Getting Your Books and Records in Order for Year-End Tax Preparation

As the end of the year approaches, businesses face one of the most important—and potentially costly—administrative tasks of the calendar year: preparing books and records for tax preparation. This may seem like a burden, but organizing financial records will reduce the stress of filing by increasing accuracy, minimizing the risk of costly mistakes, and allowing for better strategic planning. To make the process smoother and more strategic, consider these key steps to help prepare for year-end tax filing:

1. Clean and Reconcile Records

Accurate year-end reporting starts with clean records. Every bank account, credit card, and loan should be reconciled to external statements, and balances on the balance sheet should match supporting documentation such as invoices, loan statements, and supporting schedules. Paid-off loans, disposed assets, or inactive accounts should be properly removed rather than left sitting in the books. Reconciling accounts early can help with the accuracy of the year-end snapshot and avoid overstating income, liabilities, or expenses.

2. Review Income and Expenses

A thorough review of income and expense activity helps ensure transactions are categorized correctly. Misclassified items can distort taxable income, while unrecorded expenses may cause the organization to miss out on deductions. Every transaction should be accounted for, including small out-of-pocket purchases or reimbursements that are easy to overlook. This is also a good time to consider whether accelerating expenses or deferring income could improve the company’s tax position.

3. Organize Payroll and Benefits Information

Payroll and employee benefits often require special attention at year-end. Wages, bonuses, and withholdings should be verified against payroll registers, and fringe benefits, such as health insurance, vehicle use, etc., need to be correctly documented. Ensuring accuracy now reduces the risk of errors on W-2s or other payroll-related tax filings. Adjusting journal entries may be required for items like accrued vacation, year-end bonuses, or retirement plan contributions. It is also important to accrue any profit sharing or cash balance plan payments that are usually overlooked at year end that provide the opportunity to defer the payments but take the tax deduction.

4. Prepare for Tax Compliance Obligations

Beyond federal income tax, businesses often face obligations for sales tax, state and local taxes, or industry-specific filings. Accounts receivable and accounts payable should also be reviewed and cleaned up. Writing off uncollectible receivables and removing stale payables provides a truer picture of taxable income. Confirming that all contractor payments are properly recorded will also make preparing 1099s much smoother.

5. Look Ahead with Forecasting and Budgeting

Once books are cleaned up, businesses can shift their focus to the future. Comparing actual results to budgeted figures highlights performance trends and aids in next year’s tax planning. Forecasting cash flow and anticipated tax liabilities helps with timing investments, planning expenses, and ensuring sufficient liquidity. Having reliable financial data makes budgeting more accurate and gives decision-makers greater confidence heading into the new year.

6. Document and Retain Supporting Records

Finally, strong recordkeeping is essential. Every major transaction, whether it involves equipment purchases, loans, or unusual entries, should be backed by documentation. Adjusting journal entries, such as those for depreciation or amortization, should be supported by clear schedules and statements. Digital filing systems can make this process easier, ensuring receipts, invoices, and contracts are organized and accessible in case of audit or future review.

Key Takeaways

Getting the books in order ahead of year-end tax preparation isn’t just about compliance; it’s about clarity, insight, and control. Clean, reconciled records reduce the chance of errors, speed up the filing process, and help avoid costly penalties. More importantly, they give business owners and finance teams a clear view of the company’s financial position at a critical point in the year.

When records are accurate and up to date, tax advisors can provide more meaningful guidance, whether that means identifying deductions, planning for upcoming liabilities, or developing strategies to strengthen cash flow. A well-prepared set of books also serves as a foundation for forward-looking decisions by informing budgets, investment choices, and operational planning for the year ahead.

Ultimately, year-end preparation should be seen as more than a compliance exercise. It’s an opportunity to assess performance, uncover trends, and set a roadmap for future growth. Businesses that treat year-end as a chance to step back, organize, and plan position themselves for a smoother tax season and greater long-term stability and success.

How an Outsourced Provider Can Help

Managing books and records can be overwhelming, but there are outsourced accounting providers, like Anchin’s Client Accounting Advisory Services (CAS) team, that can assist in and streamline this process. Outsourcing provides both the day-to-day accounting structure and the higher-level advisory insight needed to make year-end preparation more efficient and strategic for companies in all industries. From cleaning up records and reconciling accounts to developing forecasts and budgets, an outsourced provider helps ensure financial information is accurate, timely, and positioned to drive better decisions in the year ahead.

For more information, please contact Anthony Carrella, Partner and Leader of Anchin’s CAS Group, or your Anchin Relationship Partner.