The end of the year is the best time to clean up your books. Every error you catch now is one your accountant does not have to fix later, and every missing receipt you find now is easier to track down than it will be in April. A clear year-end routine also gives you an honest picture of how the business did.
Use this year-end accounting checklist to close the year, prepare required forms, and get ready for tax season. It builds on the same steps as a month-end close, with a few extra tasks that only come once a year.
1. Make Sure Every Transaction Is Recorded
- Enter all sales, expenses, and payments for the year.
- Match receipts to every expense. See our guide to receipt management for a simple system.
- Check for personal expenses paid from the business account, or business expenses paid personally, and record them correctly.
2. Reconcile Every Account
Compare your books to the December statements for every bank account, credit card, and loan. Each balance in your books should match the statement after you account for timing differences such as outstanding checks. Our step-by-step guide to bank reconciliation walks through the process.
3. Review What Customers Owe You
Run an aging report for your accounts receivable. Follow up on late invoices and decide which balances are unlikely to be collected. If a customer debt has become uncollectible, read about the rules for writing off bad debt before you remove it from your books.
4. Review What You Owe
Check your accounts payable list against vendor statements. Make sure bills that belong to this year are recorded and that nothing has been entered twice.
5. Count Your Inventory
If you sell products, take a physical count at year-end and compare it to your records. The ending inventory figure affects your cost of goods sold, and that changes your profit. Note damaged or obsolete items. Our guide to inventory accounting explains the basics.
6. Update Your Fixed Asset List and Depreciation
List equipment, vehicles, and other long-term assets you bought or sold during the year, with dates and costs. Record the year’s depreciation. For how it works, see depreciation for small business.
7. Prepare 1099 Forms for Contractors
If you paid independent contractors in the course of your business, you may need to send them Form 1099-NEC. The reporting threshold changed recently. According to the IRS instructions for Forms 1099-MISC and 1099-NEC, nonemployee compensation of $2,000 or more is reported for payments made in 2026. For earlier years, the threshold was $600.
- Collect a Form W-9 from each contractor, ideally before you pay them.
- Form 1099-NEC is generally due to both the contractor and the IRS by January 31.
If you are unsure whether someone is a contractor or an employee, read independent contractor vs. employee.
8. Prepare W-2 Forms for Employees
If you have employees, Forms W-2 are generally due to employees and to the Social Security Administration by January 31. Review your payroll totals for the year and confirm names, addresses, and Social Security numbers. Our guide to small business payroll covers the payroll forms.
9. Plan Your Last Estimated Tax Payment
The fourth-quarter estimated tax payment for the year is generally due in mid-January of the following year. Review your profit so far and estimate what you still owe. See our guide to estimated taxes for details, and use our self-employment tax calculator for a quick estimate.
10. Review Your Financial Statements
Once the books are clean, run your year-end reports:
- The profit and loss statement shows revenue, expenses, and net profit for the year.
- The balance sheet shows what the business owns and owes on the last day of the year.
- The cash flow statement shows where cash came from and where it went.
Compare the results with last year and with your budget. Large or unexpected changes are worth a closer look.
11. Organize Records for Your Tax Return
- Gather year-end statements, 1099s you received, payroll reports, and loan interest statements.
- Save a copy of your year-end financial statements.
- Send your accountant a list of questions about unusual transactions.
Our guide to small business tax planning covers more ways to prepare.
12. Set Up the New Year
- Back up your accounting file and lock the prior period if your software allows it.
- Create a budget for the new year.
- Put next year’s tax deadlines on your calendar.
Year-End Checklist Summary
| Task | When |
|---|---|
| Record all transactions and match receipts | December |
| Reconcile bank, credit card, and loan accounts | After December statements arrive |
| Review receivables and payables | December |
| Count inventory | Last day of the year |
| Update fixed assets and depreciation | Year-end |
| Send 1099-NEC and W-2 forms | Generally by January 31 |
| Fourth-quarter estimated tax | Generally mid-January |
| Run and review financial statements | January |
Frequently Asked Questions
When should I start my year-end close?
Start in December with the tasks you can do early, such as reviewing receivables and collecting W-9 forms. Finish the reconciliations after the December statements arrive.
What is the 1099-NEC threshold for 2026?
For payments made in 2026, the IRS instructions list a $2,000 threshold for nonemployee compensation. Check the current instructions each year, because the IRS says the amount may be adjusted for inflation starting in 2027.
Do I need an accountant for year-end?
Not always, but many owners find it helpful. Doing the checklist yourself first makes any professional help faster and less expensive.
Conclusion
A year-end close turns a year of transactions into reliable numbers. Record everything, reconcile every account, prepare your 1099s and W-2s on time, and review your financial statements before tax season. Work through the checklist a little at a time in December and January, and the new year will start with clean books.
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