At Better Books Accounting, we work with lots of small businesses and independent contractors on how to keep clean and accurate records throughout the year, which ultimately enables them to maximize their tax deductions and reduce their tax liability at year end! If this is something you are interested in, here are a few checklist items you can tackle ahead of tax season to make sure you are fully prepared!

1. Organize & Reconcile Your Books
2. Review All Transactions: Check your accounting software or ledger to ensure all income and expenses are recorded.
3. Reconcile Bank Accounts: Match your records to bank and credit card statements to catch discrepancies.
4. Review Payroll Records: Ensure payroll matches your 941 filings and employee W-2s or contractor 1099s.
5. Review Accounts Receivable and Payable
6. Collect Outstanding Payments: Send reminders for unpaid invoices to boost your cash flow.
7. Pay Outstanding Bills: Clear any unpaid liabilities to avoid late fees or interest charges.
8. Pro Tip: write off uncollectible invoices as bad debts if they're unlikely to be paid.
9. Maximize Tax Deductions
10. Review Deductible Expenses: Common year-end deductions include office supplies, marketing expenses, and professional services.
11. Contribute to Retirement Plans: Max out contributions to SEP IRAs, 401(k)s, or other qualified plans.
12. Purchase Equipment: Consider buying necessary equipment to take advantage of Section 179 or bonus depreciation.
13. Prepare for Tax Filing
14. Organize Tax Documents: Gather receipts, bank statements, loan documents, and payroll records.
15. Verify W-9s and 1099s: Ensure you have W-9s for all contractors and issue 1099-NECs by January 31.
16. Review Your Tax Strategy: Meet with your accountant to discuss ways to minimize your tax liability.
17. Perform a Financial Health Check
18. Analyze Profit and Loss Statements: Identify trends in income and expenses to inform next year’s budget.
19. Review Cash Flow: Ensure you have enough reserves to cover expenses in the new year.
20. Check Debt Levels: Plan to pay down high-interest debts to strengthen your financial position.
21. Close Out Your Books
22. Make Adjusting Entries: Record depreciation, inventory adjustments, or accruals as needed.
23. Lock the Year in Your Software: Prevent accidental changes by closing the books for the year.
24. Prepare for Audits: Ensure your records are audit-ready with proper documentation for all transactions.
25. Plan Ahead for the New Year!