Every tax return is only as good as the books behind it. When your records are current and reconciled on December 31, filing in the spring is mostly a matter of reporting what is already there. When they are not, January and February turn into a scramble of missing receipts, unexplained bank transactions and guesses.
The last two months of the year are the best time to fix that. Here are ten things to clean up before the year closes.
1. Reconcile every bank and credit card account
Match each account in your books to the bank or card statement, month by month, through the latest statement you have. Reconciling is the single most important bookkeeping task, because it catches missing transactions, duplicates and errors before they reach your tax return. If you are several months behind, start with the oldest unreconciled month and work forward.
2. Categorize uncategorized transactions
Most accounting software has a holding account for transactions it could not sort, often labeled “uncategorized” or “ask my accountant.” Anything left there at year-end is either a missed deduction or a possible problem. Go through it now, while you still remember what each charge was for.
3. Separate personal and business spending
Personal expenses paid from a business account, or business expenses paid with a personal card, are among the most common bookkeeping issues for small businesses. Record them correctly as owner draws, owner contributions or reimbursements. Keeping personal and business finances apart also helps protect the liability shield of an LLC or corporation.
4. Review accounts receivable
Look at every unpaid customer invoice. Follow up on what is collectible, and talk with your advisor about invoices that are unlikely to ever be paid. If you use accrual accounting, uncollectible accounts may be deductible as bad debts; if you use cash accounting, unpaid invoices were never counted as income in the first place.
5. Review accounts payable and accrued expenses
Make sure every bill you owe is entered, and that nothing is recorded twice. For cash-basis businesses, whether you pay a bill on December 30 or January 2 decides which year the expense counts in. Make that timing a decision, not an accident.
6. Gather contractor information
For 2026 payments, most Forms 1099-NEC are only required for contractors you paid $2,000 or more, up from $600 in prior years. Run a report of what you paid each contractor this year, separate out card and payment-app payments, and collect any missing Forms W-9 now. We cover the details in our guide to the new $2,000 1099 threshold.
7. Check payroll records
If you have employees, confirm that payroll totals in your books match your payroll reports and quarterly filings. Verify employee names, addresses and Social Security numbers before W-2s are prepared, and check that any tips and overtime are tracked correctly for the new W-2 reporting rules. Forms W-2 for 2026 are due February 1, 2027.
8. Update your fixed asset list
List equipment, vehicles, computers and furniture you bought this year, with the purchase date, cost and the date each item was placed in service. Note anything you sold, traded in or threw away. Your tax preparer needs this information to calculate depreciation, and missing assets often mean missed deductions.
9. Count inventory if you carry it
Businesses that sell products should take a physical count as close to December 31 as possible and compare it with the books. Write off damaged or obsolete items and investigate large differences. An accurate year-end count directly affects your cost of goods sold and your taxable profit.
10. Organize your records
Save receipts, invoices, loan statements, lease agreements and mileage logs in one place, organized by month or category. Digital copies are fine as long as they are readable. A clear file saves hours at tax time and is your best defense if the IRS or the Maryland Comptroller ever asks questions.
Then run your year-end reports
Once the cleanup is done, run a profit and loss statement and a balance sheet for the year to date. Compare them with last year. Large swings in revenue, expenses or account balances are worth a second look before the books are closed. These reports are also what you need for a year-end tax planning meeting, where you can still make decisions that lower your 2026 tax.
Behind on your books? We can help
If this list feels like more than you have time for, you are not alone. HAMTOCK Consulting helps small businesses in Silver Spring and across Montgomery County catch up on bookkeeping, reconcile accounts and close the year with clean, tax-ready records. Learn more about our accounting and bookkeeping service and our payroll service.
Book a consultation today: call us at 240-432-2749 or email contact@hamtock.com. We reply to consultation requests within one business day.
This article is general information, not tax or accounting advice for your specific situation. Talk with us before acting.
