Start With the Books, Not the Tax Return
Tax preparation and bookkeeping are different services. A bookkeeper can help organize and maintain the financial records your tax professional may use, while tax returns and tax advice should be handled by an appropriately qualified tax professional.
The goal before tax preparation is to make sure the bookkeeping reflects the business activity as accurately and completely as possible.
Bring the Bookkeeping Through Year-End
Make sure the year's business activity has been entered or properly matched in the bookkeeping system. Unreviewed bank-feed transactions, missing transactions, or months that were never completed can leave financial reports incomplete.
Reconcile Bank and Credit-Card Accounts
Reconcile applicable accounts through their year-end statements. Reconciliation compares the transactions and balances in the books with the financial institution's statement and can help identify missing, duplicate, changed, or uncleared activity.
Review Uncategorized and Unusual Transactions
Look for transactions sitting in uncategorized accounts, suspense-type categories, or other temporary classifications. Also review unusual transactions that may require clarification or supporting documentation.
When the proper treatment is unclear or has tax implications, your tax professional should determine the appropriate tax treatment.
Review Loans, Transfers, and Owner Activity
Transfers between accounts, loan payments, owner contributions, owner draws or distributions, and similar activity can be misclassified if they are treated like ordinary income or expenses. These balances should be reviewed so the books reflect what actually occurred.
Organize Supporting Records
Keep relevant statements, receipts, invoices, loan documents, payroll records, and other supporting information organized and accessible. Your tax professional may request documents beyond what appears in the bookkeeping software.
Review Year-End Financial Reports
Once the bookkeeping is current and reconciled, review reports such as the Profit and Loss and Balance Sheet for balances or activity that appears unexpected. Reports are most useful when the underlying bookkeeping has already been reviewed.
What If You're Several Months Behind?
If bookkeeping has accumulated throughout the year, catch-up work may be needed before reliable year-end reports can be prepared. That can involve reviewing transactions, reconciling accounts, addressing inconsistencies, and bringing the records forward to a current period.
Carlisle Bookkeeping currently offers qualifying businesses up to six months of eligible catch-up bookkeeping at no additional cost when they begin ongoing monthly bookkeeping services. Eligibility and scope are determined after reviewing the business's bookkeeping needs.
Learn about the Catch-Up Bookkeeping Offer →
Make Next Tax Season Easier With Monthly Bookkeeping
Tax-season cleanup can be reduced by maintaining the books throughout the year. Monthly transaction review and reconciliations make it easier to investigate questions while the activity is still recent and provide more useful financial reports during the year.
Carlisle Bookkeeping LLC provides monthly bookkeeping, QuickBooks Online support, reconciliations, financial reporting, cleanup and catch-up services, and other bookkeeping support based on the selected service level. Based in Irvine, California, Carlisle Bookkeeping serves small businesses throughout Southern California and can also work remotely.
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Bookkeeping vs. Accounting: What's the Difference? →