The businesses that walk into tax season calm and the businesses that walk into it scrambling are usually separated by one thing: how much of the year-end close actually got done before December 31, rather than reconstructed afterward.
Why This Matters More Than It Seems
Tax season doesn’t create the underlying problems in a business’s books. It exposes them. A clean close means the return-preparation process is verifying already-accurate numbers. A messy close means it’s finding and fixing problems for the first time, under deadline pressure.
Reconciliation Checklist
Before the books are considered closed for the year, every account should be reconciled against its external source:
- Bank accounts — every transaction matched, no unexplained differences
- Credit card accounts — statements reconciled, personal and business expenses cleanly separated
- Loan accounts — principal and interest correctly split, balances matching lender statements
- Intercompany accounts — balances between related entities agreeing on both sides
Fixed Assets and Depreciation
Review new asset purchases against current depreciation elections
Confirm bonus depreciation and Section 179 decisions are documented, not just defaulted
Update the fixed asset schedule for any disposals or write-offs during the year
Review new asset purchases against current depreciation rules and elections. Confirm that bonus depreciation and Section 179 decisions are properly documented, and update the fixed asset schedule for any purchases, disposals, or write-offs during the year. Year-end is a good time to review whether depreciation treatment has been recorded correctly and whether the business’s current tax strategy is reflected in the books.
Payroll and Information Return Preparation
- Confirm employee and contractor classifications are correct before W-2s and 1099s are generated
- Reconcile payroll reported to the state and federal authorities against amounts withheld and remitted
- Verify that year-end payroll adjustments, bonuses, tips, overtime, and other reportable compensation are accurately recorded and supported by the payroll records
Errors caught in a year-end review are corrections. The same errors discovered during return preparation, or worse, after filing, become amendments, and amendments cost more time and create more client anxiety than getting it right the first time.
A Realistic Year-End Timeline
- Early December: Begin reconciliations for all accounts through November
- Mid-December: Review fixed asset and depreciation decisions for purchases made during the year
- Late December: Finalize payroll classifications and confirm year-end accruals
- First week of January: Complete final reconciliations for December activity
The Payoff
A close finished before the calendar turns doesn’t just make tax season faster. It gives the business owner accurate numbers to make final year-end decisions with, rather than estimates they’ll have to revisit once the books catch up.