How to Fix Your Books Before Your Tax Return Is Filed
Tax season has a way of exposing problems fast.
You send your information to your accountant, and suddenly you start hearing phrases like “these numbers don’t look right” or “we need to clean this up first.” That’s when panic sets in.
The good news is this.
You can still fix your books before your tax return is filed, and doing so can save you money, time, and stress.
Here’s how to approach it the right way.
Step 1: Do Not Rush to File Just to Be Done
One of the biggest mistakes business owners make is filing their tax return as quickly as possible, even when the books are not ready.
Filing with incorrect or incomplete numbers can lead to:
Missed deductions
Overpaid taxes
Amended returns later
IRS notices or penalties
It is better to pause and fix the books than to file fast and regret it later.
Step 2: Make Sure All Bank and Credit Card Accounts Are Reconciled
Reconciliation is the foundation of accurate books.
This step confirms that every transaction in your bookkeeping software matches what actually happened at the bank or on your credit cards.
If accounts are not reconciled, your Profit and Loss statement cannot be trusted, and neither can your tax return.
Start with your main business checking account and primary business credit card. Once those are accurate, the rest becomes much easier.
Step 3: Clean Up Uncategorized and Misclassified Transactions
Uncategorized expenses are one of the biggest red flags during tax prep.
Before filing, review:
Uncategorized income
Uncategorized expenses
Owner draws recorded as expenses
Personal transactions mixed into the business
Each of these can change your taxable income if left unresolved.
You do not need perfection here. You need reasonable, consistent categorization that reflects how the business actually operates.
Step 4: Review Income Carefully
Income errors are common and expensive.
Check for:
Duplicate deposits
Missing income
Owner contributions recorded as revenue
Transfers between accounts counted as sales
Even small mistakes can throw off your tax return and create issues later.
Step 5: Verify Payroll and Contractor Payments
Payroll and contractor expenses affect both taxes and compliance.
Before filing:
Confirm payroll totals match payroll reports
Make sure owner pay is recorded correctly
Verify contractor payments are categorized properly
Confirm 1099 amounts match your books
Fixing this now prevents corrections after forms are filed.
Step 6: Review Key Reports Together
Before your return is filed, you should be able to review:
A Profit and Loss statement
A Balance Sheet
Ask simple questions:
Does this profit make sense based on how the year felt
Do account balances look reasonable
Are loans, credit cards, and owner accounts accurate
If something looks off, it probably is.
Step 7: Decide What Can Be Fixed Now and What Can Be Improved Later
Not every bookkeeping issue needs to be perfect before filing.
The goal is:
Accurate income
Reasonable expenses
Reconciled accounts
Clear support for tax numbers
Once the return is filed correctly, you can improve systems and reporting going forward without pressure.
Why This Matters More Than Filing Fast
Clean books lead to:
Lower tax bills
Fewer accountant questions
Faster filing once ready
Less risk of audits or notices
More confidence in your numbers
Messy books almost always cost more in the long run.
The Bottom Line
If your books are not ready, your tax return is not ready.
Fixing your bookkeeping before filing is one of the smartest financial moves you can make, even if it feels uncomfortable to slow things down.
At Red Leaf Bookkeeping, we help business owners clean up their books, coordinate with their accountant, and file taxes with confidence.
To learn more about how we work and book a call when you’re ready, visit redleafbookkeeping.com.