Follow the steps below to get your books ready for tax filing.
Step 1: Enter all your business transactions into Wave
Make sure all your business transactions are entered into Wave. Users subscribed to Wave’s Pro Plan can connect bank and credit card accounts so transactions import automatically. Otherwise, you can upload a statement or manually enter all the transactions yourself, via the Transactions page.
Step 2: Categorize all your transactions
First, find all your uncategorized transactions:
- On the left-side menu click Accounting > Transactions.
- Above the Amount column select Filter.
- Choose Uncategorized from the Category dropdown menu.
- Click Apply.
Then, categorize each transaction. Once all your transactions are categorized, review the transactions to make sure all the activity in your business is correctly categorized.
If you're not sure how to categorize a transaction, you can create a new category and name it Ask my accountant or How do I record this? and temporarily categorize transactions to that category. If you’re not sure who to ask, learn more about Accounting Coaching Wave Advisors.
Step 3: Prepare your final payroll
If you have employees, remind your employees to submit any outstanding expense reimbursements, and complete your payroll. Also include any year-end bonuses, annual benefits, or other final adjustments that need to be included.
For these amounts to be included in the calendar year that you’re reporting, the final check date must be within the same calendar year. For more specifics on important payroll processing dates, see the article Payroll year-end checklist
Step 4: Reconcile your bank and credit card accounts
Once all your transactions are entered into Wave and are categorized, you can start reconciling. Learn how to reconcile your accounts.
When you reconcile your bank, credit card, and loan accounts, you're comparing the activity in Wave to the activity recorded by your financial institution. This ensures your books aren't over- or under-counting funds you've received and paid out. Reconciling your accounts is the most important thing to do for year-end.
Step 5: Collect important paperwork
To file your taxes, you’ll need two reports from Wave: the Profit & Loss for the fiscal year and the Balance Sheet as of the last day of the year.
You should also collect:
- Bank and credit card statements for December 31st
- Receipts or bills for any fixed assets you purchased during the year (like computers, vehicles, furniture, equipment, and real estate)
- Loan statements for December 31st and amortization schedules, if available
- Any tax documents you receive (like 1099s)
Step 6: Collect past due invoices
To accurately account for what is owed to you, collect on your past-due invoices.
If a customer does not pay and you want to recognize the non-payment as a bad debt expense, create a journal entry on the Transactions page, debit the Bad Debt Expense account and credit Accounts Receivable. Find detailed steps in How to write off an invoice.
Once you’ve completed these steps, you’re ready for tax time!
Have questions or looking for more help? Contact Wave Advisors for coaching or bookkeeping services.