Tax season doesn’t start in April—it starts now. The earlier you get your books organized, the easier it is to file accurately, reduce stress, and take advantage of every deduction you’re entitled to. Whether you manage your own books, use software, or outsource bookkeeping, there are essential tasks every business must complete before meeting with a tax preparer.
This guide outlines the most important bookkeeping steps to take before filing your 2025 taxes, ensuring a smooth, accurate, and efficient tax season in 2026.
Reconcile All Bank, Credit Card, and Loan Accounts
If your books aren’t reconciled, they aren’t ready for tax season.
Reconcile every account through December 31, including:
– Business checking accounts
– Savings accounts
– Credit cards
– Lines of credit
– Loans
– Merchant accounts (Stripe, Square, PayPal)
Reconciliation catches:
– Missing expenses
– Duplicate income
– Incorrect categorization
– Unmatched transactions
– Bank errors
Your tax preparer will rely on these reconciliations as the foundation of your financials.
Categorize All Transactions for the Year
Uncategorized or incorrectly categorized transactions can:
– Inflate profit
– Reduce allowable deductions
– Misstate your financials
– Increase tax liability
– Mislead your accountant
Focus on:
– Software and subscription costs
– Contractor payments
– Travel vs. meals
– Equipment purchases
– Owner draws and contributions
– Client refunds or discounts
– Fees from payment processors
Pro Tip: Review your chart of accounts before categorizing—clean categories prevent mistakes.
Verify Income for Accuracy
Income may be overstated or understated if:
– Invoices were duplicated
– Deposits were miscategorized as income
– Payment processor fees weren’t accounted for
– Refunds weren’t recorded properly
Cross-check:
– Invoice totals
– Bank deposits
– Sales reports from Shopify, Stripe, or Square
Accurate income reporting prevents tax errors and audit risks.
Review and Clean Up Accounts Receivable (AR)
Your Accounts Receivable should reflect reality—not invoices you forgot about two years ago.
For AR cleanup:
– Match all payments to invoices
– Remove or write off uncollectible invoices
– Correct duplicate invoices
– Update customer records
If you use accrual accounting, unclean AR can inflate your income for the year.
Review and Clean Up Accounts Payable (AP)
Just like receivables, your AP must be accurate.
Check for:
– Bills that were paid but still show open
– Duplicate vendor bills
– Incorrect vendor amounts
– Missing bills from December
AP directly affects expenses, profitability, and tax deductions.
Update Payroll Records and Verify Forms
Payroll is a critical part of tax season prep because incorrect payroll affects:
– W-2s
– 1099s
– Employer taxes
– Payroll liabilities
– Year-end filings
Verify:
– Employee wages
– Bonuses and commissions
– Reimbursements
– Payroll tax deposits
– PTO payouts
If payroll liabilities weren’t cleared properly, correct them before filing.
Review Fixed Assets and Large Purchases
Any large purchase over your capitalization threshold (often $2,500) should be classified as a fixed asset and depreciated—not expensed.
Examples:
– Computers
– Machinery
– Vehicles
– Office equipment
Provide your accountant with:
– Purchase receipts
– Financing documents
– Dates placed in service
Proper classification ensures you receive the correct depreciation deduction.
Confirm Contractor Payments and Prepare 1099s
If you paid contractors $600 or more in 2025, you must issue a 1099-NEC.
Make sure:
– You collected W-9 forms
– Names and EIN/SSNs match IRS records
– Total amounts are correct
– Payments via Zelle, PayPal, Venmo, or checks are included
Incorrect contractor totals cause one of the biggest audit flags—fix them before filing.
Check for Personal Expenses Posted as Business Expenses
This is extremely common and very risky during audits. Remove:
– Grocery or personal shopping
– Entertainment not related to business
– Personal travel
– Personal subscriptions (Netflix, Spotify, etc.)
Reclassify these as OWNER DRAW or reimburse the business if paid accidentally.
Collect All Tax Documents Early
Your accountant will need:
– 1099-K forms from payment processors
– Merchant fee statements
– Loan statements (interest amounts)
– Bank interest forms
– Payroll summaries
– Inventory records
– Mileage logs
– Home office calculations
Having these documents ready avoids delays and back-and-forth emails.
Run and Review Year-End Financial Reports
Before giving anything to your accountant, run:
– Profit & Loss Statement (P&L)
– Balance Sheet
– Trial Balance
– General Ledger
Review for:
– Negative balances
– Strange variances
– Missing categories
– Old outstanding transactions
If something looks off now, your accountant will catch it later—so fix it early.
Prepare Your Tax Questions in Advance
Make the most of your time with your tax preparer by asking:
– Am I eligible for new deductions or credits?
– Should I consider becoming an S-Corp for 2026?
– How can I reduce quarterly estimated taxes?
– Should I adjust payroll or distributions this year?
– Are there tax planning strategies I should start now?
Good bookkeeping creates the foundation for great tax planning.
Final Thoughts
Tax season is smoother, cheaper, and far less stressful when your bookkeeping is accurate and up to date. By completing these essential tasks ahead of time, you give your accountant everything they need to file correctly—and you avoid costly mistakes or delays. Clean books equal clean taxes.
If you want help preparing for tax season or managing your bookkeeping year-round, Nimble Numbers is here to support you with reliable, accurate, tax-ready financials.
Nimble Numbers provides bookkeeping, payroll, tax planning, and fractional CFO services for small businesses across the United States. Book a free consultation at nimblenumbers.com or call 1-866-448-2424. Less stress, more success.
