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Getting Your QuickBooks Online Ready For An Easier Tax Time

January 23, 2019

Somehow it’s already late January, and tax time is coming at all of us - full speed ahead!

Whether you are using QuickBooks Online for a Sole Proprietorship, a Partnership or an S-Corporation, you will want to make sure that those books are ready to go for tax preparation.  Making sure the books are cleaned up and accurate will give you the most beneficial results on the tax returns, and it’s also the best defense against an audit.  We've compiled the main things you need to review and take care of before your QBO files are ready for tax preparation.

All Transactions Entered, Reviewed & Reconciled

It is absolutely crucial that all transactions for the year have been entered into your QuickBooks Online file!  You want to have the most accurate picture of the business finances possible. Missing transactions can equal missed deductions and/or missed income that can make the tax return inaccurate. That can have an effect all the way to the personal returns! Make sure you’ve connected to all of your bank feeds and credit cards and imported transactions through the end of the year also!

Clean up any Uncategorized Expenses or Income, Unapplied Cash (bill payment or payment income), Ask My Accountant and Undeposited Funds entries. Be careful fixing these to watch for duplicates of entries that have already been reconciled. A QuickBooks Online ProAdvisor can help with any that you’re unsure of, and we can help connect you with one, just email us at support@halontax.com.

All bank and credit card accounts must be reconciled in QBO through the end of the year. This is a vital part of making sure everything is recorded, and accounts are balanced as they should be.

Once everything has been reconciled, I recommend pulling up an Income Statement and a Balance Sheet for the full year. Then reviewing accounts and transactions to make sure things are classified as they should be.  Make any changes needed.  

Review Customer & Vendor Accounts

Review Customers and Vendors to look for errors, duplicates or missing information.  Any 1099 vendors should have that indicated in their vendor information, along with the identification number they provided on their W-9. Try always to get a W-9 from contractors as soon as you know you will be paying them, or once you receive an invoice from them. If your client hires them, it is beneficial to train the client to get the W-9 before work is performed, or as quickly as possible. Review Accounts Receivable and Accounts Payable aging reports and clean up old balances and errors that might be causing issues. You may need to write off older items.

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PREPARE 1099’s

A quick mention to make sure any 1099’s that need to go out (these need to mail by January 31st!) have already been prepared and are on their way.  If not, hopefully, you already have the W-9 information in your QBO file and have 1099 Vendor checked in their details. You can prepare 1099’s in QBO Plus if you have it, or when ready you can use a solution such as Track1099, Tax1099 or Yearli to sync your QBO file and get those taken care of!  They can mail and/or email them to the vendors, and will also file with them with the IRS. Click for link to 1099-Misc instructions if you have questions about those.


If there is inventory, a physical count should be done as close to year end as possible. You will then be ready to reconcile the physical inventory to the inventory in QBO. If you are tracking inventory in QBO Plus you can make an Inventory Qty Adjustment using either the Plus (+) icon or the Gear icon. Otherwise, a journal entry will need to be made to the inventory asset and an appropriate expense account (ex shrinkage, damaged goods). For more complex inventory questions for QBO, search Intuit’s QB Community.


Review assets added during the year, and remove any that have been disposed of or sold.  

A list of assets should include date acquired, description and amount paid.  Anything under $2,500.00 should not be a fixed asset, those should just be categorized as a regular expense. If disposed of, include the date of disposal and if any money was received for that asset. You will need to make a journal entry to unrecognize the asset (take it off the books) and get rid of the accumulated depreciation for that asset as well, including any current year depreciation. If you have a depreciation schedule for the year, make sure that you have made the entries to Depreciation Expense and Accumulated Depreciation, and balanced to that schedule.


If the company is making loan payments, the loan balances need to be adjusted so the interest paid during the year is correct, which should make the loan balance correct also. Banks will generally include the interest paid and principal balance for the end of the year with the statement for that month. If it is a loan from an owner, you should have an amortization schedule for that loan and balance it with an adjusting entry for year-end.


Make sure all wages and payroll taxes balance with payroll reports for the year. Make adjustments if needed. Shareholder distributions should be checked to make sure they reflect owner percentages correctly.  For example, if the company has two owners with 50% each ownership, their shareholder distributions need to be precisely the same. If there are multiple owners with different percentages of ownership, the distributions when added up then divided by each owners percentage should calculate to what they received.  If amounts are not correct, that should be fixed before year end.


Once all your fixes are complete, review the Income Statement and Balance Sheet again to ensure that everything is correct and ready to go. Look for any negative balances that shouldn’t be there, or unusual amounts, and anything that still needs to be categorized.  Make any changes necessary.  These will be your final numbers for the year and for your tax returns, so the need to be as accurate as possible.


Once you have done all the work to verify your numbers for the year, you want to make sure those don’t change!  In QBO you can set a closing date and password. This ensures that the only way something can be added or changed up to a specific date a password must be used. Go to the Gear icon, under Your Company pick Account and Settings, and then Advanced.  Under Accounting at the top, the last option is “Close the books.” Once you choose that option and answer the three initial questions, check the box in front of “Close the books” and enter your Closing date.  In the next drop-down menu, select “Allow changes after viewing a warning and entering the password.”  Enter and confirm a password that you will keep to yourself, and then select “Save.”  Now no one but you can change the books through the closing date!


Hurray!  The books are now ready for tax preparation!  You can send an invitation for the accountant to view the account, or if they already have access just let them know they’re ready. If you are using Halon for the tax preparation, it is now time to sync the books!  No need to send any receipts, extra files or added paperwork. Once the taxes are complete, you can make any adjusting entries needed (in the current year) and say goodbye to the previous year altogether!

With all of the options QuickBooks Online has to offer, end of the year accounting can be much easier and less stressful than it is with other software!  QBO can also make daily tasks easier.  It’s mobile so you can access and add things on the go. Receipts for expenses can be uploaded to QBO for documentation. It’s cloud-based (all the rage these days) so no more daily back-ups. If you are not already using QBO, the new year is a great time to start!   Halon can easily convert your QuickBooks Desktop, Xero or spreadsheet to QuickBooks Online for a small price, just contact support@halontax.com for details!

Amy Stocking

Amy has upwards of 25 years of bookkeeping and tax preparation experience and is a QuickBooks Online ProAdvisor with Advanced certifications. Her experience ranges from retail tax preparation to CPA firm tax prep, and experience preparing financials for large to small companies of all types.  While always enjoying learning new things, she also loves sharing knowledge to help others.

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