Bookkeeping Cleanup Before Tax Season

The checklist

1. Reconcile every bank and credit-card account through year-end. Each account should agree to its statement to the cent. A difference that will not clear is usually a duplicate, a transposed figure, a transfer booked as income and expense, or an opening balance nobody checked.
2. Clear the uncategorised transactions. Holding accounts such as “Uncategorized Expense” or “Ask My Accountant” should be empty, or hold only items waiting on a genuine question.
3. Check opening balances. Opening balances should equal last year's closing balances. If they do not, every report built on them is wrong.
4. Find duplicates and misposted transfers. Look for the same transaction entered twice, and for transfers between your own accounts that were booked as income and expense.
5. Review owner and personal transactions. Personal spending run through the business, and money put in or taken out by the owner, should be recorded as such. Your tax professional decides how they are treated.
6. Tie payroll to the payroll records. Payroll expenses and payroll liabilities in the books should agree with the payroll reports.
7. Review payables and receivables. Old, disputed or already-settled items should be cleaned out so the aging reports are believable.
8. Agree loan, card and asset balances to statements. Loans, lines of credit and fixed assets should match the lender's or supplier's records.
9. Check sales-tax balances, if applicable. The sales-tax liability in the books should agree with the sales-tax reports and payments. Confirm what is required with your tax professional.
10. Collect the information your tax professional asks for. This often includes vendor details and supporting schedules. Ask what they need rather than guessing.
11. Export reconciliation reports and close the period. Reconciliation reports, a profit & loss statement and a balance sheet give the preparer something to review. Closing the period stops later edits from changing the figures.
12. List the open questions. A short note of anything only you can answer saves a round of emails.

How do you know the books need more than a tidy-up?

• Reconciliations will not clear and you cannot find why.
• Hundreds of transactions sit uncategorised.
• Your tax professional has sent the books back asking for reconciled statements.
• A bookkeeper left part-way through the year and the file stopped where they did.
• The books are months behind, or current but wrong. Behind is one problem and wrong is another, and both need the same method: find where each difference started and correct it at the source.

A short checklist for tax professionals receiving a client's books

• Ask for reconciliation reports for every account, not just a profit & loss statement.
• Check that opening balances agree to the prior year.
• Look at the uncategorised and holding accounts first. They show how the file has been kept.
• Ask which items the client was unsure about.
• If the books are not ready, say so early and agree who will bring them up to date.

Where A&M Offshore Accounting fits

A&M performs cleanup and catch-up in QuickBooks Online and Desktop for U.S. small businesses and for the clients of CPA firms and tax practices, so the tax professional receives organised, reconciled books. A&M does not prepare tax returns. Cleanup and catch-up →   For CPA and tax firms →