In a perfect world, December would be at least six weeks long as the month can roll by in a blur with business often buttonholed between holiday parties and ringing in the New Year festivities.
December can be a tricky month to navigate for small and medium-sized business owners with one survey finding that 68 percent of employees were “less productive throughout the entire month of December compared to other months.”
“As deadlines loom and productivity slows to a crawl, the run-up can be extremely stressful,” says The Startup in an article on Medium. “Managers are running a constant tightrope between keeping staff motivated by being flexible and making sure that work gets done.”
December is a Strategically Important Month
Adding to the stress for most businesses is the fact that their fiscal years end on December 31, making this final calendar month strategically important.
“Know that your actions in the last few weeks of the year can set you up for your best beginning to a new year ever,” writes Christina Green for Event.
December is the time to consider everything from budgeting to workforce issues to tax considerations for the coming year.
To keep you organized, the best plan of attack is to utilize a “Year-End 2021 HR Checklist” and if you can start on your checklist before the pumpkin pie is served in November you will be ahead of the game.
Payroll and Taxes on Top of the Year-End Checklist
Most businesses would prefer to not think about taxes, but payroll and taxes are likely the most important issues addressed in December.
“We are moving to the end of 2021, and my smartest clients are using this time to strategize how to limit their tax bill and turn those savings into cash for the year,” writes CPA Cindy Brown on LinkedIn.
Brown says to add these five issues to your year-end checklist:
- Maximize Your Employee Retention Tax Credit: Part of the 2020 CARES Act, the Employee Retention Tax Credit should have been on your year-end checklist last year, but you need to act as it ends this year.
Brown says “it can save your business as much as $10,000 per employee for 2020 and $28,000 per employee in 2021. You’re eligible if your business was partially or fully shut down due to the pandemic in either year, or if you lost 20 percent of your revenues in any quarter this year (50 percent in any quarter of 2020) compared to the same quarter in 2019. The credit is taken against the employer payroll taxes you owe, and if the credit is higher than the taxes due, you can get the difference back in cash.”
Also, if you failed to take the Employee Retention Tax Credit last year, you can go back and amend your payroll tax returns.
- Take Advantage of the Work Opportunity Tax Credit: Receive up to $9,600 per employee income tax credit if you hire somebody who is in the targeted group, which includes being unemployed for more than six months. This tax credit will run through 2025.
Browns says to “learn how to calculate in advance of hiring that employee and then use it – or a portion of it—as a hiring bonus to attract those hard-to-find workers.”
- Invest in Capital Equipment: Thanks to accelerated depreciation rules this year you can buy approximately $1.5 million in capital equipment and then deduct all of it in the same year if you put it into service. This new rule applies to certain capital asset purchases after April 19, 2021.
- Use the One-Time Loss Carryback Provision: Another CARES Act provision, Brown says “if your business lost money in 2020, 2019 or 2018, then all you have to do is amend those and other related tax returns to carry back the loss five years before.”
- Clean Up Your Inventory: 2021 has been all about supply chain issues so now is a great time to take a hard look at your inventory. You could earn a tax deduction if you dispose of older inventory that has not been used.
Also, do not forget the standard end of the year employee information verification and double check of W-2s.
Other Items on Your End-Year Checklist
Besides payroll and taxes, consider these items on your checklist:
- Evaluated Your Benefits: Review health insurance policies and coverage plans
- Examine Your Workforce and make hiring and promotion decisions
- Review Employee Time Off: Remind staff of vacation, sick leave, holiday and paid time usage with any carry over or use-it-or-lose it hours
- Update Your Employee Handbook
- Create Your 2022 HR Calendar
Contact Employer Flexible today to find out how we utilize our proven processes and powerful technology to help you achieve your company’s goals. We'd love to help you prepare for 2022 and then work with you in 2022.