The painless year-end checklist

When to do year-end (and why early matters)

Do year-end work in the first two weeks of January, not in March or April. Two reasons.

First: you have a hard January 31 deadline to send 1099s to any contractors you paid more than $600 during the year. Miss it and the IRS penalty is $60 per form (rising to $310 if you're really late).

Second: CPA season runs February through April 15. The earlier you get your year-end packet to your CPA, the more attention they can give it. CPAs working through their backlog in early April are tired, rushed, and more likely to miss things. Be the client they handle in the first week of February.

Reconcile every bank account

Reconciliation means: confirm that the ending balance shown in Clarity Books for each bank account matches the December 31 ending balance shown on your bank statement. If they don't match, find the discrepancy.

Common causes of discrepancies: a transaction posted in early January but you're looking at a December statement (timing); a duplicate import (delete the duplicate); a missing import (Plaid sometimes drops a transaction — manually add it); a category mistake that affected the running total (rare).

Clarity Books has a one-click reconciliation report that flags any discrepancy. If your books reconcile to the penny on every account, your tax return is built on trustworthy numbers. If they don't, fix it before going further.

Categorize every "needs review" transaction

Open the transactions list, filter to "needs review" or "uncategorized," and clear the queue. A clean year-end has zero uncategorized transactions.

If you genuinely don't remember what a transaction was for, dig into it: check the vendor name, the amount, the date, and your calendar from that day. If you still can't figure it out, the safest categorization is "Other Expenses" with a memo describing your best guess. Do not leave it uncategorized — uncategorized transactions don't count as deductions.

For any large transactions you marked as "Personal" by mistake (or vice-versa), now is the time to fix them. The AI will write rules from your fixes that improve next year's automation.

Verify your mileage log

If you tracked mileage all year, generate the mileage report (Reports → Mileage). Confirm the total looks right. If you tracked in MileIQ or another app, export the year's log as a PDF — your CPA will want it as backup.

If you didn't track mileage at all this year: don't fabricate one. The IRS specifically penalizes "reconstructed" mileage logs. What you can do: pull your calendar, list every business trip you can document (a meeting on a specific day at a specific location), and use Google Maps to calculate the round-trip distance for each. Document this approach in a memo. It's defensible if those trips actually happened.

Resolve next year by installing a mileage app today. Five minutes of setup saves you four-figure deductions.

Generate 1099s for contractors

For any individual or single-member LLC you paid more than $600 during the year for services (not for products), you must issue a Form 1099-NEC. You don't need to issue them to corporations or to anyone you paid via credit card or PayPal (the payment processor handles it).

You need each contractor's W-9 — their legal name, business name (if any), tax ID, and address. If you didn't collect W-9s during the year, send them out now and chase them this week. (For next year, make collecting a W-9 a precondition of paying any contractor.)

File the 1099s by January 31. The easiest way is a service like Track1099 ($3–5 per form) — it e-files to the IRS and emails the contractor a copy. Clarity Books surfaces a 1099-eligible report listing every contractor and total paid; you copy those numbers into Track1099 and you're done in 20 minutes.

Run the year-end packet

Reports → Year-End Packet generates a single PDF + companion CSV containing: full-year P&L, year-over-year comparison, Schedule C summary mapped to IRS line numbers, mileage log, all transactions in one CSV, deduction breakdown, contractor 1099 totals, and a sales tax summary if applicable.

Open it. Read it. Does anything look wrong? Is your gross revenue what you expected? Is there a category that's mysteriously empty (e.g. zero "Software" expenses despite paying for a dozen SaaS tools)? Is there a category that's wildly inflated (e.g. $80,000 in "Office Supplies" — probably a mis-categorization)?

Better to catch and fix issues now than after your CPA has filed.

Send to CPA — or DIY in TurboTax

CPA: Reports → Year-End Packet → "Send to CPA." Enter their email, add a note ("here's my 2026 packet, ready when you are"), hit send. They get a secure link with everything they need. Most CPAs can turn around a Schedule C return in 5–10 business days when given a clean packet.

DIY: open TurboTax Self-Employed (or FreeTaxUSA Deluxe). Walk through the Schedule C section. For each line on the form, type in the matching number from your year-end packet's Schedule C summary. The packet maps Clarity's categories to IRS line numbers explicitly so there's no guessing.

Either way, file before April 15 (or by October 15 with an extension, but pay your estimated tax by April 15 either way).

Set up next year (10 minutes that pay for years)

Two things to do once your taxes are filed.

One: increase your tax savings transfer percentage if you owed money this year. If you set aside 25% but ended up owing more, bump it to 30% next year. Better to over-save and refund yourself in April than to be short.

Two: schedule your quarterly tax dates as recurring calendar events. April 15, June 15, September 15, January 15 — every year, forever. The simple act of having them on your calendar is what separates "I always forget Q2" people from "I never miss a payment" people.

Three: install a mileage app if you don't have one. MileIQ, Stride, and TripLog are all good. Auto-tracking starts the moment you drive — zero friction, full deduction.