If you’re planning to hand your books off for tax prep this year, a little cleanup now can save you real money, and a lot of back-and-forth emails, later. Accountants bill for the time it takes to sort through messy data, and a disorganized file often means missed deductions simply because nobody can tell what a transaction actually was.
Here are the five things worth fixing before you hand over access.
1. Clear Out “Uncategorized Income” and “Uncategorized Expense”
These two catch-all accounts are where transactions land when nobody assigned them a category. Every dollar sitting in there is a dollar your accountant either has to guess about or ask you about, and guesses tend to land on the safe, non-deductible side. Go through each one and assign it to the right account.
2. Reconcile Every Bank and Credit Card Account
If your accounts aren’t reconciled, your accountant can’t trust that your P&L reflects reality. Reconcile each account against its actual statement, month by month, so the ending balance in QuickBooks matches what the bank shows. This alone is often the single biggest time-saver in a tax-prep engagement.
3. Match Business and Personal Expenses Correctly
Any personal expense that accidentally got run through the business account should be reclassified, usually to an owner’s draw or shareholder distribution, not left sitting in a business expense category. Mixing the two is one of the fastest ways to lose a deduction in an audit, and it’s an easy fix if you catch it before your return is filed.
4. Clean Up Open Invoices and Bills
Old open invoices that were actually paid, and old open bills that were actually settled, distort your income and expenses for the year. Match every open invoice to the payment that closed it, and do the same for bills. If something really is uncollectible, write it off properly instead of leaving it open.
5. Confirm Payroll and 1099 Contractor Totals Match Your Reports
Your books should match what your payroll provider reported, and every contractor you paid $600 or more should be flagged for a 1099. Reconcile these now, since January’s 1099 deadline comes up fast once the new year starts, and mismatched payroll numbers are one of the more common reasons a return gets delayed.
Why This Is Worth Doing Before, Not During, Tax Season
Every hour your accountant spends untangling your books is an hour they’re not spending finding deductions or planning ahead for next year, and depending on how your engagement is billed, it can add directly to your invoice. Clean books also mean a faster turnaround, since your preparer isn’t stuck waiting on answers to “what was this $4,200 charge in March?”
Don’t Have Time to Do This Yourself?
If your QuickBooks file needs more than a quick tidy-up, or you’d simply rather have someone else handle it before tax season gets busy, I offer flat-fee QuickBooks cleanups covering everything above: reconciliation, categorization, A/R and A/P, and payroll and contractor totals. Reach out at smithtaxpro.com and let’s get your books ready before your return is due.