# Year-end bookkeeping checklist

A plain year-end bookkeeping checklist for a small business: get every transaction in, sort it, reconcile, read the reports and gather tax records.

Published October 27, 2026.

Year-end bookkeeping is the work you do to finish your books for the year. When it is done, your records are complete and correct, and your accountant can prepare your tax return.

The order of the steps is important. If you look at your profit before all the transactions are in, the number will change again. So do the steps in the order below. This guide is for a sole proprietor or freelancer who uses the [cash basis](https://rightobooks.com/blog/cash-vs-accrual-accounting/).

## The short version

- First, get every transaction in, through December 31.
- Then give each transaction a category and fix common mistakes.
- Then reconcile every account to its December 31 statement.
- Only then read your reports.
- Gather the tax records, send them to your accountant and back up your books.

## Words to know

- **Category:** the type of income or expense, such as "Advertising" or "Software".
- **Transfer:** money you move between your own accounts. It is not income or an expense.
- **Owner draw:** money you take from the business for yourself. It is not an expense.
- **Reconcile:** prove that your books and the bank statement agree, to the cent.

## Before December 31

Some tasks are easier while the year is still open:

- Look at your profit so far. If it is very different from what you expected, talk to your accountant now.
- Get a Form [W-9](https://rightobooks.com/blog/form-w-9-explained/) from each contractor you paid this year.
- Write down your car's odometer reading on December 31.
- Plan your last estimated tax payment. For 2026, it is due January 15, 2027. You do not have to make it if you file your 2026 return by February 1, 2027 and pay all of the tax you owe with it ([IRS Form 1040-ES](https://www.irs.gov/pub/irs-pdf/f1040es.pdf)).

## Step 1: Get every transaction in

For each [business bank account](https://rightobooks.com/blog/separate-business-and-personal-finances/), credit card, loan and payment account, get the statements through December 31. Import or enter every transaction. Check that each account has 12 months. If you are many months behind, [catch up on your bookkeeping](https://rightobooks.com/blog/how-to-catch-up-on-bookkeeping/) first. A missing month is the most common cause of wrong year-end numbers.

Also add business costs that you paid in cash or from a personal card.

## Step 2: Categorize and clean up

Give every transaction a category. "Uncategorized" should be zero. Then check these common mistakes:

- Transfers between your own accounts are not income or expenses.
- A credit card payment is not an expense. The purchases on the card were the expenses. [Reconcile each card statement](https://rightobooks.com/blog/how-to-reconcile-a-credit-card-statement/) to find this error.
- Owner draws and money you put in are not expenses or income. See [how to record owner draws and contributions](https://rightobooks.com/blog/how-to-record-owner-draws-and-contributions/).
- A loan payment is part interest (an expense) and part principal (not an expense).
- Personal purchases on a business account are owner draws.

## Step 3: Reconcile every account

Reconcile each bank and card account to its December 31 statement. Compare each loan balance to the lender's statement. The steps are in [how to reconcile a bank statement](https://rightobooks.com/blog/how-to-reconcile-a-bank-statement/). If you skip this step, every number after it is a guess.

## Step 4: Read the reports

Now run your reports for January 1 to December 31. Compare your [Profit and Loss statement](https://rightobooks.com/blog/how-to-read-a-profit-and-loss-statement/) with last year, line by line. Look into any line that changed a lot.

## Step 5: Gather the tax records

- **Contractors:** the total you paid each one. For payments made in 2026, Form 1099-NEC is generally needed for $2,000 or more ([IRS](https://www.irs.gov/businesses/small-businesses-self-employed/am-i-required-to-file-a-form-1099-or-other-information-return)). It is due January 31, or the next business day if that is a weekend or holiday ([IRS](https://www.irs.gov/pub/irs-pdf/i1099mec.pdf)). For 2026 payments, that is February 1, 2027.
- **Estimated tax payments:** every date and amount.
- **Mileage:** business, commuting and other miles. The [mileage deduction calculator](https://rightobooks.com/tools/mileage-deduction/) turns them into an amount.
- **Equipment:** what you bought or sold, with dates and prices.
- **Forms you receive:** compare each 1099 with your books.

## Step 6: Hand off and back up

Send your accountant one organized folder. See [what to give your accountant at year end](https://rightobooks.com/blog/what-to-give-your-accountant-at-year-end/). Back up your books, and keep a copy somewhere other than your computer. In many cases the IRS says to [keep records](https://rightobooks.com/blog/how-long-to-keep-business-records/) for 3 years from the date you filed your return. Some cases need longer ([IRS](https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records)).

After you send the folder, do not change the year. If you must change something, tell your accountant what changed.

## An example

Ben is a freelance web developer. (He is an example, not a real person.) Last year he looked at his profit first. Then he imported his December card statement and found $3,100 of charges that changed the profit again. He did the work twice.

This year he follows the order. He imports December, sorts every line and finds $640 of personal spending on his business card. He records it as owner draws. He reconciles each account. Only then does he read his Profit and Loss report. He reads it once, and he trusts it.

## A tip for Righto users

Righto imports bank statements as CSV, OFX or PDF files, so step 1 is quick. The Profit and Loss report and the contractor payment report cover steps 4 and 5. You can also ask your own AI agent, such as Claude Code, to suggest categories for you to check. See [how agents work with Righto](https://rightobooks.com/agents/).

## Common questions

**When should I start?**
Start the "before December 31" tasks in December. Do the main steps in January, after the December statements arrive.

**Can I do this in one day?**
If you keep your books each month, often yes. If not, start with the months that are missing. See [how to catch up on bookkeeping](https://rightobooks.com/blog/how-to-catch-up-on-bookkeeping/).

## What to do now

1. Put January 15, 2027 in your calendar for the last estimated tax payment. See all the [small business tax deadlines for 2027](https://rightobooks.com/blog/small-business-tax-deadlines-2027/).
2. Ask each contractor for a Form W-9 now.
3. Check that every account has statements for each month so far.
4. Choose one day each month to keep your books, so next year is short.

[Righto](https://rightobooks.com/download/) is free, easy to use and needs no account.

## Sources

- [Form 1040-ES (2026), Estimated Tax for Individuals](https://www.irs.gov/pub/irs-pdf/f1040es.pdf), IRS
- [Am I required to file a Form 1099 or other information return?](https://www.irs.gov/businesses/small-businesses-self-employed/am-i-required-to-file-a-form-1099-or-other-information-return), IRS
- [Instructions for Forms 1099-MISC and 1099-NEC (Rev. December 2026)](https://www.irs.gov/pub/irs-pdf/i1099mec.pdf), IRS
- [How long should I keep records?](https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records), IRS