T H E U LT I M AT E G U I D E :GETTING YOUR BUSINESS READY FOR END OF YEAR

2014 EDITION

TA B L E O F CO N T E N T S

Introduction

The Quick Checklist

Getting Your Employees Ready

The Checklist for Getting Your Employees Ready

Getting Your Accounting Ready

The Checklist for Getting Your Accounting Ready

Getting Your Taxes Ready

The Checklist for Getting Your Taxes Ready

How ZenPayroll Can Help

1

2

3

5

6

8

9

11

12

INTRODUCTION

The end of year can be a very stressful

time for you and your business. That’s

why we wanted to help take some of the

anxiety out by providing you a helpful

guide on how to get your business ready

for the end of year.

We’ve broken this guide into three

pertinent sections for your business:

employees, accounting, and taxes.

Each section includes detailed to-dos,

best practices, and common areas of

concern. We also provide a printable

checklist in each section so you can

quickly stay on top of things.

At ZenPayroll, we try to make payroll

easy and delightful. We believe many

of the anxieties for your company’s end

of year preparation stems from legacy

processes and confusing information.

With this guide, we hope to help small

business owners like you navigate the

ins and outs of getting your business

ready for end of year.

1

GETTING YOUR EMPLOYEES READY

VERIFY EMPLOYEE DATA

Verify employee name

Verify employee address

Verify employee Social Security number

File W-2

VERIFY EMPLOYEE BENEFIT INFORMATION

Confirm retirement plan eligibility

Confirm health benefits (and imputed wages)

Confirm fringe benefits

Review sick time

Review vacation time

Review deferred compensation

VERIFY CONTRACTOR INFORMATION

Verify contractor name

Verify contractor address

Verify contractor identification number

File 1099

END OF YEAR EXTRAS

Grant year-end bonuses (if any)

Appreciate your team!

GETTING YOUR ACCOUNTING READY

PROFIT & LOSS REVIEW

Categorize your expenses

Look for anomalies

Review P&L again after adjustments

COLLECT W-9S

Collect W-9s from vendors and contractors

Issue 1099s for contractors (ZenPayroll will do this

for you) who you’ve spent $600 or more for services

GATHER AND ORGANIZE YOUR RECEIPTS

Gather receipts

Organize receipts by category

Copy down your thermal receipts

RECONCILE YOUR BANK ACCTS AND CREDIT CARDS

Check end-of year bank and credit statements match

your financial statements.

Match your accounting software ledger balance with

your accounts

ACCOUNTS RECEIVABLES AND INVOICES

Collect outstanding invoices before year-end

Check your Days Sales Outstanding to see if there

areas of concern

TAKE PHYSICAL INVENTORY

Match physical inventory with balance sheet

Appraise current value of inventory

GETTING YOUR TAXES READY

HOME OFFICE DEDUCTION

Check to see if you qualify

Calculate your deduction

VEHICLE AND MILEAGE DEDUCTION

Calculate your deduction at $0.56 per mile

Deduct additional costs like parking fees and tolls

TRAVEL EXPENSES

Collect your travel information including plane fare,

lodgings, meals, taxis, fees, tips

THE QUICK CHECKLIST

2

GETTING YOUR EMPLOYEES READYThe end of year is an important

time for every company, especially

for your employees. As a business

owner or employer, there are a

multitude of things you have to get

done to make sure your employees

are ready and compliant for the end

of year. That’s why we put together

this checklist to help you get your

employees ready for end of year.

1

3

1. VERIFY EMPLOYEE DATA

It’s important to review employee data for the end of

the year, particularly with employee names, addresses,

and Social Security numbers. Improperly filing this could

lead to penalties for each mis-filed W-2. Check with your

employee to make sure his or her employee information

is correct.

If you’re still not certain about your employee’s Social

Security number or just want to get it verified, the IRS

provides employers with the Social Security Number

Verification Service (SSNVS) to minimize employee

name and SSN mismatches.

You can access all this information on your ZenPayroll

dashboard for employers and employees. ZenPayroll will

automatically calculate and electronically file your W-2s,

but you can access it anytime. The deadline to furnish the

W-2 is on February 2.

Don’t forget you have to verify employee data for both

active and terminated employees.

2. VERIFY EMPLOYEE BENEFITS

We often set and forget employee benefits. But the end

of the year is an important time to verify your employee

benefit information for your employees.

For most retirement benefit information, like your 401(k),

you’ll want to give advanced notice of benefits, like

enrollment features and withdrawal provisions to your

employees. If your company matches, your employees

may want to fully fund their plan by the year-end. The

limit is $17,500 per employee and the catch-up for

employees over 50 is $5,500. For more information on

retirement plans for small businesses, check out the

IRS’s page on 401(k) for small businesses.

For health benefits, you’ll want to confirm your employees

have selected and contributed to their respective health

care plans. For employees on a Flexible Spending Account

(FSA), make sure your employees have spent the money

in their FSA before the end of the year (or the grace

period), or else they’ll lose any money in their FSA.

If your plan has a $500 carryover option, let your emp-

loyee know.

If you’ve offered fringe benefits to employees, you’ll

want to make sure you’ve withheld taxes for any taxable

benefits your employees have received throughout the

year. This includes fringe benefits such as: personal use of

company car, employer provided parking, and employer

provided cell phones.

Some of these fringe benefits may be considered imputed

wages. An imputed wage is additional income typically

associated with a service. A popular form of imputed

wages that requires an end of year adjustment is group

term taxable life insurance coverage over $50,000.

For more information on taxable fringe benefits, check out

IRS Publication 15-B.

For more benefit related content, check out SHRM’s Year-

End Checklist for Retirement and Health Plan Sponsors.

Finally, be sure to confirm all sick and vacation time spent

by your employees. If your employee has sick pay, you’ll

want to make sure it’s been withheld properly. Generally,

sick pay is withheld like normal wages and you have to

withhold taxes for employee and employer social security,

Medicare, and Federal Unemployment Tax Act (FUTA).

There are some exceptions so check the IRS for the full

list. For some companies that have a rollover, you’ll want

to count what dates are available for next year.

Deferred compensation can also be tricky. Your emp-

loyee’s wages may be taxed this year if it does not meet

the requirements of Section 409A. Check the IRS site

for more information.

3. VERIFY CONTRACTOR INFO

You’ll want to make sure all your contractor information

is in one place. Like with employees, you’ll want to verify

your contractor’s name, address, and identification num-

ber. The ID number can be a contractor’s SSN, ITIN, ATIN,

or EIN. For information on how to fill out the 1099-MISC,

check out the IRS page.

As with your W-2s, ZenPayroll will electronically file all

1099-MISCs for you and send them to your contractors.

You’ll have them available at all times on your dashboard

as well.

If you’re switching payroll providers to ZenPayroll and

you run payroll before the end of the year, we can manage

your current year’s contractor 1099s. Of course, be careful

you don’t double file your 1099s with another provider.

4. END OF YEAR EXTRAS

There are always a few loose strings at the end of the year

you’ll want to watch out for. In particular, the end of year

is a popular time to give bonuses.

With ZenPayroll, we recommend giving bonuses through-

out the year with our spot bonus feature. But if you plan

on giving them out at the end of year, be sure the bonus

has its taxes withheld.

Finally, there’s no better time than the end of year to

appreciate your team. Of course we’d hope you’re doing

this throughout the year too, but now is the time to plan

a company holiday party or white elephant gift exchange.

4

DIFFERENT BONUS TYPES!

Don’t just make it about money! Try giving

something that your employee can find

useful. For example, at ZenPayroll, on your

second year anniversary, you receive a

great laptop backpack.

Give gifts for their friends & family. Send

your employee monthly flowers or a gift

certificate for two at a nice restaurant and

help bring the good cheer to their home.

Let them give back to the community.

With ZenPayroll Giving, you can give dir-

ectly to your favorite charity right in app!

Give them a new experience! Your emp-

loyees may love a free wine-tasting class

or trip abroad. At ZenPayroll, we give a

free ticket to anywhere in the world on an

employee’s one-year anniversary.

Give praise. One of the most neglected

but effective ways to show your gratitude

is praising your employees in front of their

peers. It is a great motivator and can really

bring a lot of satifaction.

CHECKLIST 1 : GETTING YOUR EMPLOYEES READY FOR END OF YEAR

1. Verify Employee Data

Verify employee name

Verify employee address

Verify employee Social Security #

File W-2

2. Verify Employee Benefit Info

Confirm retirement plan eligibility

Confirm health benefits

Confirm fringe benefits

Review sick time

Review vacation time

Review deferred compensation

3. Verify Contractor Info

Verify contractor name

Verify contractor address

Verify contractor identification number

File 1099

4. End of Year Extras

Grant year-end bonuses (if any)

Appreciate your team!

5

GETTING YOUR ACCOUNTING READYOne thing that is important to do

at the end of the year is to close

your books. That’s why we put

together a check-list of the most

common accounting to-dos for the

year-end. Whether you work with

a CPA, bookkeeper, or just DIY,

this checklist should help get your

accounting ready for end of year.

2

6

1. PROFIT & LOSS REVIEW

The first thing you should do before and after this

checklist is review your profit and loss statement.

It’s a good reminder to see how you’re spending your

money but also if your expenses are categorized.

Fortunately, if you use an online accounting provider

like Xero or Freshbook, they can sync directly with

your bank account or credit card statement and help

you categorize your expenses.

Return to your P&L again after you reconcile your

bank accounts, receipts, and other potential concerns.

2. COLLECT W-9S

Did you use vendors this year? If so, you’ll have to

collect W-9 forms for each of them. The W-9 form

can be used as a paper trail for the IRS to track your

expenses. It’s also a way for the government to keep

track of vendors and their income.

For every vendor you’ve spent $600 or more for ser-

vices, you’re required by law to issue and complete

a 1099 form. The 1099 must be filled out by January

31 and sent to the IRS by February 28 (or March 31)

if you file electronically. Fortunately, your accounting

software solution will likely have a line item for all

1099 vendors and contractors. In addition, ZenPayroll

will file the contractor 1099s on your behalf.

3. GATHER AND ORGANIZE YOUR RECEIPTS

It’s important to gather and organize your receipts.

A shoebox of receipts is the last thing your CPA wants

to see. An easy way to organize your receipts is to use

a software solution, which syncs with your credit card

or bank account. That should help you account and

categorize many of your expenses, which helps you

reconcile your paper receipts. Be sure to copy down

your thermal receipts because they have a tendency

to fade too.

4. RECONCILE YOUR BANK ACCOUNTS AND CREDIT CARDS

The end of year is important to make sure what you

have in your financial statements match up with

your bank and credit card accounts and your year-

end statements. If you are using online accounting

software, it’s important your ledger balance matches

as well.

5. CHECK PAYROLL

A payroll provider like ZenPayroll should have with-

held taxes for your employees throughout the year.

However, there are a few common areas to watch

out if you’re worried about end of year accounting.

We’ve covered this the prior section but they include

withholding taxes for fringe benefits, deferred comp-

ensation, and end of year bonuses.

6. ACCOUNTS RECEIVABLES AND INVOICES

There’s a tendency to forget to collect on your in-

voices if you don’t use invoicing software. Without

a good collection system, you may have checks “lost

in the mail.” Read our piece on How to Master Small

Business Accounting in One Week to learn more about

invoice collection throughout the year. For end of

year, manage your Days Sales Outstanding and follow-

up with your invoices more than a few weeks out.

Of course, collecting on your accounts receivable

is good practice year-round.

7. TAKE PHYSICAL INVENTORY

For some of you, there’s no need to take physical

inventory. For others, getting an accurate account

of your inventory is important. You’ll want to match

it with your end of year balance sheet. It’ll also be

helpful for your bookkeeper, especially to know how

much you’ve spent on inventory throughout the year

and its current value. To determine the value, you can

use the gross profit method or the retail method.

As always, refer to your tax specialist, accountant,

or bookkeeper for counsel. All information listed

here is for the 2014 tax year.

7

CHECKLIST 2: GETTING YOUR ACCOUNTING READY FOR END OF YEAR

1. Profit & Loss Review

Categorize your expenses

Look for anomalies

Review P&L again after adjustments

2. Collect W-9s

Collect W-9s from vendors and contractors

Issue 1099s for vendors (ZenPayroll will do

this for you) who you’ve spent $600 or more

for services

3. Gather and Organize Your

Receipts

Gather receipts

Organize receipts by category

Copy down your thermal receipts

4. Reconcile your bank accounts

and credit cards

Check your year end bank and credit statements

match with your financial statements.

Match your accounting software ledger balance

with your accounts

5. Check Payroll

See checklist on Employees

6. Accounts Receivables and Invoices

Collect outstanding invoices before the year-end

Check your Days Sales Outstanding to see if

there are areas of concern

7. Take Physical Inventory

Match physical inventory with your balance sheet

Appraise current value of inventory

ALMOST ACCOUNTANTS!

Mick Jagger: The frontman of the

Rolling Stones attended the prest-

igious London School of Economics

on scholarship. He studied accounting

and finance but after reuniting with

his childhood friend, Keith Richards,

decided being the biggest rock star

in the world was a better career move.

Chuck Liddell: The former Light Heavy-

weight champion of the UFC may have

as easily gone from MMA to CPA.

Chuck graduated from California Poly-

technic University with a Bachelor of

Arts Degree in Business/Accounting

in 1995.

Cris Carter: The Hall-of-Fame wideout

is known for catching touchdowns.

In an alternate universe, Cris could’ve

been catching accounting mistakes.

In an interview with the StarTribune,

he said: “I always loved math in high

school and I thought that I would be an

accountant. But I also thought I would

be better at counting money in the NFL.”

8

GETTING YOUR TAXES READYDoing your own corporate taxes can

be challenging. There are a number

of deductions and rules you’ll want

to consider so you can minimize

your tax burden. Don’t wait until

April to get your company taxes

in order. We selected a few of the

most common areas of concern

for small business owners and put

them in this helpful checklist.

3

9

1. GO OVER YOUR BOOKS

There’s no better time to go over your books to check

your P&L statement for any red flags, particularly if

you work with a bookkeeper or accountant. While

you can always make adjustments in the future, take

time at the end of year while some of the context is

still fresh. See the prior section for more accounting

concerns.

2. GATHER AND ORGANIZE YOUR RECEIPTS

As we mentioned previously, expense reporting can

be a real challenge in April if you’re opening a shoebox

of receipts. The IRS may audit your filing for up to

six years, so it’s recommended you keep a record of

your receipts for at least that long. Most accounting

software providers can even help you categorize

your expenses automatically. See here for some rec-

ommended vendors ZenPayroll integrates with.

3. HOME OFFICE DEDUCTION

One of the most popular deductions for small

business owners (and yet not taken) is the home

office deduction. The IRS provides two methods

for calculating your home office deduction, simp-

lified and regular. Since most entrepreneurs will

use the simplified option, we’ll cover that here.

First, you’ll have to qualify for the deduction. If you

meet the two main criteria 1) Regular and Exclusive

Use and 2) Principal Place of Your Business, then

your business is eligible. Check the IRS site for more

information.

The simplified option uses a standard $5 per square

foot (rather than actual expenses determined by

records) to determine the deduction. To calculate

your deduction, you simply multiply the portion of

your home dedicated to home office use (capped at

300 square feet) by $5 to get your deduction, which

is capped at $1,500 (300 x $5).

Check the IRS site for updated information.

4. VEHICLE AND MILEAGE DEDUCTION

For some small business owners, operating a vehicle

is part of their daily work. The IRS allows you to deduct

your mileage based on two methods, actual cost or

standard mileage rate.

The actual cost method requires you to keep detailed

records of your business-related expenses, which is

prohibitively difficult for many of us. If you choose to

take the standard mileage method, the standard rate

is 56 cents per mile for business miles driven in 2014.

In addition to mileage, you may deduct additional

costs like parking fees and tolls. See here for more

information on transportation related deductions.

5. PAYROLL TAXES

The end of year is a great time to gross up any fringe

benefits for tax withholding purposes if they were not

filed throughout the year. Fortunately, ZenPayroll can

help you do this within our service. Check out our earlier

section on how to get your employees ready for the

end of year for more information.

6. TRAVEL EXPENSES

Do you travel frequently for work? If so, you may be

eligible to deduct the cost of the trip, including plane

fare, lodging, meals and incidental expenses such as

taxis, fees and tips. For more information on travel

expense deductions, check out the IRS site.

There are even more tax savings you may be

eligible for. Check out the IRS site for more

information on credits and deductions and

Publication 463, information on Travel, Entert-

ainment, Gift, and Car Expenses.

10

CHECKLIST 3: GETTING YOUR TAXES READY FOR END OF YEAR

1. Go Over Your Books

See checklist on Accounting

2. Gather & Organize Receipts

See checklist on Accounting

3. Home Office Deduction

Check to see if you qualify

Calculate your deduction

4. Vehicle & Mileage Deducation

Calculate your deducation at $0.56 per mile

Deduct additional costs like parking fees

5. Payroll Taxes

See checklist on Employees

6. Travel Expenses

Collect your travel information including

plane fare, lodgings, meals, taxis, etc.

SOME FUN TAX FACTS!

Aruba has the highest income tax in the

world with up to 58.95%.

In 1660, England placed a tax on fire-

places. People covered their fireplaces

with bricks to conceal them and avoid

paying the tax.

In 1705, Russian Emperor Peter the Great

placed a tax on beards, hoping to force

men to adopt the clean-shaven look that

was common in Western Europe.

New York City places a special tax on

prepared foods, so sliced bagels are

taxed once as food and again as prepared

food, thus creating a sliced bagel tax.

Pennsylvania has a tax on coin-operated

vacuum machines at gas stations.

“The hardest thing in the world to

understand is the income tax.”

—Albert Einstein

11

HOWZENPAYROLLCAN HELPThe end of year can be stressful. With ZenPayroll,

running payroll doesn’t have to be. We make sure

your end of year payroll is easy. That’s why we

calculate, pay, and file your payroll tax filings for

you. We built our software with small business

owners in mind, because we know you’re already

busy growing your business.

For more information on how ZenPayroll can help

you, check out the following resources:

ZenPayroll Blog: This is our ongoing corporate blog

that covers the latest small business best practices,

updated multiple times a week.

ZenPayroll Resources: Here are some of resources

to help businesses like yours with funding, prod-

uctivity, compliance, accounting, and more.

ZenPayroll Customers: See what other ZenPayroll

customers are doing to grow their business.

JOIN ZENPAYROLL TODAYAND GET YOUR FIRST TWO MONTHS FREE

“ZenPayroll has been a lifesaver. I don’t have to

worry anymore and all my back office loads are

fixed with a push of a button — that’s special.”

—Tristan Walker, Bevel

12

www.zenpayroll.com • (800) 936-0383

13