Your tax return can only be as accurate as the books underneath it. Most of the delays we see in filing season trace back to the same few gaps: a credit card nobody reconciled, a pile of transactions sitting in “uncategorized,” or a loan balance that has not matched the lender’s statement since spring.
The fix is to close the year in two steps. Do the heavy lifting in November on the first ten months, so December is small and January is fast. Here is the checklist we use.
1. Reconcile every account through October 31
Every bank account, credit card, line of credit and loan should be reconciled to its statement, not just “looked at.” That includes the accounts people forget:
- Merchant processors and payment apps. Deposits from a card processor are usually net of fees and refunds. Your sales should be recorded gross, with fees booked as an expense, or your revenue will be understated and your fees invisible.
- Loans. Each payment needs to be split between principal and interest. The quickest test is whether the loan balance in your books matches the lender’s statement. If it does not, the interest deduction is probably wrong too.
- Owner accounts. Money you put in and took out should run through equity or, for an S corporation, through the appropriate shareholder accounts, not through income and expense.
2. Empty the holding accounts
Most bookkeeping software has a place where unclear transactions wait: uncategorized income, uncategorized expense, “ask my accountant,” undeposited funds, suspense. At year-end every one of those should be at zero. Anything still sitting there is either a missed deduction, unreported income or a duplicate, and all three cause problems on the return.
3. Separate business from personal
Personal charges on a business card are common, and they are not a disaster if they are recorded properly. Reclassify them to owner draws or, for a corporation, to the shareholder account. If you paid business expenses personally, get them reimbursed or recorded before year-end. Our post on how to categorize receipts for taxes covers how to keep this straight during the year.
4. Review receivables and payables
Run an aged receivables report and decide what is actually collectible. Two points matter for tax purposes. If you are on the cash method, an unpaid invoice was never included in income, so there is generally no bad debt deduction when a customer does not pay. If you are on the accrual method, a genuinely worthless receivable that was already included in income may be deductible, but you need to be able to show it is uncollectible. Either way, the receivables report should match reality before it goes into a return.
Do the same for payables. Bills you have already paid should not still show as open, and bills you owe should be entered if you report on the accrual method.
5. List your asset purchases
Pull every equipment, furniture, computer and vehicle purchase for 2026 into one list with the invoice, the date it was placed in service and the cost. The depreciation decisions come later, but they depend on this list being complete.
This is also the time to check your capitalization policy. Under the IRS de minimis safe harbor, a business without an applicable financial statement can elect to deduct tangible property costing up to $2,500 per invoice or item, if it treats those amounts the same way in its books. The election is made each year with a statement attached to the timely filed original return, including extensions. If your books expense items at one threshold and your return assumes another, that is worth fixing now.
6. Identify your 1099 vendors
For payments made in 2026, you generally issue a Form 1099-NEC to a non-corporate contractor you paid $2,000 or more for services. Run a vendor report now, flag everyone over that amount and confirm you have a current Form W-9 for each. Payments you made by credit card, debit card or through a payment app are reported by the payment processor on Form 1099-K, not by you, so it helps to know how each vendor was paid. Filing is due February 1, 2027. If someone you paid should really be treated as an employee rather than a contractor, sort that out before you file anything.
7. Count inventory at December 31
If you carry inventory, schedule the count for the last day of the year or as close as you can get. The count drives cost of goods sold, and an estimate in March is not the same as a count in December.
8. Close December quickly, then lock the year
Once December statements arrive, reconcile them the same way. Then set a closing date in your software so 2026 cannot be edited without a password. This protects the numbers your return was built on. A change to a prior period that nobody notices is one of the most common reasons a balance sheet stops agreeing with last year’s return.
9. Keep the support
Save the year-end bank and card statements, loan statements, the asset list and the receivables report with your tax records. The IRS generally expects you to keep records that support your return for three years after filing, and longer in some situations. Records for property you own should be kept until the limitations period runs out for the year you sell or dispose of it, because they determine depreciation and gain.
What we hand to the tax preparer
When the close is done, the result is a short package: a December 31 balance sheet that ties to the statements, a profit and loss for the year, the asset list, the 1099 list and any open questions in writing. With that, the return becomes a review of decisions rather than a reconstruction of the year.
If your books are behind
If your 2026 books are not current and you want us to prepare your return, we can do a one-time cleanup as part of that tax engagement so the return is built on reconciled numbers. To keep it from piling up again, our monthly bookkeeping service closes the books every month for a flat monthly fee, with a dedicated team that knows your file.
Start the close now
We have served Fresno and Clovis businesses for more than eight years, and the businesses that close in November have the easiest filing seasons. If you want help getting there, book a free 30-minute call through our contact page, or read about our business tax preparation. You are welcome to meet us in person at our Fresno office.
Harlan Willow Accounting Group · 7257 N Maple Ave STE 107, Fresno, CA 93720 · 559-372-9213
This post is general information, not tax advice for your specific situation.
