Year-end bookkeeping checklist for Colorado small businesses.
The 12-step close we run for every monthly client — what to reconcile, when to true-up, which deadlines have hard penalties, and how to stop scrambling in March.
By Kali Gilliland · April 25, 2026
Most small business owners we onboard arrive in late January with three months of unreconciled bank statements, a stack of vendor 1099 forms that haven't been collected, and a tax preparer asking for things nobody documented. The scramble is avoidable. A real year-end close starts in October — not the second week of January when everyone is panicking.
Here is the 12-step year-end checklist we run for every monthly bookkeeping client. If you are doing your own books, this is the work that has to get done before your tax preparer can file.
1. Reconcile every bank and credit card account through December 31
Beginning balance, ending balance, every transaction in between. Not "matched" in QuickBooks — actually reconciled to the statement. We use the statement balance reconciliation feature, not the bank-feed match button. The two are different. Bank-feed match catches transactions; reconciliation confirms completeness.
Do this for every account: checking, savings, credit cards, lines of credit. A missed reconciliation here cascades into the rest of close.
2. Run an aged accounts receivable report and write off the dead ones
Anything older than 90 days, decide: still collectible, or write it off as bad debt? Bad-debt write-offs are deductible in the year they're written off — but only if you've been recognizing the revenue all along on the accrual basis. Cash-basis businesses can't write off bad debt because they never recognized it as income.
3. Run aged accounts payable and pay what you can before December 31
If you are on cash basis, expenses are deductible when paid. Paying open A/P before December 31 accelerates the deduction into the current year. If your year-end income is high and you have cash available, this is the easiest way to shift several thousand dollars of deduction into the current year.
4. Inventory count (if you carry inventory)
A physical count, not just the QuickBooks number. Compare against book inventory. The variance is a year-end adjustment — shrinkage if it's smaller, an overage adjustment if larger. Most product businesses we audit have 3–8% variance from book to actual.
5. Fixed asset additions and dispositions
Pull every asset purchase over $2,500 (your capitalization threshold may differ). Decide: capitalize and depreciate, or expense under Section 179 / bonus depreciation. Section 179 election needs to be made on the current-year return, so the categorization happens at close.
Also document any asset dispositions — sold, scrapped, traded in. Gain or loss on disposition is a current-year tax event.
| Asset class | Common 2026 treatment |
|---|---|
| Office furniture, computers | Section 179, full year-1 deduction up to limit |
| Light vehicles (under 6,000 lbs) | Limited annual deduction (luxury auto rules) |
| Heavy work trucks (over 6,000 lbs) | Section 179 + bonus depreciation, often full year-1 |
| Real property improvements | 15-year QIP if commercial, with bonus eligibility |
| Software | 3-year amortization or Section 179 for off-the-shelf |
6. Collect W-9s and prepare 1099-NEC for contractors
Any contractor you paid $600 or more during the year needs a 1099-NEC by January 31. Collect a W-9 from each one if you don't already have it. Late or missing 1099 filings carry penalties of $60–$330+ per form.
Common gotcha: payments via credit card or third-party payment processor (Stripe, PayPal, Square) do not require a 1099 from you — the processor issues 1099-K. ACH and check payments do require 1099-NEC.
7. Payroll true-ups
If you ran payroll yourself or used a service, verify:
- Total wages match your books
- Federal and state withholding match deposits made
- FUTA / SUTA wage base limits handled correctly
- S-corp owner W-2 reflects health insurance addback if applicable
- Group-term life insurance over $50,000 added to W-2 wages
The W-2 deadline is January 31. Errors discovered after that require corrected W-2s (W-2c), which is annoying and expensive.
8. Owner draws and distributions documented
For S-corps, distributions need to come from retained earnings or current-year profit. Distributions in excess of basis become taxable as capital gains — a surprise nobody wants. We track basis on a workpaper and flag any year where distributions risk exceeding it.
9. Sales tax true-up
Colorado sales tax is a moving target with home-rule cities. Year-end is a good moment to:
- Confirm all returns filed for state and home-rule cities you operate in
- Reconcile the sales-tax payable account on the balance sheet to actual remittances
- Verify customer exemption certificates are on file for any tax-exempt sales
10. Quarterly tax planning + year-end Q4 estimated payment
Final estimated tax payment for federal and Colorado is due January 15 for the prior tax year. Run a year-end projection and pay the right amount — both underpayment penalties and overpayment-as-interest-free-loan-to-the-government are easy to avoid with one calculation.
11. Retirement contribution decisions
SEP-IRA contributions can be made up until your tax return deadline including extensions, so there's flexibility. Solo 401(k) employee deferrals had to be elected by December 31 (employer side has more time). HSA contributions follow tax-deadline rules. Decide and fund.
12. Close the books and produce the package
Final P&L, balance sheet, and statement of cash flows for the year. Lock the prior period in QuickBooks (Settings → Advanced → Close the books) so the historical data stays clean. Hand the package to your tax preparer with a short note on anything unusual.
January 15 — Q4 estimated tax payment (federal + Colorado).
January 31 — W-2s to employees, 1099-NECs to contractors, 940/941 employer filings.
March 15 — S-corp (1120-S) and partnership (1065) returns, or extensions.
April 15 — Individual returns (1040), C-corps (1120), Q1 estimates for the new year.
What changes if you are on monthly bookkeeping with us
If we run your books month-to-month, items 1–4 are already done by mid-January because we've been closing each month all year. Items 5–7 happen in early January as part of normal year-end. The whole list typically wraps in 10 business days, not 6 weeks. The reason monthly bookkeeping costs less than people think is that the alternative is paying someone double to scramble through it in March.
Year-end is a 12-step process, not a panic.
Start in October, finish in mid-January, hand off clean books to your tax preparer. The whole calendar gets easier when the work happens on a real schedule.
Need help with your year-end close? We do year-end engagements for Denver-area small businesses. Call (720) 333-7274 or request a quote.
Frequently asked questions
When should I start year-end work?
October. Pull a draft P&L, identify any cleanup needed, and run a tax projection. The actions that move the bottom line (Section 179 timing, retirement contributions, S-corp salary adjustments) need to happen before December 31 — not when you sit down to file.
What is the difference between a 1099-NEC and 1099-K?
1099-NEC reports payments you make to non-employees of \$600+ for services (contractors, freelancers). 1099-K reports payments processed by third-party platforms like Stripe, PayPal, or Square. If you paid a contractor by credit card, you do not file a 1099-NEC — the processor handles it. If you paid by check or ACH, you do.
Can I extend my tax return?
Yes. Form 7004 extends business returns 6 months. Form 4868 extends individual returns 6 months. The extension extends the time to file, not the time to pay — taxes owed are still due by the original deadline. Extensions are normal and not a red flag.
What happens if I miss the 1099-NEC deadline?
Penalties scale with how late you are: \$60 per form if filed within 30 days late, \$130 within mid-August, \$330 after that, with a maximum cap. Intentional disregard penalties are higher. The fix is to file as soon as possible and document why it was late.