2021 is moving full speed ahead, and it can be difficult to tune out the distractions.
I mean, really, really difficult.
However, sometimes the best way to move forward with confidence — in spite of what’s going on in the world around you — is to buckle down and focus on what you CAN control.
And yes, even if it means dealing with those taxes.
Let’s take a look at what you need to know heading into 2021 for smooth(ish) sailing ahead.
First, Some Housekeeping
Before we can plan for a successful future, we’ve got to tidy up the details of last year.
So pull out a sticky note and jot down the following important updates:
1. 1099-NEC is new for 2020 Filings
You’ll now use 1099-NEC to report any payments of $600 or more made to contractors in 2020.
The exceptions to this rule are any contractors who are registered as a C or S corporation. You’ll discover this information on their W-9.
The due date for your 1099-NEC is January 31, so make sure to take care of these now to stay punctual! (Since January 31 falls on the weekend this year, your forms are due the next business day.)
2. 1099-MISC Still Works for Miscellaneous Income
Whether you paid your dues in attorney fees or spent mounds of cash on monthly rent, miscellaneous income still belongs in the 1099-MISC category.
You’ll need to file by March 1 if you’re submitting your forms by paper. For electronic submissions, you’ve got until March 31.
Okay, now that we’ve got those seriously fun details out of the way, let’s move onto the next piece of housekeeping you should get on top of ASAP…
3. Review Your 2020 Books With a Professional
There’s no better way to kiss goodbye the potential for future success than to ignore your past.
So let’s not wing it, okay?
Instead, enlist the help of a professional to get the full story behind what happened in 2020, and why it happened.
Next, if you sell a physical product, make sure to do an inventory count to not only get your books in shape but prepare for the year ahead.
You should also use this time to review your Accounts Receivable, still holding out hope that you’re getting paid for that invoice from 2017? NEWSFLASH: You’re not, write it off & move on!
And check for any transactions that haven’t cleared.
I know it can be a headache to pour over the details, which is why we’re here to help! And believe me, once you dot your i’s and cross your t’s, the next step will be so much more worthwhile.
Which brings me to…
How To Prepare An A+ Budget
This is where the REAL fun begins. At least, it does for us math nerds!
Once you understand how the story of last year unfolded for your business, you will be the proud owner of a roadmap for success in 2021.
First things first, create three scenarios that could arise over the coming months…
- Your best-case scenario — where money pours in and business operates without a hitch
- Your base case scenario — the most pragmatic look at the year ahead
- Your worst-case scenario — everything that could go wrong, does (just don’t spend too much time dwelling on it)
This isn’t an exercise in mental rumination. So don’t spend sleepless nights paralyzed by analysis!
Instead, treat it as an exercise in objectivity.
If you can plan for how you’d mitigate the downfalls of your worst-case scenarios, and for how you’d optimize business to achieve your best-case scenario, you’ll already have a leg up on 2021. And you can get more info on how to prepare a budget here.
Not sure where to start? I get it. The details can be confusing, which is why there are professionals to do these things for you! Contact us today and we’ll help get those financials sorted out for a seamless year ahead.