Year-End Bookkeeping Close: Steps Before Tax Time

Before December ends

In the last weeks of the year, review your profit and year-to-date numbers and talk to your tax preparer about planning. Decisions like equipment purchases, retirement contributions and timing of income are easier to make before the year closes. Rules change, so ask what applies now.

Also collect W-9 forms for contractors you paid and confirm addresses, so 1099 forms are not delayed.

Reconcile everything through year end

Reconcile every bank, credit card, loan and merchant account through the last day. Get the December statements as soon as they are available. Clear any items in uncategorized, ask my accountant or suspense accounts.

Check that payroll reports agree with payroll tax filings, and that sales tax collected matches what you filed or will file.

Review receivables, payables and inventory

Look at old receivables and decide whether any should be written off. Review payables for bills dated this year but not yet entered. Complete the year-end inventory count and adjust to the actual value.

These are the numbers that most often differ between a rough set of books and a tax-ready set.

Fixed assets, loans and equity

Update the fixed asset register with additions and disposals, record depreciation, and match loan balances to lender year-end statements. Ask the lender for the interest paid total. Review owner draws, contributions and any owner loans, and make sure they are recorded in the right accounts.

Move personal items out of the business books before the tax preparer sees them.

Information returns and the handoff

Prepare contractor information returns according to the current IRS instructions and deadlines, and check W-2 information with your payroll provider. Do not rely on memory for due dates, since they are set by the agencies.

Then assemble a package for your tax preparer: the year-end profit and loss, balance sheet, general ledger, asset list, loan statements, payroll summaries and a short note on unusual events. Lock the year in your software so no one edits it by accident. If a correction is needed later, make it with a dated adjusting entry.

Common year-end surprises

Owners are often caught out by a few items: a contractor who never returned a W-9, a personal credit card used for business with no receipts, a loan payment coded entirely to expense, and deposits that are sitting in uncategorized income. Give yourself time in January to chase these, since the fixes depend on other people responding. Starting in early December rather than late January makes the whole process calmer.

A final tip is to ask your tax preparer for a document checklist in November. Each preparer wants slightly different items, and learning their list early lets you gather loan statements, asset invoices and payroll summaries while they are still easy to find.

Common questions

This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation.