What your CPA needs from you at year end: a contractor checklist

Tax season is a scramble for a specific, fixable reason: nobody closed the months as they went. Everything your accountant asks for in March is something that could have been settled in the month it happened, when you still remembered what the transaction was.

This is the list. If these are all true when you hand over, the conversation with your CPA takes one email.

Bank and card accounts

• Every business bank account reconciled through December 31, matching the closing statement balance exactly
• Every credit card reconciled the same way
• Any account you stopped using during the year reconciled through its final transaction, not abandoned mid-year
• Personal transactions run through business accounts identified and reclassified as owner draws rather than expenses

That last one is the most common source of an amended return. It is also the easiest to fix in the month it happens and the hardest to reconstruct nine months later.

Loans and financing

• Every loan and equipment finance agreement with a current statement showing the December 31 balance
• Payments split correctly between principal and interest, rather than the whole payment sitting in an expense account
• Vehicle and equipment purchases identified as fixed assets, not expensed
• Any line of credit drawn or repaid during the year traced

Splitting principal and interest is where DIY books most often go wrong. Booking the full payment as an expense overstates your costs and understates what you still owe.

Payroll

• All four quarterly 941 filings
• State unemployment filings
• W-2s and W-3 reconciled against what the books show for wages
• 1099-NEC issued to every subcontractor paid $600 or more during the year
• Officer or owner compensation identified separately from staff wages

Subcontractor 1099s are worth checking carefully in the trades, because the threshold catches people who only worked a couple of jobs for you.

Accounts receivable and payable

• An aged receivables list as at December 31
• Anything genuinely uncollectible identified rather than left sitting as an asset
• An aged payables list, including anything invoiced to you in December but not paid until January
• Customer deposits and progress payments identified as deposits rather than recognised as revenue

Inventory and materials

• A physical count of any material held at year end, if you carry stock
• Material bought for a specific job but not yet installed identified as work in progress

Many contractors carry no meaningful inventory. If you carry material on trucks or in a yard, your accountant needs a number.

Documents to hand over

• Any new equipment purchase invoices
• Insurance policies, especially workers compensation
• Vehicle mileage logs
• Home office details if you claim it
• Last year's tax return, if this is your first year with a new preparer

The point of all of this

Every item above is trivially answerable in the month it happened and genuinely difficult to reconstruct in March. That is the entire reason a monthly close exists, and it is why owners who close each month describe tax season as an email while owners who do not describe it as two weeks.

If you are reading this in March, none of it is lost — it is catch-up work, and it is normal. If you are reading it in October, this is a very good month to start closing properly.

We do your most recent month free, closed to this standard, so you can see what a finished month actually looks like.