To prepare financial statements for tax season, reconcile every bank and credit card account, categorize all transactions, then generate your profit and loss statement, balance sheet, and cash flow statement. Review them for errors, gather supporting documents (W-2s, 1099s, receipts, loan statements), and hand everything to your tax preparer well before the deadline.
If that sounds like a lot, it is. But it’s much easier when you break it into steps. At TJ Marshall Tax & Accounting here in Marietta, GA, we see the same pattern every year. Business owners who prepare early file with less stress, find more deductions, and avoid surprise bills. Here’s how we’d walk you through it.
Why Financial Statements Matter at Tax Time
Your tax return is only as accurate as the numbers behind it. Financial statements turn a year of messy transactions into a clear picture of what you earned, what you spent, and what you own and owe. Your preparer uses them to calculate taxable income, claim the right deductions, and catch mistakes before the IRS or the Georgia Department of Revenue does.
Clean statements also help beyond taxes. Lenders ask for them, and they show you whether the business is actually healthy.
The Three Statements You Need
1. Profit and Loss Statement (Income Statement). Shows revenue, expenses, and net profit over a period. This is the backbone of most business tax returns.
2. Balance Sheet. A snapshot of what you own (assets), what you owe (liabilities), and what’s left (equity) on a specific date, usually December 31.
3. Cash Flow Statement. Tracks the actual cash moving in and out. Profit on paper doesn’t always mean cash in the bank, and this statement shows the difference.
Sole proprietors and small businesses can often get by with just the P&L and balance sheet. Corporations, partnerships, and anyone seeking financing should have all three.
Step-by-Step: How to Prepare Your Financial Statements
Step 1: Close out your books for the year
Pick a clear cutoff date (December 31 for most calendar-year businesses). Make sure every invoice you sent and every bill you received is recorded in the correct period.
Step 2: Reconcile every account
Match your bookkeeping records to your bank statements, credit card statements, and loan statements, line by line. If a number doesn’t match, find out why now. Reconciliation is where most hidden errors, duplicate charges, and missing deposits show up.
Step 3: Categorize your transactions properly
Make sure each expense sits in the right category: supplies, advertising, vehicle costs, meals, payroll, professional fees, and so on. Miscategorized expenses are one of the most common reasons we see deductions missed or flagged.
Step 4: Separate personal and business spending
If personal purchases are mixed into your business accounts, clean that up before anything else. Commingled funds make statements unreliable and create audit risk.
Step 5: Review accounts receivable and payable
List who owes you money and who you owe. Write off debts you know you’ll never collect, and make sure unpaid bills are recorded.
Step 6: Record depreciation and major purchases
Equipment, vehicles, computers, and property you bought this year may qualify for depreciation or other deductions. Pull your purchase records and share them with your tax professional.
Step 7: Reconcile payroll and contractor payments
Confirm that payroll totals match your quarterly filings. Make sure you have a W-9 on file for every contractor, because you’ll likely need to issue 1099s. Confirm the current 1099 reporting thresholds with your preparer, since they have changed recently.
Step 8: Generate your statements
Run your P&L, balance sheet, and cash flow statement from your accounting software, then read them like a skeptic. Does revenue look right? Is any expense category oddly high or suspiciously empty? Does the balance sheet actually balance?
Step 9: Gather supporting documents
Have these ready for your preparer:
- W-2s and 1099s (received and issued)
- Bank, credit card, and loan statements
- Receipts for large or unusual expenses
- Mileage logs
- Prior-year tax return
- Home office details, if applicable
- Retirement and health savings contributions
- Last year’s depreciation schedule
Step 10: Meet with your tax professional early
Don’t wait until the last week. Sitting down with a preparer in January or February leaves time to fix problems and plan, rather than just report.
Key Tax Season Dates to Watch
These are the general federal deadlines for the upcoming season. Always confirm exact dates each year, since weekends and holidays can shift them.
| Deadline | What’s due |
|---|---|
| January 31 | W-2s to employees; 1099-NEC to contractors |
| March 15 | S corporation and partnership returns (Forms 1120-S and 1065) |
| April 15 | Individual returns, sole proprietors, and C corporations |
Georgia business owners should also note that business personal property returns for Cobb County are typically due April 1. Check with the county tax assessor for the current year’s requirements.
Common Mistakes That Cost People Money
- Waiting until April. Rushed returns lead to missed deductions and errors.
- Skipping reconciliation. Small mismatches become big problems.
- Poor recordkeeping. No receipt, no proof, and a deduction can disappear in an audit.
- Mixing personal and business expenses. It muddies your numbers and raises red flags.
- Ignoring estimated payments. Underpaying during the year can trigger penalties.
- Not asking for help. A few hours with a professional can save far more than it costs.
Should You Do It Yourself or Hire a Pro?
If you have a simple setup, such as one income stream, few transactions, and good records, you may be able to handle much of this on your own. But if you have employees, contractors, multiple income sources, inventory, rental property, or growth plans, professional help usually pays for itself. A good accountant doesn’t just file your return. They help you understand your numbers and plan ahead.
Local Help for Marietta and Cobb County
TJ Marshall Tax & Accounting helps individuals, freelancers, and small businesses in Marietta, GA and the surrounding Cobb County area get their books in order and their returns filed accurately. Whether you need a cleanup of messy records, help building your year-end financial statements, or full tax preparation, we’re happy to talk it through.
Ready to get ahead of tax season? Contact TJ Marshall Tax & Accounting in Marietta, GA to schedule a consultation.
Frequently Asked Questions
What financial statements do I need for my taxes?
Most businesses need a profit and loss statement and a balance sheet. A cash flow statement is also recommended, and sometimes required for larger entities or lenders. Individuals typically need income documents such as W-2s and 1099s rather than formal statements.
When should I start preparing financial statements for tax season?
Start in December or early January. Closing your books and reconciling accounts takes time, and early preparation leaves room to fix errors before filing deadlines.
Can I prepare my own financial statements?
Yes, if your finances are simple and your records are accurate. Accounting software can generate the statements, but a professional review helps catch errors and missed deductions.
What happens if my financial statements are wrong?
Errors can lead to incorrect tax filings, penalties, interest, or an audit. If you find a mistake after filing, your tax preparer can help you file an amended return.
How much does it cost to have an accountant prepare financial statements?
Cost depends on the size of your business, the condition of your records, and the number of transactions. Contact TJ Marshall Tax & Accounting for a quote based on your situation.