Most tax season stress has nothing to do with tax. It comes from opening the books in February and finding 47 bank feed transactions nobody ever categorized, two credit card accounts that have not been reconciled since June, and a client invoice from last spring that is still sitting in accounts receivable.
Your accountant can only prepare a return from the numbers in front of them. If those numbers are wrong, the return is wrong, or it is late while everyone untangles the year. Cleaning up in the middle of filing season also costs more, because the work is rushed and usually done by someone who was not there when the transactions happened.
The good news is that most of this is predictable. The same handful of problems show up in almost every small business file, and you can find and fix them months before any deadline.
Start with the dates that apply to you
Tax calendars differ a lot between countries, and they do not always follow the calendar year. A few examples so you can see the range:
- US: Sole proprietors reporting on Schedule C generally file with their personal return in mid-April.
- UK: Self Assessment for the tax year ending 5 April has an online filing deadline of 31 January the following year.
- Canada: Self-employed individuals usually have until 15 June to file, but any tax owing is still due 30 April.
- Kenya: Individual returns to the KRA are due by 30 June for the previous calendar year.
Confirm your own deadline and your financial year end with your accountant. Then work backwards. If your filing date is four months away, your books should be finished at least six to eight weeks before that, which leaves room for questions and corrections.
Reconcile every account before you do anything else
Reconciliation is where hidden errors surface, so it comes first. That means every bank account, credit card, loan, and payment processor such as Stripe, PayPal, or Square, reconciled through the last day of the tax year.
Take a fictional example. Marisol runs a small design studio and uses QuickBooks Online. Her business checking account shows a bank balance of 18,640.25, but QuickBooks says 21,905.10. The gap of 3,264.85 looks like one big mistake, but when we work through it, it is really three smaller ones:
- A client payment of 1,850.00 was recorded twice, once by the bank feed and once by a manual entry.
- A software subscription of 414.85 was entered in the wrong month, so it appears as a timing difference.
- A deposit of 1,000.00 was matched to the wrong invoice, leaving the correct invoice open.
None of these is dramatic. Together they overstate her cash and her income for the year. If she had filed without reconciling, she would have paid tax on money that was never earned twice.
If an account has not been reconciled in months, start from the last month that you know was correct and work forward one month at a time. Do not try to reconcile a full year in a single sitting, because the differences compound and become hard to trace.
Clear the bank feed backlog
Bank feeds are convenient, and they are also where categorization quietly falls apart. Transactions get accepted in bulk, coded to the wrong account, or left sitting in the review queue.
Go through the queue and look for three things in particular. Anything categorized as "uncategorized income" or "uncategorized expense" needs a real home. Transfers between your own accounts should be recorded as transfers, not as income and expense, or your revenue will be inflated. And any vendor that was coded differently from month to month should be made consistent, because your profit and loss report is only reliable if the same cost always lands in the same account.
Marisol's queue had 47 unreviewed items totaling 12,318.40. About a third turned out to be client payments that belonged against open invoices, which is why her receivables looked higher than reality.
Separate personal spending from business spending
This is one of the most common problems in small business books, and it matters for tax. If you paid for groceries, a family holiday, or your personal phone plan from the business account, those are not business expenses. They should be reclassified to owner's draw (or the equivalent for your entity type, such as shareholder loan or owner's equity account).
Leaving them in as expenses reduces your reported profit, and if the return is ever reviewed, personal costs claimed as business costs are difficult to defend. It is far easier to correct them now with a clear note than to explain them later.
The reverse also happens. If you paid a genuine business cost from a personal card, record it properly as a reimbursable expense or owner contribution, so you do not lose a legitimate deduction.
Check payroll, sales tax, and other liabilities
Anything you collected on behalf of a tax authority is not your income. That includes payroll withholdings, employer taxes, and sales tax, whether that is US state sales tax, GST/HST in Canada, VAT in the UK, or GST in Australia.
A frequent error is to record these amounts as revenue or as ordinary expenses instead of running them through liability accounts. When that happens, the liability balance on your balance sheet no longer agrees with what you actually owe, and your income is overstated.
Compare your payroll and sales tax liability accounts against the returns you filed and the payments you made. They should tie out. If the books say you owe 2,300.00 in sales tax and your last filing says you owe nothing, one of them is wrong, and you want to know which before your accountant asks.
Review receivables and payables for old items
Open your aged receivables report and look at anything more than 90 days old. Some of those invoices are simply unpaid and deserve a follow-up. Others were paid and never matched, which often shows up as money sitting in an undeposited funds account.
If a balance is genuinely uncollectable, discuss it with your accountant. Depending on your jurisdiction and accounting method, a bad debt write-off may be allowed, but the rules differ, and the timing matters.
Do the same with accounts payable. Bills that were paid but never marked as paid, or duplicate bills from the same supplier, can inflate your expenses and liabilities at year end.
Fix opening balances and parent account balances
When books have been through a software migration or a change of bookkeeper, the opening balances are often where errors hide. A balance may have been posted to a parent account rather than the right subaccount, or a prior year balance may not agree with last year's filed return.
Compare the opening equity, loan balances, and fixed asset values with last year's final numbers. If they do not agree, the difference has to be explained, not simply adjusted away.
Gather the supporting documents
Once the numbers are right, make sure you can prove them. Most tax authorities expect you to keep records for several years, and the exact period varies by country, so ask your accountant for yours.
At a minimum, collect:
- Year-end bank and credit card statements
- Loan statements showing interest paid
- Receipts or invoices for larger purchases and any asset over your capitalization threshold
- Payroll summaries and contractor payment records
- Prior year tax return and any tax authority correspondence
Keep them in a single folder, digital if possible, named by year. Attaching receipts directly to transactions in QuickBooks Online or Xero saves you from hunting later.
Run a simple year-end review
Before you send anything to your accountant, run the profit and loss and balance sheet for the full year and read them like a stranger would. Ask whether anything looks strange. A utilities bill that is triple the usual amount, a revenue month that is far lower than the rest, or a negative balance in an account that should never be negative are all signs of an error.
Compare this year's figures with last year's. Large swings should have an explanation you can put into a sentence. If you cannot explain a number, your accountant will have to ask, and that is where time and fees start to grow.
A practical takeaway
You do not need to finish all of this in one weekend. Pick one task each week: reconcile a single account, clear a month of the feed, review one liability. By the time your accountant asks for the file, you will have already done the hard part, and the return becomes a matter of reporting rather than repair.
If your books are already behind and you would rather not face the backlog alone, I can review the file, clean up what needs fixing, and get your records ready well ahead of your deadline. Get in touch here and we can talk through where your books stand today.