Tax preparation goes more smoothly when the books reconcile to supporting records and important changes are documented. A financial report is useful, but it does not replace the evidence behind the transactions.
Confirm the starting information
Identify the business entities, tax year, accounting system, and prior filings involved. Note changes in ownership, operations, locations, or business structure. Gather prior returns and relevant notices for review.
Do not assume a prior engagement covers a new entity, state, or transaction. Discuss changes early so the scope and information requests can reflect the actual business.
Make the books explainable
- Reconcile bank and credit card accounts and identify unresolved differences.
- Prepare a balance sheet and income statement supported by the underlying ledger.
- Review uncategorized activity, owner contributions and distributions, loans, and transfers.
- Keep a list of estimates, missing records, and adjustments still under review.
Collect the supporting schedules
Depending on the business, useful schedules may include fixed asset purchases and disposals, debt balances, payroll reports, inventory records, and accounts receivable and payable. Include contracts or transaction summaries for unusual events.
The IRS explains that business records should support the income and expenses reported and that supporting documents can include invoices, receipts, and other transaction records. Keep electronic records organized and accessible as well as paper records.
Separate organization from tax conclusions
A payment’s appearance in the ledger does not by itself establish its tax treatment. Flag mixed business and personal use, unusual expenses, related-party activity, and major asset transactions for discussion.
Retention periods also depend on the type of record and the circumstances. Do not dispose of records simply because a single general time period has passed; use applicable guidance and ask about exceptions.
Use the preparation process to plan ahead
- What changed during the year that the prior return does not explain?
- Are estimated payments and owner tax obligations being coordinated?
- Are there upcoming purchases, sales, hires, or entity changes to discuss before they happen?
- What recurring recordkeeping gap should we fix for next year?
Official references
References checked September 24, 2026. Follow the linked agency guidance for updates.
General educational information. This guide does not determine the treatment of your particular tax, accounting, or financial situation. Contact us to discuss the facts and applicable requirements.
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