7 Year-End Bookkeeping Do’s and Don’ts for 2022
As 2022 comes to a close, our Lifetime Tax Advisors want to ensure you are prepared for year-end bookkeeping procedures that will affect your 2022 tax return(s). People often concentrate on the profit and loss, not realizing how much money gets lost by not also watching the balance sheet. As most of our clients know, the cleaner your books are at 12/31/22, the more efficiently we can process your end of year reports. Furthermore, clean books allow us to prep your tax return(s) in a much timelier manner, and help you monitor the financial health of your company before it becomes a problem.
Not only does your year-end bookkeeping impact our ability to process your reports and prep your return(s), but it could also help you avoid filing an extension! In fact, disordered books could result in late delivery of K1’s and tax returns, causing us to automatically file an extension. So, with all these caveats in mind, here are some year-end bookkeeping do’s and don’ts to help you wrap up 2022 successfully.
The Year-End Bookkeeping DON’Ts
1. DON'T send incomplete year-end reports
DON’T send end of year reports that are incomplete – sending reports that are incomplete will result in an incorrect tax return that could potentially provoke an audit by the IRS. Additionally, incorrect books will cost you more if our team must make additional adjustments at tax time!
2. DON'T change info in the financials after it's been reconciled
DON’T change any information in the financials once you have reconciled and entered everything for 2022; in other words, LOCK YOUR BOOKS DOWN! We make sure our clients understand that no changes to the reports should be made after submitting to our Tax Advisors.
3. DON’T delay sending year-end reports
DON’T wait until the last minute to send your end of year reports. Our team implements a ‘first in – first out’ policy. While we understand that changes can be made throughout the month of January, we ask our clients to have their end of year reports to our team no later than 1/15/23 for 2022 tax return preparation.
The Year-End Bookkeeping Do’s
1. DO reconcile all bank accounts & credit cards through the date of 12/31/22
DO ensure all accounts & credit cards are reconciled through 12/31/22 & are on your balance sheet. Unreconciled accounts lead to missing money (INCOME) & unaccounted expenses that could be used on your 2022 tax return.
3. DO make sure your accounts receivable is up to date as of 12/31/22
DO make sure your Accounts Receivable is up to date as of 12/31/22. Your Accounts Receivable report should match the general ledger. To help illustrate this important point, here is a sample report: AR Summary/Detail Report with general ledger example.
2. DO ensure liability & end of year statement balances match & are up to date as of 12/31/22
DO make sure your liability balances are current with the end of year statement balances, i.e., Mortgage Loans, Vehicle Loans, Land Loans, Line of Credit. Ideally, these statement balances should all be up to date as of 12/31/22.
4. DO clear "Ask My Accountant/Suspense" account to zero
DO ensure that if you have an “Ask My Accountant/Suspense” account it’s cleared to zero. Expenses and Income are often left sitting in these accounts. If you’re not sure how to properly characterize an expense or income, contact your accountant or our team before moving anything.
Does your 12/31/21 and 1/1/22 Balance Sheet report match? If so, WAY TO GO! That is the first step in the right direction; if not, please schedule some time with one of our staff members to go over why. A NO answer could end up making your tax bill higher than expected for 2022 preparation.
Year-End Bookkeeping & 1099s
1099’s are forms that report payments made (over $600/annually) to independent contractors. Rents and legal fees should also be monitored. When setting up vendors, all businesses should collect a W9. The vendor will let you know if you need to complete a 1099 at the end of the year.
Additional Resources & Info
1099-C, Canceling Debt
1099-MISC / 1099-NEC
A Final Bookkeeping Note
Our team at Lifetime Tax Advisors is here to make the process of preparing your tax return seamless. We strive to be your trusted advisor in Accounting/Bookkeeping and Tax. We are passionate about what we do for our clients, and we are here to help! So, please – reach out if you have any questions regarding your 2022 End of Year process, and we will be happy to help!
Tackle Your Year-End Bookkeeping with Our Help
Don’t get bogged down in the process of maintaining your tax records – let our team help you tackle your recordkeeping and beyond!