It’s the last week before the final deadline for your business return. (That’s 9/15 but because it’s on a weekend, the deadline is extended until Monday, 9/16/19)
Now is NOT the time for bookkeeping changes and last minute financials, yet, invariably it happens every year. If you’re the person who gets really busy with the day-to-day running of your business, doing the essential things that keep the doors open, please consider hiring an outside bookkeeper.
But of course, it’s the last week and it is what it is at this point. In this past week, we got the QuickBooks files for a client. It was a business return that needed to show the Balance Sheet as part of the return. This the financial statement that has the assets, liabilities and equity. It shows ending balances as of the last year (12/31/17) and the ending balances this year (12/31/18). The equity portion needs to be reconciled so that it shows the ending balance at 12/31/17 plus income and contributions less loss and distributions. That total needs to be the same as what the balance sheet has.
If everything is reported correctly and entered into the tax software correctly, it’s easy. If there is a problem in the balance sheet, it can take hours to find the problem.
In this case, it was fairly straightforward to spot the problem. The profit and loss numbers weren’t right. That’s because there had been entries made to change the QuickBooks 12/31/17 balance. If that’s true, that means last year’s tax return is wrong and it needs to be amended. That’s added expense for the tax prep fee, extra tax, one more year before the statute of limitations on audits runs and an increased chance of an audit. The alternative is finding and unwinding all of the entries that were backdated to 12/31/17 and restating the 2018 profit and loss.
That means a lot of bookkeeping hours. At a time when there just aren’t a lot of hours before the filing dead line.
There aren’t a lot of choices at the last minute. Fix the 2017, which may not be possible with the short window of time. Amend 2017 so that 2018 can be prepared and filed. (Most likely choice, but certainly not ideal) Or, file 2018 late and get it right. Or file with the errors and them amend both the 2017 and 2018 returns as soon as possible.
There were a couple of things that could have been better. One is not waiting till the last minute with financial statements. If there was more time, this mistake could have been caught in time to fix it. Another error was in self-preparing and making a timing change. I wish there was a way to lock down QuickBooks so that it was difficult to make back-dated entries but there really isn’t. So if it’s the owner preparing the financials they can make this mistake without realizing the consequences. And finally, the best answer, get a trained bookkeeper to keep track of your bookkeeping.
In the end, the client opted to amend his 2017 return, despite the cost, and get his 2018 tax return filed in time.
If we can help you with your bookkeeping,Contact Us.You might be surprised at how affordable professional bookkeeping actually can be.