A year-end close is a month-end close with a few extra steps and a harder deadline. Your CPA, your payroll filings, and your 1099s all lean on the same ledger, so it pays to get it right once. This checklist follows the order that saves the most rework, so you can start in November, while there’s still time to fix what you find.
Key takeaways
- Reconcile every bank, card, and loan account through December 31, then review the balance sheet line by line.
- Build the fixed-asset list, inventory count, and receivables and payables reports while the year is still fresh.
- Verify payroll against your 941s and W-2 totals, and collect W-9s for the 1099s due February 1, 2027.
- Send your CPA one organized package in early January instead of a series of follow-ups.
Start in November, not January
By November you know roughly how the year went, your vendors and your CPA are still reachable, and a problem you uncover can be fixed with a phone call instead of a scramble. Begin with the opening balances. Your January 1, 2026 numbers should match the final 2025 numbers your CPA used, including any adjustments they made. If that return was on extension, here’s what to do if you extended your 2025 return. If you’re behind on the ledger, here’s the order to do things before you work down this list. The IRS’s recordkeeping guidance is a good reference for what to keep.
Reconcile every account, then review the balance sheet
Reconcile every account through December 31
Every bank account, credit card, loan, and payment processor needs a reconciliation through the last day of the year. Do October now to flush out problems, then repeat for November and December as the statements arrive. Say a bakery’s bank statement ends at $27,430 while its ledger says $26,270. Two things explain the gap: a $1,500 check written on December 29 that hasn’t cleared, and $340 of card-processing fees the bank took out that nobody recorded. Subtract the outstanding check from the bank balance and you get $25,930. Record the fees and the ledger lands on $25,930 too. That’s a reconciliation: every dollar of difference has a name.
Review the balance sheet line by line
Once everything is reconciled, print the December 31 balance sheet and read it top to bottom like a stranger would. Cash should match the reconciled balances. Anything sitting in Uncategorized, Ask My Accountant, or Undeposited Funds needs a home. In QuickBooks Online, Opening Balance Equity should be zero. Loans and credit cards should match their statements, and payroll liabilities should tie to your filings. A negative balance in an account that shouldn’t have one, like inventory, usually points to a mis-posted transaction. Fix these now and your profit and loss statement will be closer to right before your CPA ever sees it.
Assets and inventory: the list and the count
Fixed assets and depreciation list
List every asset you bought this year: what it was, the vendor, the cost, the date it was placed in service, and whether anything was sold, traded in, or scrapped. The in-service date is what counts for depreciation, and December 31 is the cutoff for 2026, so our note on buying equipment before year-end explains the placed-in-service rule. Ask your CPA what dollar level your business uses to decide between expensing and capitalizing a purchase, and apply it consistently. Depreciation itself is your CPA’s decision; your job is to hand over an accurate list. The 2025 tax law changed several depreciation rules, which we cover in what the 2025 tax law means for small businesses.
Inventory count
If you carry stock, count it as close to December 31 as you can, and count it with a sheet, not from memory. Compare the count to the ledger, investigate large differences, and record the adjustment along with a note on damaged or obsolete items. The gap between the ledger and the shelf flows straight into your cost of goods sold, and from there into your profit. Keep the signed count sheets; your CPA may ask how you arrived at the number.
Receivables, payables, and owner transactions
Receivables and payables cleanup
Run an accounts receivable aging report and go through it customer by customer. Invoices you’ll never collect should be written off or flagged for your CPA; payments that landed without being applied to an invoice should be matched; credits sitting open should be resolved. Then do the same for payables: enter every December bill you’ve received, even if you plan to pay it in January. If you use the cash basis, remember that expenses count in the year you pay them, and December 31 is the last day for 2026. If you use the accrual basis, an unpaid bill for December work still belongs in 2026.
Owner transactions
This is where personal and business money like to mix. Move personal charges off the business card and record them as owner draws or distributions, not expenses. Record owner contributions as equity, not income. If you lent money to the business or the business lent to you, document it. For an S corporation, check that salary ran through payroll and any extra cash came out as distributions. And pull your mileage log now: 2026 has two rates, 72.5 cents per mile through June 30 and 76 cents from July 1, so the log should split at that date.
Payroll and 1099s
Payroll reconciliation and W-2 prep
Tie your payroll reports to the ledger three ways. Quarterly Form 941 wages should match the payroll register, the register should match wages in the ledger, and payroll liability accounts should be zero or explainable after the last deposit. Confirm every employee’s name, Social Security number, and address, because a typo now becomes a corrected form later. The 2026 W-2 adds Box 12 codes TP (qualified tips), TT (qualified overtime), and TA (employer contributions to a Trump account), and Box 14 splits into 14a and 14b. Your payroll provider handles most of that, but you supply the data. W-2s are due to employees and the SSA on February 1, 2027, and the IRS’s W-2 and W-3 instructions explain each box.
1099 vendor review
For payments made in 2026, the 1099-NEC and 1099-MISC threshold is $2,000, up from $600, per the IRS instructions. Run your vendor payment report, mark everyone at $2,000 or more for services, and check that a W-9 is on file for each one. Our guide to collecting W-9s before January has an email you can copy. The 1099-NEC is due February 1, 2027, so a vendor who is missing a tax ID in mid-January is a vendor you needed to email in November.
The package for your CPA
When the year is closed, send one package, not a trickle of attachments. Here’s what goes in it:
| Item | Why your CPA wants it |
|---|---|
| Profit and loss, January 1 to December 31 | The starting point for taxable income |
| Balance sheet at December 31 | Confirms assets, debts, and equity |
| Reconciliation reports and final statements | Proves the cash is right |
| Fixed-asset list with in-service dates | Drives depreciation |
| Inventory count and valuation | Sets cost of goods sold |
| Receivables and payables aging | Supports write-offs and cutoff |
| Payroll reports and 941 totals | Ties wages to W-2s |
| Vendor list with W-9s and 2026 totals | Supports 1099 filing |
| Mileage logs split at June 30 | Supports the vehicle deduction |
| Owner draws, distributions, and loans | Separates personal from business |
Timing matters. Partnerships and S corporations file by March 15, 2027 (their K-1s feed the owners’ personal returns), and individuals and C corporations file by April 15, 2027, so a package in early January leaves room for questions. Confirm the dates on IRS.gov once the 2027 calendar is posted. Our year-end tax planning guide covers the planning moves that use this package, from equipment timing to retirement contributions.
Frequently asked questions
When should I start the year-end close?
November, with October reconciled and the fixed-asset list started. Early work is what turns December into confirmation instead of discovery. Then finish November and December as their statements arrive.
Do I need to close the year if my CPA does the tax return?
Yes. Your CPA builds the return from your records, so every gap or misposted transaction turns into a question, and questions take time. A clean ledger means faster answers and fewer surprises, and you get numbers you can actually use to plan.
What if I find a mistake from earlier in the year?
Correct it in the period where it belongs and leave a short note of what changed and why. If the mistake touches something already filed, such as a quarterly payroll return, tell your CPA before you fix it. Finding errors is what a year-end review is for.
Where to go from here
Pick one account this week and reconcile it through October. By Thanksgiving you’ll know how big the job really is. If it’s bigger than you have hours for, a BooXkeeping team does catch-up work and closes the ledger every month, and a free consultation is an easy way to talk it through.
Reviewed for tax year 2026.
BooXkeeping is a bookkeeping company, not a CPA firm or a law firm. This article is general information for business owners, not tax, legal, or financial advice. Rules change and your situation is specific, so confirm anything here with your CPA or attorney before acting on it.
A year-end close is a month-end close with a few extra steps and a harder deadline. Your CPA, your payroll filings, and your 1099s all lean on the same ledger, so it pays to get it right once. This checklist follows the order that saves the most rework, so you can start in November, while there’s still time to fix what you find.
Key takeaways
- Reconcile every bank, card, and loan account through December 31, then review the balance sheet line by line.
- Build the fixed-asset list, inventory count, and receivables and payables reports while the year is still fresh.
- Verify payroll against your 941s and W-2 totals, and collect W-9s for the 1099s due February 1, 2027.
- Send your CPA one organized package in early January instead of a series of follow-ups.
Start in November, not January
By November you know roughly how the year went, your vendors and your CPA are still reachable, and a problem you uncover can be fixed with a phone call instead of a scramble. Begin with the opening balances. Your January 1, 2026 numbers should match the final 2025 numbers your CPA used, including any adjustments they made. If that return was on extension, here’s what to do if you extended your 2025 return. If you’re behind on the ledger, here’s the order to do things before you work down this list. The IRS’s recordkeeping guidance is a good reference for what to keep.
Reconcile every account, then review the balance sheet
Reconcile every account through December 31
Every bank account, credit card, loan, and payment processor needs a reconciliation through the last day of the year. Do October now to flush out problems, then repeat for November and December as the statements arrive. Say a bakery’s bank statement ends at $27,430 while its ledger says $26,270. Two things explain the gap: a $1,500 check written on December 29 that hasn’t cleared, and $340 of card-processing fees the bank took out that nobody recorded. Subtract the outstanding check from the bank balance and you get $25,930. Record the fees and the ledger lands on $25,930 too. That’s a reconciliation: every dollar of difference has a name.
Review the balance sheet line by line
Once everything is reconciled, print the December 31 balance sheet and read it top to bottom like a stranger would. Cash should match the reconciled balances. Anything sitting in Uncategorized, Ask My Accountant, or Undeposited Funds needs a home. In QuickBooks Online, Opening Balance Equity should be zero. Loans and credit cards should match their statements, and payroll liabilities should tie to your filings. A negative balance in an account that shouldn’t have one, like inventory, usually points to a mis-posted transaction. Fix these now and your profit and loss statement will be closer to right before your CPA ever sees it.
Assets and inventory: the list and the count
Fixed assets and depreciation list
List every asset you bought this year: what it was, the vendor, the cost, the date it was placed in service, and whether anything was sold, traded in, or scrapped. The in-service date is what counts for depreciation, and December 31 is the cutoff for 2026, so our note on buying equipment before year-end explains the placed-in-service rule. Ask your CPA what dollar level your business uses to decide between expensing and capitalizing a purchase, and apply it consistently. Depreciation itself is your CPA’s decision; your job is to hand over an accurate list. The 2025 tax law changed several depreciation rules, which we cover in what the 2025 tax law means for small businesses.
Inventory count
If you carry stock, count it as close to December 31 as you can, and count it with a sheet, not from memory. Compare the count to the ledger, investigate large differences, and record the adjustment along with a note on damaged or obsolete items. The gap between the ledger and the shelf flows straight into your cost of goods sold, and from there into your profit. Keep the signed count sheets; your CPA may ask how you arrived at the number.
Receivables, payables, and owner transactions
Receivables and payables cleanup
Run an accounts receivable aging report and go through it customer by customer. Invoices you’ll never collect should be written off or flagged for your CPA; payments that landed without being applied to an invoice should be matched; credits sitting open should be resolved. Then do the same for payables: enter every December bill you’ve received, even if you plan to pay it in January. If you use the cash basis, remember that expenses count in the year you pay them, and December 31 is the last day for 2026. If you use the accrual basis, an unpaid bill for December work still belongs in 2026.
Owner transactions
This is where personal and business money like to mix. Move personal charges off the business card and record them as owner draws or distributions, not expenses. Record owner contributions as equity, not income. If you lent money to the business or the business lent to you, document it. For an S corporation, check that salary ran through payroll and any extra cash came out as distributions. And pull your mileage log now: 2026 has two rates, 72.5 cents per mile through June 30 and 76 cents from July 1, so the log should split at that date.
Payroll and 1099s
Payroll reconciliation and W-2 prep
Tie your payroll reports to the ledger three ways. Quarterly Form 941 wages should match the payroll register, the register should match wages in the ledger, and payroll liability accounts should be zero or explainable after the last deposit. Confirm every employee’s name, Social Security number, and address, because a typo now becomes a corrected form later. The 2026 W-2 adds Box 12 codes TP (qualified tips), TT (qualified overtime), and TA (employer contributions to a Trump account), and Box 14 splits into 14a and 14b. Your payroll provider handles most of that, but you supply the data. W-2s are due to employees and the SSA on February 1, 2027, and the IRS’s W-2 and W-3 instructions explain each box.
1099 vendor review
For payments made in 2026, the 1099-NEC and 1099-MISC threshold is $2,000, up from $600, per the IRS instructions. Run your vendor payment report, mark everyone at $2,000 or more for services, and check that a W-9 is on file for each one. Our guide to collecting W-9s before January has an email you can copy. The 1099-NEC is due February 1, 2027, so a vendor who is missing a tax ID in mid-January is a vendor you needed to email in November.
The package for your CPA
When the year is closed, send one package, not a trickle of attachments. Here’s what goes in it:
| Item | Why your CPA wants it |
|---|---|
| Profit and loss, January 1 to December 31 | The starting point for taxable income |
| Balance sheet at December 31 | Confirms assets, debts, and equity |
| Reconciliation reports and final statements | Proves the cash is right |
| Fixed-asset list with in-service dates | Drives depreciation |
| Inventory count and valuation | Sets cost of goods sold |
| Receivables and payables aging | Supports write-offs and cutoff |
| Payroll reports and 941 totals | Ties wages to W-2s |
| Vendor list with W-9s and 2026 totals | Supports 1099 filing |
| Mileage logs split at June 30 | Supports the vehicle deduction |
| Owner draws, distributions, and loans | Separates personal from business |
Timing matters. Partnerships and S corporations file by March 15, 2027 (their K-1s feed the owners’ personal returns), and individuals and C corporations file by April 15, 2027, so a package in early January leaves room for questions. Confirm the dates on IRS.gov once the 2027 calendar is posted. Our year-end tax planning guide covers the planning moves that use this package, from equipment timing to retirement contributions.
Frequently asked questions
When should I start the year-end close?
November, with October reconciled and the fixed-asset list started. Early work is what turns December into confirmation instead of discovery. Then finish November and December as their statements arrive.
Do I need to close the year if my CPA does the tax return?
Yes. Your CPA builds the return from your records, so every gap or misposted transaction turns into a question, and questions take time. A clean ledger means faster answers and fewer surprises, and you get numbers you can actually use to plan.
What if I find a mistake from earlier in the year?
Correct it in the period where it belongs and leave a short note of what changed and why. If the mistake touches something already filed, such as a quarterly payroll return, tell your CPA before you fix it. Finding errors is what a year-end review is for.
Where to go from here
Pick one account this week and reconcile it through October. By Thanksgiving you’ll know how big the job really is. If it’s bigger than you have hours for, a BooXkeeping team does catch-up work and closes the ledger every month, and a free consultation is an easy way to talk it through.
Reviewed for tax year 2026.
BooXkeeping is a bookkeeping company, not a CPA firm or a law firm. This article is general information for business owners, not tax, legal, or financial advice. Rules change and your situation is specific, so confirm anything here with your CPA or attorney before acting on it.