How to Prepare Your Books for Tax Season

Your tax return can only be as accurate as your books. If your books aren't ready, your preparer either waits, guesses, or files an extension. Here's how to get them ready, ideally six weeks before your deadline.

Start with the deadlines

Partnership (1065) and S corporation (1120-S) returns are generally due March 15 for calendar-year businesses; individual returns with Schedule C and C corporation returns (1120) are due April 15. Extensions give more time to file, not to pay.

Step 1: Close every month of the year

Every bank, card and loan account should be reconciled through December 31. If months are missing, that's a catch-up project, and it should start now.

Step 2: Clean up the problem accounts

• Empty Uncategorized Income and Expense.
• Clear Undeposited Funds and suspense accounts.
• Check that receivables and payables reflect real, open items.

Step 3: Review owner activity

• Owner draws, contributions and distributions recorded in equity, not as income or expenses.
• S corporation owners: confirm salary went through payroll and matches W-2s.
• Personal expenses paid by the business moved out of expense accounts.

Step 4: Gather the year-end items

• Loans: year-end balances and interest from lender statements or Form 1098.
• Assets: a list of equipment, vehicles and improvements bought or sold, with dates and amounts.
• Payroll: year-end payroll reports, W-2s and W-3.
• Contractors: totals paid to each, for 1099-NEC filing in January.
• Inventory: a year-end count if you carry inventory.
• 1099-K and 1099-NEC forms you received, compared with recorded income.

Step 5: Run and review the reports

Run a full-year P&L and a December 31 Balance Sheet. Compare with last year. Large swings deserve an explanation before your preparer asks for one.

Step 6: Hand off a package, not a pile

Send your preparer the reports, the reconciliations, the asset list and a short note of anything unusual. If you work with us, our bookkeeping clients get this year-end package as part of the engagement, and our tax team can prepare the return directly from the books.

Behind already?

Don't file on guesses. A catch-up or cleanup priced per month of books ($120, $220, $340) gets you there, and our catch-up guide explains what to expect.