staff, be sure that any required amendments have been made. Tax law changes during the pandemic allowed plans to operate under new rules but still require certain terms to be amended (many by Dec. 31, 2021). Check your:
- Qualified retirement plans. If you permitted Covid-19-related distributions and loans, you likely have to amend your plan. The IRS has a list of required amendments. These extend beyond Covid-19-related changes.
- Dependent care and health FSAs if you permitted mid-year election changes and unlimited carryovers of unused employee contributions. The IRS has guidance on amending these FSAs.
4. Schedule a Physical Inventory Count
There’s been much discussion of late about inventory due to supply-chain issues. Despite problems and concerns, every business with inventory needs to do a physical count. Typically, this is done at the end of the year so you know what’s on hand and can report things accurately for tax purposes. Even if you’re busy during the holiday season, a count can be taken after Dec. 25 during off hours.
Doing a physical count can also alert you to:
- Problems with “shrinkage.” Shrinkage means having less items on hand than you expected. Shrinkage may be the result of employee theft, shoplifting or just bad recordkeeping. Identify the cause or causes of your shrinkage and take steps so it will be minimized in the future.
- Restocking needs. You’ll likely have a better idea of what customers liked or didn’t like so you know what to reorder.
5. Take Advantage of Expiring Tax Breaks
There are a number of business-related federal tax laws due to expire on Dec. 31. Some or all of the could be extended, but you never know. You may want to take advantage of them while you can. Some expiring provisions include:
- Tax credit for constructing new energy efficient homes
- Indian employment tax credit (this is the name of the credit as it appears in the Internal Revenue Code)
- Enhanced deduction for donations of food inventory
- Various energy-related tax credits
Also check for state law changes that may warrant action before the end of the year.
It will be 2022 before you know it. Wind up the affairs of 2021 so you can start the year off right.
As Roman philosopher Seneca The Younger said: “Every new beginning comes from some other beginning’s end.”
Barbara Weltman is the founder of Big Ideas for Small Business, Inc., which publishes Idea of the Day. She is the author of J.K. Lasser’s Small Business Taxes 2022 and other books that inform the small business community of tax, financial, and legal information they should know about.