Key takeaways
- Reconciled accounts are the foundation. Every other step depends on bank and card balances that match your statements.
- Collect contractor names, addresses and tax IDs before January so information returns go out on time.
- An extension gives you more time to file, not more time to pay.
- Clean, organized books usually lower what your CPA charges for tax preparation.
Why tax prep starts with your books
Your tax return is built from your bookkeeping. If transactions are missing, miscategorized or duplicated, your CPA either spends billable hours fixing them or files from numbers that do not reflect what really happened. Both cost you money.
The most common reason small businesses scramble in March is that the books were last touched months earlier. Working through this checklist in October or November leaves room to track down missing statements and receipts while they are still easy to find.
The year-end bookkeeping checklist
- Reconcile every bank and credit card account through December 31. The ending balance in your books should match each statement exactly.
- Reconcile loan and line of credit balances, and split each payment between principal and interest. Only the interest is an expense.
- Clear out the uncategorized and "ask my accountant" accounts so every transaction has a real category.
- Separate personal spending that ran through business accounts and record it as an owner draw or distribution, not an expense.
- Review accounts receivable. Follow up on old invoices and identify any that will never be collected.
- Review accounts payable so bills you owe at year end are recorded in the right year.
- Match payroll reports to your books, including wages, employer taxes and benefits.
- List large purchases such as equipment, vehicles and computers with dates and amounts, so your CPA can decide how to depreciate them.
- Confirm sales tax collected in your books ties to the returns you filed.
- Run a profit and loss statement and balance sheet for the full year and look for anything that seems off compared with last year.
Contractors and information returns
If you paid independent contractors during the year, you may need to send them a Form 1099-NEC and file a copy with the IRS. The form is due by January 31, so the details need to be gathered before the holidays, not after.
- Request a Form W-9 from every contractor before you pay them. It gives you their legal name, address and taxpayer ID.
- Total what you paid each contractor for the year and compare it with the current IRS reporting threshold.
- Payments made by credit card or through a payment app are generally reported by the card company or app, not by you. Keep those separate in your records.
Key federal deadlines for calendar-year businesses
| Date | What is due |
|---|---|
| January 31 | W-2s to employees and Forms 1099-NEC to contractors, plus copies filed with the government |
| March 15 | Partnership returns (Form 1065) and S corporation returns (Form 1120-S) |
| April 15 | C corporation returns (Form 1120) and individual returns, including sole proprietors who file Schedule C |
When a deadline falls on a weekend or federal holiday, it moves to the next business day. State deadlines and estimated tax payment dates vary, so confirm the full calendar with your CPA.
What to send your CPA
- Year-end profit and loss statement and balance sheet
- December statements for every bank, credit card and loan account
- Payroll year-end reports and copies of W-2s and 1099s you issued
- A list of fixed asset purchases and any assets you sold or disposed of
- Loan documents for any new financing taken on during the year
- Last year's tax return if your CPA did not prepare it
Organized books do more than prevent errors. They let your CPA spend time on planning and deductions instead of cleanup, which usually lowers the bill for tax preparation.
If you are months behind
If the books have not been updated in a while, start with the oldest month and work forward one month at a time, reconciling as you go. Trying to fix the whole year at once is how transactions get missed.
This is exactly what catch-up bookkeeping is for. A catch-up project rebuilds the missing months from your bank and card statements so your CPA receives a complete, reconciled year.
This guide is general information, not tax or legal advice. Rules and thresholds change, so confirm details for your situation with your CPA. FirstFruits Financial keeps books accurate and tax ready and works alongside your CPA.