Most owners treat year-end as their accountant’s job. It mostly isn’t.
This checklist is for owner-run small businesses where the owner or a part-time bookkeeper keeps the books and a CPA sees them once a year.
Your CPA works from what your books say on December 31. If the books are wrong, the return is built on wrong numbers or your CPA spends billable hours fixing the books first—usually at a higher rate than your bookkeeper charges.
Some work can wait until January. Several items can’t, because once the year ends, the decisions behind them have already been made. Here are seven steps we see skipped most often, roughly in the order to do them.
1. Reconcile every account, not just the main one
The main bank account and main credit card are usually reconciled. The accounts that get skipped are the second card, PayPal, Stripe or Square balances, loans, and lines of credit.
Two errors show up repeatedly:
- Loan payments booked entirely as an expense. Only the interest is an expense; principal reduces the loan. Booking the full payment as an expense overstates expenses and leaves the loan balance wrong.
- Payment-processor deposits booked net. Stripe or Square pays you after deducting fees. If you record only the deposit, revenue is understated, fees disappear, and your books may not match the Form 1099-K the processor sends.
When: In November, reconcile January through October, since October’s statements are in. Reconcile November in the first week of December, once its statements arrive, and December in the first week of January.
2. Empty the “uncategorized” bucket
Every accounting system has a holding account for transactions nobody has classified yet. QuickBooks Online calls them Uncategorized Expense and Uncategorized Income. Older QuickBooks files may have an account named “Ask My Accountant.” Accountants call the general idea a suspense account.
A balance there at year-end means someone still has to work out what those transactions were. It is usually cheaper for you to investigate in November than for your CPA to do it in March.
One rule: if you can’t identify a transaction after checking the receipt and bank detail, don’t guess. Put it on a short list for your CPA with the question attached.
3. Decide what you’re actually going to collect
Intuit QuickBooks’ 2026 Small Business Late Payments Report found that 59% of small businesses had invoices 30 or more days overdue, with an average of $17,700 outstanding. Year-end is a good time to decide what to do with each old invoice: collect it, settle it, or write it off.
One tax detail owners often get wrong: writing off an unpaid invoice generally reduces taxable income only if you previously counted that invoice as income. That is generally true on the accrual method. On the cash method, an unpaid invoice was not income, so there is generally no bad-debt deduction for it. See IRS Topic 453 and confirm your accounting method and facts with your CPA. Either way, clearing invoices you will not collect makes your receivables and balance sheet more accurate.
4. Collect W-9s now, not in January
For payments made in 2026, the reporting threshold for certain information returns, including Form 1099-NEC, increased from $600 to $2,000. The 2026 forms are due to contractors and the IRS by February 1, 2027, because January 31 falls on a Sunday. See the IRS instructions for Forms 1099-MISC and 1099-NEC.
The January panic is chasing a W-9 in the last week of the month from a contractor you paid in March. To avoid it:
1. List everyone you paid for services this year and total payments by payee.
2. Anyone at $2,000 or more may need a Form 1099-NEC; keep a W-9 on file with the payee’s legal name, taxpayer ID, and entity type.
3. Payments made by credit card or through PayPal and similar third-party platforms are generally reported by the payment company on Form 1099-K, not by you.
4. Payments to most corporations generally do not require Form 1099-NEC, but exceptions apply, including certain legal-service payments. Check the IRS instructions and confirm edge cases with your CPA.
We’ll cover the full 1099 calendar in a separate guide later this month.
5. Separate the owner from the business
Small-business books often mix personal expenses paid on the business card, business expenses paid from a personal account, and owner draws recorded as expenses.
An owner’s draw is money you take from the business for yourself: a transfer to your personal account or a personal bill the business pays. It applies to sole proprietorships, partnerships, and most LLCs. A draw is not wages or a business expense, so it does not reduce the business’s taxable profit. In the books it reduces the owner’s equity. In an S corporation, the equivalent is a shareholder distribution.
- Move personal spending out of expenses and into owner’s draw (or shareholder distributions for an S corporation).
- Record business expenses you paid personally, with receipts, and decide whether the business reimburses you.
- If you work in an S corporation, you are generally expected to receive reasonable compensation through payroll. That has to happen during the year; it cannot be fixed after December 31 by relabeling distributions. See IRS guidance on S corporation compensation. If no owner payroll ran this year, call your CPA now.
6. List what you bought, and count what you hold
List equipment, computers, vehicles, and other significant purchases made this year, with the purchase date, cost, and invoice. How each item is depreciated or expensed is your CPA’s call, and the choice can affect this year’s tax and future years’.
One caution: don’t buy equipment in December just for the deduction. A deduction saves only a fraction of what you spend. If you would buy it anyway, discuss timing with your CPA before December 31.
If you carry inventory, count it on December 31, or as close to that date as practical. The year-end figure should be based on the count, not just what the software says you have.
7. Close the year and lock it
Once everything is reconciled and reviewed, produce the year-end package. Then set a closing date in your accounting software so nobody edits 2026 after your CPA has the numbers. Most systems call this a closing date or period lock.
Your package should include:
- Full-year profit and loss, and balance sheet as of December 31
- Receivables and payables aging as of December 31
- December statements for every bank, card, and loan account
- A list of assets bought during the year
- Year-end payroll reports that match the W-2s, due February 1, 2027
- The 1099 payee list with W-9s
- Your list of open questions
When to do what
November: Complete steps 1–3 for January through October. Start collecting W-9s. S corporations should confirm owner payroll with their CPA.
December: Reconcile November. Finish W-9 collection. Discuss asset and timing decisions with your CPA. Count inventory on December 31.
January: Reconcile December. File 1099-NEC and W-2 forms by February 1. Close and lock the year, then send the package.
The common thread
None of these steps is hard. They get skipped because in December they’re nobody’s job.
If that’s the situation in your business, our bookkeeping plans include monthly reconciliation and a CPA-ready year-end package, starting with Launch at $95 a month. We don’t file tax returns. We get your books to the point where your CPA can do that quickly. Explore our business templates for practical tools to organize your work and keep priorities on track.
This article is general information, not tax or legal advice. Tax treatment depends on your entity type, accounting method, and circumstances. Confirm specifics with your CPA.