Hi there,

Embrace the Final Stretch of 2023 with Insight: Dive into our Top 3 Financial Insights to Power Up Your Business as We Gear Up for 2024! Let's make these last months count with savvy strategies and smart planning.

1) Tricky Way to Avoid Underpayment Penalties.

This one goes out to S-Corp owners.

We all know the IRS likes their hot little hands on your money during the year, and thus if you’re not paying in a certain amount of tax during the year (110% of the prior year tax liability or 90% of your current tax liability) they will charge you an underpayment penalty.

Because of this, they want individuals, especially business owners, to pay in quarterly estimated taxes during the year. If you’re not paying your estimates evenly, (meaning you pay it all in for Q4 and none in the other quarters), you’ll still get hit with an underpayment penalty.

One fact that the IRS doesn’t care if you know, is that W-2 withholdings are counted as being paid in “all year”, even if they’re not evenly distributed in paychecks throughout the year.

That means, you can run one big pay-check at the end of the year, withhold the necessary taxes to the federal and state governments, and avoid any type of underpayment penalty, even though you did not pay in throughout the year.

2) What Makes Good Bookkeeping?

If your books are a mess and you swear you’ll do better in 2024, it’s important to understand what exactly makes your books (accounting records) “good”.

I’ve developed a framework of three fundamentals of good bookkeeping, and each fundamental builds on the one prior, so you need ALL THREE in order to have good books.

1. Timeliness: The first pillar of good bookkeeping is maintaining up-to-date records. Are all your financial transactions accurately recorded in your books? Depending on the frequency of your financial activities, you should aim to update your books at least once a month. If you’re in a situation where cash is type, you will need to review at least weekly.

2. Accuracy: Once you've ensured that all transactions are in your records, the next step is to verify their accuracy. Are they classified correctly in their respective categories? In this phase, you scrutinize the accounts to ensure that each transaction is allocated to the correct account. Additionally, PLEASE reconcile your bank accounts to make sure that every transaction reported by your bank aligns with what's in your books.

3. Utility: Simply having data in your books isn't enough; it must also be useful. Do your books offer a structured framework for making informed strategic decisions? To enhance the utility of your financial records, consider two primary tactics:

   • Implement a well-structured chart of accounts, which simplifies book review and key performance indicator (KPI) analysis.

   • Employ project tracking, especially if your income is tied to distinct projects. This can reveal the true profitability of each project, helping you make more informed business decisions. Often, tracking projects can lead to surprising discoveries about which projects are genuinely profitable.

All these elements work together to establish a foundation of good bookkeeping, setting the stage for higher-level financial services provided by accountants, such as forecasting and tax strategy. Effective bookkeeping is the cornerstone of sound financial management, making it a crucial starting point for any business.

3)  Get Your Solo 401(k) Created!

If you’re a sole-proprietor, a single-member LLC or a corporation with no employees except your spouse and don’t currently have a retirement plan - a 401(k) is something you might want to consider setting up before year-end.

The reason you want to set it up before year-end is because that will allow you to fund it in 2024 before you file your taxes on 4/15/24, for the 2023 tax year. But it needs to be established by year-end in order for you to do that.

Hope you all have a wonderful week and see you next week!

Your Accountable Advisor