The year is almost ending. It is never too early to prepare the catch-up bookkeeping for the closing process for all income and expenses accumulated from previous accounting period by the end of the year. 

Small business owners in the construction industry, to include HVAC, wear multiple hats from being the technical expert in their field to purchaser of supplies for ongoing projects for their company.  As the season is slowing down, they will need to close their books at year end to properly file their income tax returns. Closing the books properly ensures that your bookkeeping system is in good order.  

One of the most important uses of your financial records is to help you comply with federal and state tax laws and prepare accurate tax returns. In the construction industry, it is very common to hire independent contractors through required expertise to help on various projects such as remodeling a home or installing a HVAC unit for a single-family unit.  

Whether you employ a bookkeeper, hire an external bookkeeper, or do it yourself bookkeeping, at the end of the year, you will need to sort your final documents and properly prepare 1099 forms. The 1099-NEC, a nonemployee compensation, specifically reports any amount to $600 or more made to non-employee parties, such as vendors, freelancers, and independent contractors.  

It may take days or weeks for you to collect, find, and sort through your financial transactions and obtain the recipient information. Generally, your business will need to provide this to the recipients and file it to the IRS by January 31st, 2022 to avoid penalties. 

For payroll, on the other hand, you will need to submit a W2 forms, wage and tax statement, to Social Security Administration and employees by January 31st, 2022. For employment taxes, this is done by filing quarterly for the state and federal through next day, monthly, or quarterly deposits.   

Secondly, all your business transactions for the year, such as sales, supplies, telephone expenses, independent contractor, permits, taxes, and others, must be compile directly from your business banking statements and cash disbursements. These transactions are categorized into a general ledger, then a profit & loss statement and balance sheet if needed.  

Thus, it is best practice to keep all your business transactions in your business banking and strictly keep away from your personal banking. If accidently merge or mix, it can take even longer for you to correct mistakes if you hear back from the IRS.  

As your business continues to grow, it is always recommended to hire a bookkeeper internally or externally depending on your budget and structure preference as a business owner. They’ll be able to answer any questions you have, organize your financial records, and ensure your tax paperwork is in good standing and ready to go come tax season. The benefits of someone with a professional bookkeeping experience will help you give a neutral view of your business’s financial health.  

Lastly, it can allow business owners, operators, and general contractors to focus on their core business aspect and customer care while knowing that a professional is behind the scenes and taking care of their books.