SMALL BUSINESS BOOKKEEPING
Year-End Bookkeeping Checklist for Small Businesses (2026)
The last two weeks of December decide how painful tax season will be. This checklist walks through closing your 2026 books in order: reconcile, clean up invoices and bills, count inventory, sort expenses, prepare 1099s and hand your accountant a clean file. Includes the new $2,000 1099 rule and a checker for your contractors.
WHY IT MATTERS
What "closing the books" actually means
Closing the year means making sure every 2026 transaction is recorded once, in the right category, and that your totals match what the bank, the card company and the payment processors say. After that you lock the year so nothing changes by accident. The result is a profit and loss statement you can trust, which is what your tax return is built from.
Nothing missing
Every sale, refund, fee and expense from January 1 to December 31 is in the books.
Reconciled
Book balances equal the December 31 statement balances for every account.
Categorized
Expenses sit in categories your accountant (and Schedule C) can use.
Closed
The year is frozen, so January edits can't silently change 2026.
STEP BY STEP
The year-end bookkeeping checklist
Work through these in order: the later steps depend on the earlier ones being done.
Record every transaction through December 31
Import or type in the last bank and card transactions of the year, including fees, refunds and transfers. For online sellers, pull the December payout reports from Shopify, Etsy, Amazon, Stripe or PayPal so the fees are recorded, not just the net deposit.
Reconcile every account
Checking, savings, business credit cards, loans, PayPal and payment processors. Your book balance on December 31 should equal the statement balance, apart from items you can name (a check not yet cashed, a deposit in transit). Find unexplained differences now, not in April.
Clean up accounts receivable
List every unpaid invoice. Chase the ones you can still collect. If you use accrual accounting, talk to your accountant before writing off a bad debt. On cash-basis books (most small businesses) unpaid invoices were never counted as income, so there is nothing to write off.
Review accounts payable
Check unpaid bills and vendor credits. Paying deductible business expenses before December 31 moves the deduction into 2026 on a cash-basis return; the expense still has to be a real business cost, not prepaying years ahead.
Count inventory
If you sell physical products, count stock as close to December 31 as you can and value it at cost. Ending inventory affects cost of goods sold, and so taxable profit. Note damaged or obsolete stock separately.
Re-categorize expenses
Scan the "uncategorized" and "miscellaneous" lines. Split mixed transactions (a phone bill used partly for personal calls), move personal purchases out of the business books, and keep receipts for meals, travel and anything over a few hundred dollars.
List equipment and big purchases
Write down laptops, machines and furniture bought in 2026 with date and cost. Your accountant decides whether to deduct them at once or depreciate them; many small businesses elect the IRS de minimis safe harbor, which lets items up to $2,500 per invoice or item be expensed if your books treat them that way.
Total business mileage
The IRS used two business mileage rates in 2026, so split your log at June 30. See the mileage calculator below.
Collect W-9s and prepare 1099s
For each contractor you paid by check, cash or bank transfer, make sure you have a W-9 and total what you paid in 2026. The threshold changed this year; use the 1099-NEC checker.
Check sales tax and estimated tax
Confirm your last sales tax returns of the year are filed for every state where you collect. Self-employed people usually pay the fourth estimated tax installment in mid-January; know your figure before the holidays.
Run the year-end reports
Profit and loss for JanuaryβDecember, a balance sheet at December 31 and, if you track it, a cash flow summary. Compare with 2025: big jumps in a category are worth a second look before your accountant asks.
Back up and lock the year
Save a copy of the final file (or export the ledger), store statements and receipts for at least the IRS record period, then close the period in your software or protect the 2026 sheet so it can't change.
CALENDAR
Key dates for closing 2026
| Date | What | Who it applies to |
|---|---|---|
| Thu, Dec 31, 2026 | Last day for 2026 transactions; count inventory around this date | Everyone |
| Fri, Jan 15, 2027 | Fourth-quarter 2026 estimated tax payment | Self-employed and others who pay estimated tax |
| Mon, Feb 1, 2027 | Form 1099-NEC to contractors and to the IRS; W-2s to employees and the SSA (January 31 falls on a Sunday) | Businesses that paid contractors or employees |
| Mon, Mar 15, 2027 | Partnership (Form 1065) and S corporation (Form 1120-S) returns | Partnerships and S corps |
| Thu, Apr 15, 2027 | Individual returns, including Schedule C for sole proprietors and single-member LLCs | Sole proprietors, freelancers |
State deadlines and sales tax due dates vary; check your state revenue department. Extensions give more time to file, not to pay.
CONTRACTORS
1099-NEC and the new $2,000 threshold
The One Big Beautiful Bill Act raised the reporting threshold for Form 1099-NEC (and 1099-MISC) from $600 to $2,000 for payments made on or after January 1, 2026. That means the forms you file in early 2027 use $2,000, and the figure is to be indexed for inflation from 2027. Contractors still have to report all their income, even with no form.
Usually required
A non-employee (individual, sole proprietor or most LLCs) you paid $2,000 or more in 2026 for services, by check, cash, ACH or bank transfer. Attorneys get one even if they are incorporated.
Usually not required
Payments by credit card, debit card or through PayPal, Venmo business and similar apps: the payment company reports those on Form 1099-K. Payments to C and S corporations (except attorneys), for goods only, or to employees (they get a W-2).
The 1099-K side also changed: the federal threshold for payment apps and marketplaces went back to more than $20,000 and more than 200 transactions per platform for 2025 and 2026. Sellers may get fewer 1099-Ks, but every sale is still income that belongs in the books, which is one more reason to reconcile payout reports rather than rely on forms.
YOUR CONTRACTORS
1099-NEC checker for 2026 payments
TRY IT
Who needs a 1099-NEC from you?
Enter what you paid each contractor in 2026, split by how you paid. Nothing you type is saved or sent anywhere. This is a first pass, not tax advice.
Enter your contractors.
VEHICLE
Business mileage: two IRS rates in 2026
The IRS set the 2026 business standard mileage rate at 72.5 cents per mile, then raised it to 76 cents per mile for miles driven from July 1, 2026. So a 2026 mileage log needs two totals: JanuaryβJune and JulyβDecember. The standard rate replaces actual car costs such as gas and repairs; parking and tolls for business trips are still separate.
MILEAGE
2026 mileage deduction
Use business miles from your log only, not commuting.
KEEP SCORE
Doing year-end in Excel or Google Sheets
If your books live in a spreadsheet, a few formulas cover most of the checklist. Assume a Transactions table with Date, Account, Category, Payee, Method and Amount columns:
| Task | Formula |
|---|---|
| Account balance on Dec 31 | =SUMIFS(Transactions[Amount],Transactions[Account],"Checking",Transactions[Date],"<="&DATE(2026,12,31)) plus the opening balance; compare with the statement |
| Expenses by category | =SUMIFS(Transactions[Amount],Transactions[Category],A2,Transactions[Date],">="&DATE(2026,1,1),Transactions[Date],"<="&DATE(2026,12,31)) |
| Uncategorized items | =COUNTIFS(Transactions[Category],""): should be 0 before you close |
| Paid per contractor (1099) | =SUMIFS(Transactions[Amount],Transactions[Payee],A2,Transactions[Method],"<>Card") |
| Net profit | =SUMIFS(β¦Incomeβ¦)-SUMIFS(β¦Expensesβ¦) for the year; this is the starting point for Schedule C |
Then protect the 2026 tab (in Excel: Review βΊ Protect Sheet; in Google Sheets: Data βΊ Protect sheets and ranges) and start 2027 on a fresh tab with opening balances. Our guide on locking cells in Excel and Google Sheets shows the steps.
Selling on Etsy? How much Etsy takes per sale explains every fee line in your payment account, so you can match deposits to sales before you close the year.
READY-MADE TEMPLATE
Prefer bookkeeping that's already set up?
You can build the sheet above yourself. If you'd rather start 2027 with categories, dashboards and tax reports already in place, there is a ready-made bookkeeping template for Excel and Google Sheets; check the product page for current features.
Small Business Bookkeeping Spreadsheet Template for Excel & Google Sheets
The current listing describes an operations tracker with drop-down categories for income and expenses, monthly and annual dashboards, sales and expense tax tracking with monthly and yearly tax reports, balances across checking, savings and credit card accounts, sales channel analysis and multi-currency support.
- Income and expense ledger with categories
- Annual dashboard and tax reports
- Bank and card balances in one view
Product features and compatibility are listed on the product page and may change.
Browse small business templatesFAQ
Year-end bookkeeping questions
What should be on a year-end bookkeeping checklist?
Record all transactions through December 31, reconcile every bank, card and payment account, review unpaid invoices and bills, count inventory, fix categories, list equipment purchases, total mileage, collect W-9s and prepare 1099s, check sales and estimated tax, run the P&L and balance sheet, then back up and lock the year.
What is the 1099-NEC threshold for 2026?
$2,000. The One Big Beautiful Bill Act raised it from $600 for payments made on or after January 1, 2026, so it applies to forms filed in early 2027. It is scheduled to be adjusted for inflation from 2027.
When are 1099-NEC forms due in 2027?
Normally January 31. In 2027 January 31 is a Sunday, so forms for 2026 payments are due Monday, February 1, 2027, both to the contractor and to the IRS.
Do I send a 1099 if I paid a contractor by credit card or PayPal?
Generally no. Card and payment-app payments are reported by the payment company on Form 1099-K, so you don't also issue a 1099-NEC for those amounts.
What mileage rate do I use for 2026?
The IRS business rate was 72.5 cents per mile from January 1 to June 30, 2026 and 76 cents per mile from July 1 to December 31, 2026. Multiply each period's business miles by its rate.
How long should I keep business records?
Generally three years after filing the return, but six years if income was under-reported by more than 25%, seven years for a bad-debt deduction, at least four years for employment tax records, and asset records until the period for the year you sell the asset ends.
Sources and further reading
- IRS: Standard mileage rates (2026 rates and July 1 change)
- IRS: About Form 1099-NEC
- IRS: Understanding your Form 1099-K
- IRS: How long should I keep records?
- IRS: Tangible property regulations (de minimis safe harbor)
- IRS: Estimated taxes
Checked October 2026. Thresholds and dates can change; confirm with the IRS or your tax professional. This article is general information, not tax or accounting advice.
