How Your Bookkeeper and CPA Work Together

Who does what

The split keeps each person doing the work their skills and rates are suited for. For a broader comparison of the two roles, see bookkeeper vs. accountant.

The year-end handoff, step by step

1. Close December. All transactions through December 31 are recorded and categorized.
2. Reconcile everything. Every bank, credit card and loan account is reconciled to its December statement.
3. Review the balance sheet. Equipment purchases, loan balances, owner draws and contributions are checked and documented.
4. Confirm payroll and contractor totals. Payroll in the books matches the provider's year-end reports, and contractor payments are totaled for 1099-NEC forms, which are due to contractors and the IRS by January 31.
5. Send the package. The CPA receives the full-year profit and loss, balance sheet, supporting detail and access to the file.
6. Answer questions. The bookkeeper handles questions about specific transactions.
7. Record adjustments. The CPA's adjusting entries, such as depreciation, are entered in the books so the opening balances for the new year agree with the return.
8. Lock the year. The prior year is closed in the software so it cannot change by accident.

Clean contractor records make January far easier. See 1099 forms for contractors for what to collect and when.

What your CPA typically asks for at year end

Every CPA has their own checklist, but most year-end requests for a small business include some version of these:

• A full-year profit and loss and a balance sheet as of December 31.
• Bank, credit card and loan statements for December, with the reconciliation reports.
• A list of equipment, vehicles or other assets bought or sold during the year.
• Loan statements showing interest paid and the year-end balance.
• Payroll reports from the provider and the total paid to each contractor.
• Details of owner draws, contributions and any money moved between related businesses.

A bookkeeper can prepare nearly all of this straight from current books. When the books are behind, the same list becomes a scramble.

Common friction points, and how to avoid them

• Adjustments never recorded. The CPA's entries stay on their worksheet, so next year starts from the wrong balances. Ask for the adjusting entries every year.
• Different categories. The bookkeeper's categories do not map to the tax return. Agree on the chart of accounts early.
• Late books. December is still open in March. Set a target date for the year-end package together.
• Missing context. A large transfer or one-time purchase has no note. Bookkeepers should flag and explain unusual items before the CPA asks.

During the year, not just at tax time

The most useful CPA relationships are not limited to spring. Current monthly books let your CPA give advice while it can still change the outcome:

• Reviewing year-to-date profit before estimated tax payments are made.
• Planning the timing of large equipment or vehicle purchases.
• Deciding whether a change in structure makes sense as profit grows.
• Checking the owner's pay setup, such as draws versus payroll.
• Preparing financial statements for a loan or lease application.

None of this works well from books that are six months behind. Current books are what make mid-year advice possible.

Texas businesses: what the records need to support

Texas has no state personal income tax, but businesses still have state filings that depend on good records. Most businesses with Texas nexus file an annual franchise tax report with the Texas Comptroller, normally due May 15. Entities below the Comptroller's revenue threshold owe no franchise tax but still file the required information report.

Businesses that sell taxable goods or services collect sales tax, file on the schedule the Comptroller assigns and keep the tax collected separate, since it belongs to the state. Your bookkeeper keeps the records and reports ready. SmartGrowth can prepare and file the Texas sales tax and franchise tax reports itself, or hand them to your CPA if you prefer. More on Texas sales and franchise tax records.

Making the relationship run smoothly

• One shared file. Everyone works in the same QuickBooks or Xero file, with their own login.
• Agreed basis. Cash or accrual is decided with the CPA and used consistently.
• A chart of accounts the CPA likes. Categories that map cleanly to the tax return save time at year end.
• One list of open questions. A running list, rather than scattered emails, keeps nothing lost.
• Clear permission. Tell both parties in writing that they may talk directly.

No CPA yet?

Plenty of small businesses start with a bookkeeper and add a CPA later. If that is you, keep the books in a standard, reconciled form so any tax professional can pick them up easily, and look for a CPA well before the filing deadline rather than during the rush.

SmartGrowth Bookkeeping delivers tax-ready books to whichever CPA or tax preparer you choose. SmartGrowth does not sign or file federal income tax returns. It makes sure the person who does has clean, complete numbers to work from. The first step is a free call.