Every spring, CPAs spend hours fixing their clients' books before they can start on the tax return. That time shows up on your bill, and messy records are a common reason returns get extended. Handing over clean books is one of the easiest ways to lower your tax preparation cost and reduce stress.
Here is what your CPA typically needs from you.
The core package
- Year-end financial statements: a balance sheet and profit and loss for the full year, matching your accounting records
- The general ledger: every transaction for the year, so your CPA can check anything that looks unusual
- Bank, credit card and loan reconciliations for December, showing year-end balances match the statements
- Fixed asset details: what you bought or sold during the year, with dates and amounts, so depreciation is right
- Loan statements showing interest paid and the year-end balance
- Contractor payments: a list of contractors you paid, with amounts and W-9s on file, for 1099 reporting
Common problems to fix before year end
- Owner transactions mixed with business ones. Personal spending on a business card should be recorded as owner draws, not expenses.
- Uncategorized or "ask my accountant" transactions. Clear these out before December 31, while you still remember what they were.
- Unreconciled accounts. A bank balance in your books that doesn't match the statement is the first thing a CPA will question.
- Missing loan entries. Recording the full loan payment as an expense, instead of splitting interest and principal, overstates expenses.
Start in the fall, not in March
The best time to prepare is October or November. You have time to fix problems, find missing documents and talk with your CPA about year-end planning before the year closes.
SalBooks clients receive a tax-ready year-end package as part of every plan. We send it straight to your CPA, or to you to pass on. Note that SalBooks does not prepare tax returns; your CPA or tax preparer does.