Some might say the end of one calendar year and the beginning of another is a formality. The linear nature of time doesn’t change, merely the numbers we use to mark it.

Others, however, would say that a fresh 12 months — particularly after the arduous, anxiety-inducing nature of 2020 — creates the perfect opportunity for business owners to gather their strength and push ahead with greater vigor. One way to do so is to ring in the new year with a systematic approach to renewing everyone’s focus on profitability.

Create an idea-generating system

Without a system to discover ideas that originate from the day-in, day-out activities of your business, you’ll likely miss opportunities to truly maximize the bottom line. What you want to do is act in ways that inspire and allow you to gather profit-generating concepts. Then you can pick out the most actionable ones and turn them into bottom-line-boosting results. Here are some ways to create such a system:

Share responsibility for profitability with your management team. All too often, managers become trapped in their own information silos and areas of focus. Consider asking everyone in a leadership position to submit ideas for growing the bottom line.

Instruct supervisors to challenge their employees to come up with profit-building ideas. Leaving your employees out of the conversation is a mistake. Ask workers on the front lines how they think your business could make more money.

Target the proposed ideas that will most likely increase sales, cut costs or expand profit margins. As suggestions come in, use robust discussions and careful calculations to determine which ones are truly worth pursuing.

Tie each chosen idea to measurable financial goals. When you’ve picked one or more concepts to pursue in real life, identify which metrics will accurately inform you that you’re on the right track. Track these metrics regularly from start to finish.

Name those accountable for executing each idea. Every business needs its champions! Be sure each profit-building initiative has a defined leader and team members.

Follow a clear, patient and well-monitored implementation process. Ideas that ultimately do build the bottom line in a meaningful way generally take time to identify, implement and execute. Don’t look for quick-fix measures; seek out business transformations that will lead to long-term success.

Many benefits

A carefully constructed and strong-performing profitability idea system can not only grow the bottom line, but also upskill employees and improve morale as strategies come to fruition. Our firm can help you identify profit-building opportunities, choose the right metrics to evaluate and measure them, and track the pertinent data over time.

When it comes to taxes, December 31 is more than just New Year’s Eve. That date will affect the filing status box that will be checked on your 2020 tax return. When filing a return, you do so with one of five tax filing statuses. In part, they depend on whether you’re married or unmarried on December 31.

More than one filing status may apply, and you can use the one that saves the most tax. It’s also possible that your status could change during the year.

Here are the filing statuses and who can claim them:

• Single. This is generally used if you’re unmarried, divorced or legally separated under a divorce or separate maintenance decree governed by state law.
• Married filing jointly. If you’re married, you can file a joint tax return with your spouse. If your spouse passes away, you can generally file a joint return for that year.
• Married filing separately. As an alternative to filing jointly, married couples can choose to file separate tax returns. In some cases, this may result in less tax owed.
• Head of household. Certain unmarried taxpayers may qualify to use this status and potentially pay less tax. Special requirements are described below.
• Qualifying widow(er) with a dependent child. This may be used if your spouse died during one of the previous two years and you have a dependent child. Other conditions also apply.

How to qualify as “head of household”

In general, head of household status is more favorable than filing as a single taxpayer. To qualify, you must “maintain a household” that, for more than half the year, is the principal home of a “qualifying child” or other relative that you can claim as your dependent.

A “qualifying child” is defined as one who:

1. Lives in your home for more than half the year,
2. Is your child, stepchild, foster child, sibling, stepsibling or a descendant of any of these,
3. Is under 19 years old or under age 24 if enrolled as a student, and
4. Doesn’t provide over half of his or her own support for the year.

If a child’s parents are divorced, different rules may apply. Also, a child isn’t eligible to be a “qualifying child” if he or she is married and files a joint tax return or isn’t a U.S. citizen or resident.

There are other head of household requirements. You’re considered to maintain a household if you live in it for the tax year and pay more than half the cost. This includes property taxes, mortgage interest, rent, utilities, property insurance, repairs, upkeep, and food consumed in the home. Don’t include medical care, clothing, education, life insurance or transportation.

Under a special rule, you can qualify as head of household if you maintain a home for a parent even if you don’t live with him or her. To qualify, you must claim the parent as your dependent.

Determining marital status

You must generally be unmarried to claim head of household status. If you’re married, you must generally file as either married filing jointly or married filing separately — not as head of household. However, if you’ve lived apart from your spouse for the last six months of the year, a qualifying child lives with you and you “maintain” the household, you’re treated as unmarried. In this case, you may qualify as head of household.

Contact us if you have questions about your filing status. Or ask us when we prepare your return.

In the early 1990s, the Balanced Scorecard approach to strategic planning was developed to enable business owners to better organize and visualize their objectives. With 2021 shaping up to be a year of both daunting challenges and potentially remarkable recovery, your company should have a strategic plan that’s both comprehensive and flexible. Giving this methodology a try may prove beneficial.

Areas of focus

The Balanced Scorecard approach segments strategic planning into four critical areas:

1. Customers. Every business owner knows the importance of customer satisfaction but, to truly know and fulfill customers’ needs, you must identify the right metrics that measure it. Also identify the types of customers you want and, more important, can best serve.

Key question to ask: To fulfill our strategic objectives, how can we attract and retain the customers that build our bottom line?

2. Finance. Companies generally know how to measure their financial performance. However, they too often rely on finances as the only barometer of overall operational stability and success. Financial details are often lagging indicators because they reveal past events — not future performance. So, along with continuing to properly generate financial statements, also track data such as employee productivity and sales growth.

Key question to ask: To achieve our vision, how will our leadership and employees drive our company’s financial success?

3. Internal processes. To operate more productively and efficiently, identify problems and change the related processes. Simply paying closer attention to a shortcoming isn’t an adequate solution. For example, measuring productivity won’t automatically increase it. Your business must analyze the internal components of production — from design to delivery to billing and receipt of revenue — and implement process improvements.

Key question to ask: To meet our goals, in which business processes do we need to excel?

4. Learning and professional growth. Continuing education often calls for more time and effort than businesses are willing or able to devote. Learning must go beyond simply training new hires to include, for instance, mentoring and knowledge sharing through performance management programs. Many companies’ success depends largely on the development and preservation of intellectual capital.

Key question to ask: To accomplish our strategic plan, how can we better preserve and pass along knowledge, as well as encourage learning?

A multipronged effort

Compiling data under the Balanced Scorecard approach requires a multipronged effort. You might use a survey to gather customer info. Your financial statements and industry benchmarks should provide insights into finances. Employee surveys and open forums can illuminate internal operations. And a performance management consultant could help you target learning opportunities and methods.

We can assist you in identifying pertinent financial metrics and incorporating accurate analysis into your strategic plan to help you achieve your profitability goals in the coming year.

Here are some of the key tax-related deadlines affecting businesses and other employers during the first quarter of 2021. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.

January 15

• Pay the final installment of 2020 estimated tax.
• Farmers and fishermen: Pay estimated tax for 2020.

February 1 (The usual deadline of January 31 is a Sunday)

• File 2020 Forms W-2, “Wage and Tax Statement,” with the Social Security Administration and provide copies to your employees.
• Provide copies of 2020 Forms 1099-MISC, “Miscellaneous Income,” to recipients of income from your business where required.
• File 2020 Forms 1099-MISC reporting nonemployee compensation payments in Box 7 with the IRS.
• File Form 940, “Employer’s Annual Federal Unemployment (FUTA) Tax Return,” for 2020. If your undeposited tax is $500 or less, you can either pay it with your return or deposit it. If it’s more than $500, you must deposit it. However, if you deposited the tax for the year in full and on time, you have until February 10 to file the return.
• File Form 941, “Employer’s Quarterly Federal Tax Return,” to report Medicare, Social Security and income taxes withheld in the fourth quarter of 2020. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter in full and on time, you have until February 10 to file the return. (Employers that have an estimated annual employment tax liability of $1,000 or less may be eligible to file Form 944, “Employer’s Annual Federal Tax Return.”)
• File Form 945, “Annual Return of Withheld Federal Income Tax,” for 2020 to report income tax withheld on all nonpayroll items, including backup withholding and withholding on accounts such as pensions, annuities and IRAs. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year in full and on time, you have until February 10 to file the return.

March 1 (The usual deadline of February 28 is a Sunday)

• File 2020 Forms 1099-MISC with the IRS if: 1) they’re not required to be filed earlier and 2) you’re filing paper copies. (Otherwise, the filing deadline is March 31.)

March 16

• If a calendar-year partnership or S corporation, file or extend your 2020 tax return and pay any tax due. If the return isn’t extended, this is also the last day to make 2020 contributions to pension and profit-sharing plans.