How do I prepare my books for tax season?
Reconcile every account through December 31. Your bank accounts, credit cards, and any payment processors like PayPal or Square need to match your accounting software exactly. Unreconciled accounts mean missing transactions, duplicate entries, or errors that will create problems on your tax return. If you’re months behind on reconciliation, start here before anything else.
Review how transactions are categorized. A purchase sitting in “Uncategorized Expenses” doesn’t help your accountant and might mean you miss a deduction. Go through the year and make sure office supplies are in office supplies, vehicle expenses are in vehicle expenses, and nothing is lumped into vague categories that hide what you actually spent money on.
Separate personal from business. If you accidentally used your business card for groceries or paid a personal bill from your business account, those transactions need to be coded as owner’s draw rather than business expenses. Your tax preparer can’t deduct your personal spending, and mixing the two raises red flags if you’re ever audited.
Gather your documents. By late January you should receive 1099s from clients who paid you over $600, interest statements from your bank, and any other tax-related forms. Keep these organized because your accountant will need them. Also collect receipts for any large purchases or expenses you want to make sure get deducted properly.
Issue 1099s to your contractors. If you paid any subcontractors, freelancers, or service providers more than $600 during the year, you’re required to send them a 1099-NEC by January 31. Missing this deadline means penalties. You’ll need their W-9 information to complete the forms, so if you don’t have that on file, start collecting it now.
Check your payroll records if you have employees. Make sure W-2s are accurate and will be issued on time. Verify that all payroll tax deposits were made and quarterly filings are complete. Payroll errors discovered during tax season are expensive to fix.
Review accounts receivable and accounts payable. Write off any receivables you know you’ll never collect. Make sure outstanding bills are recorded so your expenses are complete. Your books should reflect reality, not optimistic assumptions about what customers might pay.
Look at fixed assets. Any major equipment purchases during the year need to be recorded properly for depreciation. If you sold or disposed of equipment, that needs to be documented too. Section 179 deductions and depreciation schedules affect your tax liability significantly.
The businesses that have the smoothest tax seasons are the ones with monthly bookkeeping already in place. When your books are current and accurate all year, preparing for taxes just means a final review rather than a frantic catch-up.
If your books are a mess and tax season is approaching fast, a bookkeeper near Bentonville can help you get organized. Cleanup work before your accountant starts saves time and money on the tax preparation side, and you’ll end up with better records going forward.
Northwest Arkansas's Dedicated Bookkeeping Partner
The Next Step:
A Quick Conversation
Tell us about your business and where you need help. We'll listen, ask a few questions, and give you a clear plan and honest price.
More Questions
What questions should I ask before hiring a bookkeeper?
Ask about their industry experience, what's included in their pricing, how often you'll communicate, and how they handle mistakes. Pay attention to how they answer as much as what they say.
Read answerWhat expenses can landlords deduct on taxes?
Landlords can deduct mortgage interest, property taxes, insurance, repairs, depreciation, and professional fees. Depreciation alone often creates significant tax savings by writing off a portion of the property's cost each year.
Read answerHow do I account for tuition payments received in advance?
Record advance tuition payments as deferred revenue, which is a liability, not income. Then recognize the revenue month by month as you deliver the educational services. This keeps your books accurate and prevents overstating income before you've earned it.
Read answerWhat financial reports should contractors review monthly?
Job cost reports are the most important because they show profitability by project, not just overall. Beyond that, review your profit and loss, cash flow position, accounts receivable aging, and accounts payable aging every month.
Read answerHow do I add my accountant to my QuickBooks account?
In QuickBooks Online, go to Settings, then Manage Users, and invite them under the Accountant section. You just need their email address. They'll get an invite and can access your books once they accept.
Read answerHow do I separate personal and business expenses as an owner-operator?
Open a dedicated business checking account and credit card. Run every trucking expense through those accounts and use owner's draw to pay yourself. Keep personal purchases on personal accounts entirely.
Read answer
