Tax season can be stressful for small business owners, especially when bookkeeping records are incomplete or not properly organized. Preparing your books before tax season can make the process easier and give your tax professional accurate financial information to work with.
Whether you manage your books yourself or use QuickBooks bookkeeping services, a year-end review can help you identify missing transactions, unreconciled accounts, and other bookkeeping issues before tax preparation begins.
Here are some important steps to help prepare your bookkeeping records for tax season.
Review Your Business Income
Start by reviewing all income recorded in your bookkeeping system or QuickBooks account. Make sure sales, customer payments, deposits, and other business income have been entered correctly.
If you receive payments through different platforms, compare those records with your bank statements and payment processor reports. Look for missing or duplicate transactions and make sure recorded amounts are accurate.
Accurate income records give your tax professional a clearer picture of your business activity for the year.
Organize and Review Business Expenses
Review your business expenses and make sure they are categorized correctly. Common business expenses may include:
- Office expenses
- Advertising and marketing
- Software and subscriptions
- Business travel
- Equipment and supplies
- Professional services
- Insurance
- Business-related vehicle expenses
Also check for personal transactions that may have been accidentally recorded as business expenses. Keeping business and personal transactions separate helps maintain cleaner financial records.
If you use QuickBooks, review your expense categories and make sure transactions are assigned to the appropriate accounts.
Reconcile Bank and Credit Card Accounts
Compare the transactions in your bookkeeping software with your actual bank and credit card statements.
During the review, look for:
- Missing transactions
- Duplicate transactions
- Incorrect amounts
- Unreconciled transactions
- Unusual balances
If you find old unreconciled transactions or balances that do not make sense, investigate them before your records are sent for tax preparation.
Regular reconciliation can help catch errors and make sure your bookkeeping records match your actual accounts.
Review Invoices, Payroll, and Contractor Records
If your QuickBooks file contains old errors, unreconciled accounts, duplicate transactions, or inaccurate records, QuickBooks cleanup services in the United States can help bring your financial records back into order before tax preparation.
Gather Receipts and Supporting Documents
Make sure your bookkeeping records are supported by receipts, invoices, statements, and other relevant documents.
Depending on your business, you may need records for:
- Business purchases
- Equipment
- Travel
- Advertising
- Insurance
- Professional services
- Loan payments
- Business subscriptions
- Contractor payments
Keeping these documents organized makes it easier to review transactions and answer questions about your financial records.
Your tax professional can confirm which documents are needed for your specific tax filing.
Review Your Financial Reports
Before tax preparation, review your Profit and Loss statement and Balance Sheet.
Your Profit and Loss statement can help you check whether your recorded income and expenses accurately reflect your business activity. Look for expenses that seem unusually high or low and investigate anything that does not look correct.
Your Balance Sheet should also be reviewed for unusual balances in accounts such as:
- Bank accounts
- Credit cards
- Loans
- Accounts receivable
- Accounts payable
- Fixed assets
If something looks incorrect, investigate it before providing your records to your tax professional.
Create a Year-End Bookkeeping Checklist
A simple checklist can help you make sure nothing important is missed.
Before tax preparation, review:
- Business income
- Business expenses
- Bank and credit card accounts
- Accounts receivable
- Payroll and contractor records
- Receipts and supporting documents
- Profit and Loss statement
- Balance Sheet
- Unusual or incorrect transactions
The records needed for tax preparation can vary depending on your business structure and tax situation. Your tax professional can help you determine which documents are required for your specific tax filing.
When Should You Get Professional Bookkeeping Help?
Some business owners are comfortable managing their own bookkeeping, while others may find it difficult as their business grows.
If your books are months behind, accounts have not been reconciled, financial reports contain unexplained balances, or your QuickBooks file has old errors, professional bookkeeping support can help.
QuickBooks bookkeeping services can help keep your financial records organized, reconciled, and up to date. If your QuickBooks file needs to be corrected or organized before tax preparation, QuickBooks cleanup services can help address bookkeeping issues and improve the accuracy of your financial records.
Getting your bookkeeping organized before tax season can also make it easier for your CPA or tax professional to review the information they need.
Final Thoughts
Preparing your bookkeeping records for tax season does not have to be complicated. Review your income and expenses, reconcile your accounts, organize your supporting documents, and check your financial reports before sending your records for tax preparation.
Keeping your books organized throughout the year can make year-end preparation easier and reduce the need for last-minute bookkeeping work.
If your bookkeeping has fallen behind or your QuickBooks file needs cleanup, 904 Bookkeeping can help you keep your financial records accurate, organized, and up to date.
