Bookkeeping · Reconciliation & Close · Brief · Working level
Year-end close vs. monthly: what December adds
The year-end close is the monthly close plus a second layer: 1099 preparation, physical inventory, owner-account cleanup, annual reconciliations, and the accountant handoff package.
Year-end is not a different kind of close — it is the December monthly close with a second layer bolted on. Everything in the month-end close checklist runs exactly as usual; then come the tasks that only exist once a year: information returns, physical counts, owner-account housekeeping, the annual reconciliations, and the handoff that determines whether tax season is smooth or expensive.
The annual layer
What year-end adds on top of the monthly checklist:
| Task | What you do | Deadline pressure |
|---|---|---|
| 1099 vendor review | Identify reportable vendors; confirm W-9s on file; tally payments | Forms due Jan 31 |
| Physical inventory | Count, price, and adjust book inventory to actual | Before statements finalize |
| Owner accounts | Reclassify personal items; document draws, contributions, owner loans | Before the return |
| Loan tie-outs | Match every loan balance to lender year-end statements | With the package |
| Payroll tie-out | Four quarters of 941s to W-3/W-2 totals | Jan filing season |
| Handoff package | Assemble everything the accountant needs | Their deadline, not April's |
| Final lock | Lock the year after the accountant's entries post back | Once, permanently |
Three items deserve a word each.
1099s. Payments to unincorporated service providers are reported on Form 1099-NEC, due January 31. The threshold was $600 through payments made in 2025; OBBBA raised the information-reporting threshold to $2,000 for payments beginning in calendar 2026 (indexed after). The January scramble is really a W-9 problem — collect the form before a vendor's first payment and year-end 1099 prep collapses into running a report.
Inventory. If you carry stock, count it. The book-to-count adjustment runs through cost of goods sold, and for inventory taxpayers the count is what makes COGS real rather than notional — the accounting-method rules are in Publication 538.
Owner accounts. Twelve months of "we'll classify it later" — personal charges on the business card, business costs paid personally, undocumented transfers — must resolve now, into draws, contributions, reimbursements, or documented loans. For multi-entity owners, the intercompany due to/from mirror gets its annual settlement here too.
The accountant handoff package
One table, one folder, no follow-up emails:
| Item | Format |
|---|---|
| Final P&L and balance sheet (locked) | |
| General ledger / trial balance export | Software backup or export file |
| Dec 31 bank & card reconciliation reports + statements | PDF per account |
| Loan statements with year-end balances and interest paid | PDF per loan |
| Fixed-asset purchases and disposals list, with invoices | Spreadsheet — feeds Form 4562 |
| Payroll: four 941s, W-3/W-2s, state filings | |
| Inventory count summary | Spreadsheet |
| AR and AP agings at Dec 31 | Report |
| Prepaid, deferred revenue, and accrual schedules | Spreadsheet |
| Open questions and oddities, listed honestly | One page |
When the return is done, the accountant sends adjusting journal entries — depreciation true-ups, method adjustments, reclasses. Post them exactly as provided, verify your ledger's retained earnings matches theirs, and only then lock the year for good.
Frequently asked questions
- How is a year-end close different from a monthly close?
- Year-end runs the normal monthly close first, then adds annual-only work: 1099 vendor review and filing prep, a physical inventory count, owner draw and loan account cleanup, annual reconciliations of loans and payroll to filings, and assembling the package your accountant needs to prepare the tax return.
- What should I give my accountant at year-end?
- Final locked statements, the general ledger export, every December 31 bank and card reconciliation with statements, loan statements, the fixed-asset purchase list, payroll filings, inventory count, AR and AP agings, and a list of open questions. A complete package cuts preparation time and fees; an incomplete one converts into billable back-and-forth.
- When do 1099s have to be filed?
- Forms 1099-NEC are due to recipients and the IRS by January 31. The reporting threshold was $600 through payments made in 2025; OBBBA raised the information-reporting threshold to $2,000 beginning with payments in calendar 2026, indexed thereafter. Collect Form W-9 from vendors before paying them, not in January.