Year-End Financial Checklist: Simplify Tax Time with These Steps

As the end of the year approaches, small business owners know one thing for sure—tax season is just around the corner. Gathering your business financials at the end of the year may seem like a daunting task, but with a little planning and organization, you can streamline the process and make filing taxes far less stressful. Here’s a step-by-step guide to help you get your financials in order so you can greet tax time with confidence.

Step 1: Reconcile Your Bank and Credit Card Accounts

Start by ensuring your business bank accounts and credit card statements are reconciled. Double-check that all transactions in your accounting software match your bank and credit card statements. Any discrepancies should be resolved now so they don’t create headaches later.

Pro Tip: Set a recurring monthly reminder to reconcile accounts going forward. This keeps you on top of your finances year-round.

Step 2: Organize Your Receipts and Expenses

Receipts are your best friend when it comes to claiming deductions. If you haven’t been tracking them consistently, now’s the time to dig them out. Use accounting software, apps like Expensify, or even a simple spreadsheet to categorize expenses.

Key Categories to Review:

• Office supplies
• Travel and meals
• Advertising and marketing
• Vehicle and mileage
• Utilities and rent

Pro Tip: Consider digitizing your receipts using a scanner or an app to save time in future years.

Step 3: Review Your Income Statements

Run a profit and loss statement (P&L) to review your income and expenses. This document provides a snapshot of your business's financial health and ensures you haven’t missed any income or expense entries.

Check for:

• Missing invoices that haven’t been recorded.
• Payments from clients that may not have been categorized correctly.

Pro Tip: Keep an eye out for duplicate entries, which can throw off your numbers.

Step 4: Separate Personal and Business Expenses

If you’ve mixed personal and business expenses throughout the year, now is the time to sort them out. Business expenses are tax-deductible, but personal ones are not. Maintaining a separate business bank account and credit card can help avoid this issue moving forward.

Step 5: Inventory Check (If Applicable)

If your business involves selling products, conduct a physical inventory count at year’s end. Compare it to your recorded inventory to identify discrepancies and update your records. This is crucial for reporting accurate cost of goods sold (COGS).

Step 6: Collect Tax Forms from Vendors and Employees

If you paid any independent contractors more than $600 during the year, you’ll need to send them a 1099-NEC form. Gather their W-9 forms now to ensure you have the necessary information. Similarly, make sure your employee payroll records are in order for W-2 filing.

Step 7: Evaluate Your Estimated Tax Payments

If you’re self-employed or own a small business, you likely made quarterly estimated tax payments throughout the year. Compare your payments to your anticipated tax liability to ensure you’re on track. If you’ve underpaid, consider making a final payment by the deadline to avoid penalties.

Step 8: Maximize Year-End Deductions

Review potential year-end tax-saving opportunities, such as:

• Contributing to a retirement account (e.g., SEP IRA, Solo 401(k)).
• Writing off bad debts.
• Prepaying business expenses for the upcoming year.

Pro Tip: Consult with a tax professional to identify additional deductions and credits tailored to your business.

Step 9: Back Up Your Records

Before handing everything over to your accountant or filing your taxes, make sure to back up all your financial records. Store copies digitally and physically to safeguard your data.

Step 10: Work with a Professional Accountant

Once your financials are in order, consult a tax professional who can review your records, identify potential savings, and ensure your return is filed correctly. Working with a professional not only saves time but can also help you avoid costly mistakes.



Conclusion

Getting your business financials ready at the end of the year doesn’t have to be overwhelming. With these steps, you’ll be better prepared for tax season and set up for financial success in the coming year. By staying organized and proactive, you can simplify the process and focus on what really matters—growing your business.

Need help with year-end financial prep? Contact us today for expert accounting and tax planning services!