---
title: "Year-end close checklist 2026: Owners, dates, timeline"
description: "Year-end close checklist for December 31, 2026: owners, due dates, the February 1, 2027 W-2 and 1099 deadlines, APQC benchmarks, and worked examples."
url: https://emptyspaces.ai/resources/blog/year-end-close-checklist
language: en
---

[Blog](https://emptyspaces.ai/resources/blog) Checklist

# Year-end close checklist: Owners, due dates, and the October-to-audit timeline for 2026

Published November 9, 2026 30 min read

Key takeaways

- A year-end close is your December month-end close plus once-a-year work: the inventory count, roll-forwards, the tax provision, the retained earnings tie-out, W-2 and 1099 filings, the audit, and locking the year.
- For a December 31, 2026 year-end, W-2s and 1099-NECs are due Monday, February 1, 2027, and the 1099-NEC threshold rises from $600 to $2,000 for payments made in 2026.
- APQC's median annual close is 18 calendar days and top performers finish in 10 or less, so move reconciliations, W-9 collection, and audit planning into October through December.

A year-end close checklist lists every task that finalizes your fiscal year's books, with an owner, a due date, and a "done when" test for each, from October planning through the audit. Working from one dated list keeps payroll filings, 1099s, auditor requests, and the January close from landing on the same week. This guide gives you a 30-task checklist for a December 31, 2026 year-end, a phase-by-phase timeline from October to audit sign-off, and APQC's benchmark for how long the close should take. It also shows worked numbers for every year-end-only adjustment, the 2027 filing deadlines, a PBC list, and what QuickBooks Online, Xero, NetSuite, Business Central, and Sage Intacct do at year-end.

## What is year-end close?

Year-end close is the process of finalizing your accounting records for the fiscal year: you close the last month, post annual adjustments, roll retained earnings forward, file year-end tax forms, support the audit, and lock the year. It's also called the annual close or fiscal year-end close.

- **Fiscal year-end** The last day of your 12-month accounting year, December 31 for a calendar-year company
- **Roll-forward** A schedule that proves an account's ending balance: opening balance, plus additions, minus reductions
- **PBC list** The "prepared by client" list of schedules and documents your auditors request before fieldwork

The year-end close starts as the last [month-end close](https://emptyspaces.ai/resources/blog/month-end-close) of the year, and it matters because the annual statements are the ones outsiders rely on. Your auditors sign an opinion on them, your tax return starts from them, and your lenders test covenants against them. A December error that would be a quick fix in a monthly report can become an audit adjustment, an amended return, or a covenant breach.

Financial closeout is the general term for finishing an accounting period, project, or contract: you record the last transactions, reconcile, report, and lock the records. For a fiscal year, financial closeout is the year-end close. For a grant or project, it also means final costs, final reports, and settled balances with the funder.

## How is year-end close different from month-end close?

Year-end close is the December month-end close plus work done once a year: physical counts, impairment and allowance reviews, the income tax provision, the retained earnings rollover, W-2 and 1099 filings, and the external audit.

| Compared | Month-end close | Year-end close |
| ---------------------------- | --------------------------------------- | ---------------------------------------------------------------------------------------------------- |
| How often | 12 times a year | Once a year |
| Scope | Reconcile, accrue, and review one month | The December close plus counts, impairment, allowance, tax, equity, and debt reviews |
| Revenue and expense accounts | Keep year-to-date balances | Close to retained earnings, or your system rolls them into retained earnings when the new year opens |
| Evidence | Reconciliations your reviewer signs | A schedule for every balance that ties to the trial balance and holds up to audit testing |
| Outside parties | Internal reviewers | Auditors, tax preparers, lenders, and the board |
| Tax forms | Payroll deposits and quarterly returns | W-2s, W-3, and 1099s, plus the tax provision that feeds the return |
| Output | Monthly management reports | Audited annual financial statements with footnotes |

For a staff accountant, the year-end difference is mostly evidence. You run the usual December close, then prepare full-year roll-forwards for prepaids, accruals, and fixed assets, pull support for audit samples, and deliver your PBC items by their due dates. The monthly steps that year-end builds on are in the guide to the [month-end close process](https://emptyspaces.ai/resources/blog/month-end-close-process).

## Year-end close checklist with owners and dates

This year-end close checklist covers 30 tasks for a December 31, 2026 year-end, grouped by phase, with the role that prepares each task, its due date, and what "done" looks like. The controller is accountable for the whole list, and every task gets a reviewer who didn't prepare it.

Business day 1 (BD 1) is Monday, January 4, 2027, because January 1 is a holiday. If your team observes Martin Luther King Jr. Day on January 18, BD 15 is Monday, January 25. Each task opens on its done-when test and a small business line, which marks the tasks a small business without an audit can skip.

### Plan: October 2026

- Task 1: Agree the close calendar, count date, fieldwork dates, and report date with your auditors. Owner: Controller. Due: October 16.
Small business
Agree dates with your CPA instead
Done when
Dates are confirmed in writing
- Task 2: Agree the PBC list and give every item one owner and a due date. Owner: Controller. Due: October 30.
Small business
Skip if no audit
Done when
Every PBC item has an owner
- Task 3: Reconcile every balance sheet account through September and clear prior-year audit points. Owner: Close team. Due: October 30.
Small business
Yes
Done when
No reconciling item older than 90 days

### Pre-close: November 2026

- Task 4: Run a mock close on October data and fix what slows it down. Owner: Controller. Due: November 13.
Small business
Optional
Done when
Bottleneck list has an owner per item
- Task 5: Collect missing W-9s and build the 1099 vendor list at the $2,000 threshold. Owner: AP lead. Due: November 20.
Small business
Yes
Done when
Every 1099 vendor has a TIN and a tax classification
- Task 6: Plan the physical inventory count and cutoff procedures. Owner: Operations lead and cost accountant. Due: November 20.
Small business
If you carry inventory
Done when
Count instructions, teams, and tag control are set
- Task 7: Review the fixed asset register for disposals and impairment indicators. Owner: Senior accountant. Due: November 25.
Small business
Disposals only
Done when
Disposal list and impairment memo drafted
- Task 8: Build the tax provision model on October numbers. Owner: Tax manager or outside tax advisor. Due: November 30.
Small business
Skip; your CPA handles tax
Done when
Model runs and open tax questions are listed

### Pre-close: December 2026

- Task 9: Send the cutoff memo to sales, purchasing, HR, and operations. Owner: Controller. Due: December 4.
Small business
Yes
Done when
Memo sent with the last dates for invoices, receipts, and expense reports
- Task 10: Reconcile through November and confirm employee data, addresses, and year-to-date payroll. Owner: Close team and payroll lead. Due: December 15.
Small business
Yes
Done when
Payroll register ties to the general ledger
- Task 11: Collect bonus, commission, and accrual estimates from department heads. Owner: FP&A lead. Due: December 18.
Small business
Yes
Done when
Estimates are in writing with support
- Task 12: Test the debt covenants on forecast December numbers. Owner: Treasury lead or controller. Due: December 18.
Small business
If you have a loan
Done when
Headroom is calculated and shared with the CFO

### Count and cutoff: December 31, 2026

- Task 13: Count physical inventory and reconcile it to the perpetual records. Owner: Operations lead, observed by auditors. Due: December 31.
Small business
If you carry inventory
Done when
Count sheets are signed and tags are reconciled
- Task 14: Log the last shipping and receiving documents of the year. Owner: AR lead and AP lead. Due: December 31.
Small business
Yes
Done when
Document numbers are saved for cutoff testing

### Close: BD 1–5, January 4–8, 2027

- Task 15: Complete the standard December month-end close. Owner: Close team. Due: BD 5.
Small business
Yes
Done when
Bank and balance sheet accounts are reconciled
- Task 16: Post the inventory count adjustment. Owner: Cost accountant. Due: BD 3.
Small business
If you carry inventory
Done when
Book inventory equals the count
- Task 17: True up bonus, commission, vacation, and invoice accruals. Owner: Senior accountant. Due: BD 5.
Small business
Yes
Done when
Accruals tie to approved amounts or support
- Task 18: Roll forward prepaid expenses and deferred revenue. Owner: Staff accountant. Due: BD 5.
Small business
Yes
Done when
Roll-forwards tie to the balance sheet
- Task 19: Recalculate the allowance for credit losses from the year-end aging. Owner: AR lead, reviewed by controller. Due: BD 5.
Small business
Write off bad debts instead
Done when
Allowance calculation is approved

### Close: BD 6–10, January 11–15, 2027

- Task 20: Roll forward fixed assets, post disposals, and document impairment. Owner: Senior accountant. Due: BD 7.
Small business
Yes
Done when
Register ties to the general ledger
- Task 21: Reconcile and eliminate intercompany balances. Owner: Senior accountant. Due: BD 8.
Small business
If you have entities
Done when
Both sides match and eliminations post
- Task 22: Roll forward debt, split current and long-term portions, and retest covenants. Owner: Treasury lead or controller. Due: BD 8.
Small business
If you have a loan
Done when
Covenant calculation is signed off
- Task 23: Roll forward equity and tie it to the cap table and board minutes. Owner: Controller with legal. Due: BD 9.
Small business
Owner's equity only
Done when
Share counts match the cap table
- Task 24: Review full-year flux against the prior year and budget. Owner: FP&A lead and controller. Due: BD 10.
Small business
Yes
Done when
Every variance over threshold is explained

### Close: BD 11–15, January 19–25, 2027

- Task 25: Draft the income tax provision on closed numbers. Owner: Tax manager or outside tax advisor. Due: BD 13.
Small business
Skip
Done when
Current and deferred tax entries post
- Task 26: Close revenue and expenses to retained earnings, or confirm your system does it, and tie retained earnings to last year. Owner: Controller. Due: BD 14.
Small business
Yes
Done when
Retained earnings ties to the prior-year balance sheet and tax return
- Task 27: Draft the financial statements and footnotes. Owner: Controller. Due: BD 15.
Small business
Statements go to your CPA
Done when
Draft statements go to the CFO

### Filings: by February 1, 2027

- Task 28: File W-2s and W-3 with the SSA and 1099-NECs with the IRS, and furnish copies to employees and contractors. Owner: Payroll lead and AP lead. Due: February 1.
Small business
Yes
Done when
E-file confirmations are saved

### Audit and lock: February–March 2027

- Task 29: Deliver PBC items, post audit adjustments, true up the tax provision, and sign the representation letter. Owner: Controller and CFO. Due: Before the report date.
Small business
Skip if no audit
Done when
Final statements are issued
- Task 30: Lock the fiscal year in your accounting system and archive the evidence. Owner: Controller. Due: After audit adjustments post.
Small business
Lock after year-end adjustments are approved; reopen only for CPA-approved entries
Done when
No one can post to 2026 without approval

Use the due dates as defaults, and move them to match your auditors' calendar. The [month-end close checklist](https://emptyspaces.ai/resources/blog/month-end-close-checklist) covers the monthly tasks inside task 15 in more detail.

## Year-end close timeline: October 2026 to audit sign-off

A year-end close timeline for December 31, 2026 runs from October planning to an audit report in March 2027, with the books closed by January 25 and W-2s and 1099s filed by February 1.

Each phase ends with an exit gate, a check that must pass before the next phase starts. The audit dates below are an example (fieldwork February 16 to March 5 and a March 31 report date), so swap in the dates you agree with your auditors.

| When | What happens | Lead | Exit gate |
| ------------------------------ | ------------------------------------------------------------------------------------------------------------------------- | --------------------------------- | ----------------------------------------------------- |
| October 5–30, 2026 | Audit planning, PBC list, close calendar, reconciliations through September, prior-year audit points cleared | Controller | Audit dates confirmed and every PBC item has an owner |
| November 2–30, 2026 | Mock close on October data, count plan, W-9 collection, tax provision model, fixed asset review | Controller and close team | Mock close done and every 1099 vendor has a W-9 |
| December 1–18, 2026 | Cutoff memo, reconciliations through November, payroll data check, accrual estimates, covenant forecast | Close team | November is reconciled and estimates are in writing |
| December 31, 2026 | Inventory count and cutoff documents | Operations and close team | Count sheets signed and cutoff numbers logged |
| January 4–8, 2027 (BD 1–5) | December close, count adjustment, accrual true-ups, prepaid and deferred revenue roll-forwards, allowance | Close team | Balance sheet reconciled |
| January 11–15, 2027 (BD 6–10) | Fixed assets, intercompany, debt and covenants, equity, full-year flux | Senior accountants and controller | Every roll-forward ties to the trial balance |
| January 19–25, 2027 (BD 11–15) | Tax provision draft, retained earnings tie-out, draft statements and footnotes | Controller and tax manager | Draft statements to the CFO by January 25 |
| January 26–February 9, 2027 | PBC package delivered in three waves: governance items, then most schedules, then the statements and tax workpapers | PBC item owners | Every item submitted |
| By February 1, 2027 | W-2s and W-3 filed with the SSA, 1099-NECs filed with the IRS, and W-2 and 1099-NEC copies furnished to recipients | Payroll and AP leads | E-file confirmations saved |
| Mid-February 2027 | 1099-MISC recipient statements if you report amounts in box 8 or 10 | AP lead | Furnished |
| February 16–March 5, 2027 | Audit fieldwork, sample requests, proposed adjustments | Controller | Every request answered |
| March 1 and March 31, 2027 | 1099-MISC due to the IRS on paper (March 1) or electronically (March 31) | AP lead | Filed |
| March 8–31, 2027 | Audit adjustments posted, tax provision trued up, subsequent events reviewed, representation letter signed, report issued | Controller and CFO | Audit opinion issued |
| After the report date | Fiscal year locked, checklist, reconciliations, and sign-offs archived | Controller | No open posting access to 2026 |

The pre-close is where you save the most time. Anything you can reconcile, estimate, or document in the fourth quarter shouldn't wait for January, because January also carries the filings and the first audit requests.

### Timeline for a small business without an audit

A small business with clean monthly books can finish its year-end close in the first two to three weeks of January. Reconcile bank, card, and loan accounts in the first week, and post adjustments and review them by about January 22. File W-2s and 1099s by February 1, 2027, then send the final statements to your CPA and lock the year.

Bring in outside accountants when you need an audit or review, or when no one in house can prepare the tax provision. The same goes for books that need catch-up work before the year can close. Many small companies keep the monthly close in house and use a CPA firm only for year-end adjustments and the tax return.

### Timeline for a SaaS company

A SaaS company usually has no inventory count, so the weight moves to revenue and equity. Add these items to the BD 1–10 window:

- **Deferred revenue** Tie the contract-level schedule to the ledger and review new contracts under ASC 606
- **Capitalized commissions** Roll forward contract costs under ASC 340-40 and check the amortization period
- **Stock-based compensation** Tie grants, exercises, and forfeitures to the cap table and expense under ASC 718
- **Capitalized software** Review which development costs were capitalized and when amortization started

## How long does a year-end close take?

A year-end close takes a median of 18 calendar days, according to APQC's benchmarking (April 8, 2026). Top performers finish in 10 days or less, and slower performers take 35 days.

APQC's measure counts calendar days, from running the trial balance to completing the consolidated financial statements, so weekends count and the audit comes after. The same April 8, 2026 APQC post breaks the median down by company size.

| Company size or performance | Median annual close (calendar days) | Source |
| ----------------------------------- | ----------------------------------- | -------------------- |
| Top performers | 10 days or less | APQC (April 8, 2026) |
| All companies (median) | 18 days | APQC (April 8, 2026) |
| Slower performers | 35 days | APQC (April 8, 2026) |
| Under $100 million in revenue | 10 days | APQC (April 8, 2026) |
| $1 billion to $5 billion in revenue | 23 days | APQC (April 8, 2026) |

Two to three weeks is normal for a mid-size company. The timeline above runs 21 calendar days by APQC's count, from a first trial balance on January 4 to draft statements on January 25. Large companies close in phases: subledgers in the first days, then consolidation, eliminations, and the tax provision, on a calendar agreed with auditors in the fall. The audit usually runs for weeks after the books close. For how the monthly close compares, see the guide to [how long month-end close should take](https://emptyspaces.ai/resources/blog/month-end-close-time).

Four habits shorten the year-end close the most:

- **Roll forward monthly** Roll forward prepaids, accruals, fixed assets, and debt monthly, so December adds one month, not twelve
- **Run a mock close in November** Find the slow tasks while you still have time to fix them
- **Agree the PBC list in October** Build the schedules once, in the format your auditors want
- **Settle judgments early** Document impairment, allowance, and revenue questions in the fourth quarter, before the close starts

## Year-end close process: How to complete each step

The year-end close process runs in order: close December, count inventory, roll forward balances, true up estimates, prepare the tax provision, roll retained earnings forward, draft statements, support the audit, and lock the year.

The steps below add the method behind the checklist, with a worked example wherever there's a calculation. All company figures are illustrative.

### 1. Close December like any other month

Start with your standard December close: cutoff, [account reconciliations](https://emptyspaces.ai/resources/blog/account-reconciliation), accruals, and review. Every annual step depends on December balances being right, starting with the year-end bank statements and the [bank reconciliation](https://emptyspaces.ai/resources/blog/bank-reconciliation) for every account.

### 2. Count physical inventory and test cutoff

If you carry inventory, count it on or near December 31, compare the count to your perpetual records, and investigate large differences before you post. If inventory is material, your auditors will want to observe the count, so agree the date in October. Record the last shipping and receiving document numbers so auditors can test that sales and receipts landed in the right year.

Example

Your perpetual records show $1,240,000 of inventory, and the count values it at $1,226,500. You record the $13,500 shortfall: debit cost of goods sold $13,500 and credit inventory $13,500, dated December 31, 2026.

### 3. Roll forward fixed assets and check for impairment

Roll forward the fixed asset register, tie it to the general ledger, and write off assets you no longer own or use. Under ASC 360, you test long-lived assets for recoverability when events suggest the carrying amount may not be recoverable, such as a site closure or a sharp drop in use. Goodwill under ASC 350 needs an impairment test at least once a year, unless you're a private company that elected the goodwill accounting alternative, which tests only when a triggering event occurs.

Example

Opening cost of $4,800,000 + additions of $650,000 − disposals of $210,000 = ending cost of $5,240,000. If the ledger shows $5,265,000, find the $25,000 difference before you post the final month's depreciation.

### 4. Recalculate the allowance for credit losses

Recalculate the allowance for credit losses from the year-end aging and adjust the balance to match. Under ASC 326, the allowance reflects expected losses, so update your loss rates for current conditions, not only past write-offs.

Example

Your loss rates by aging bucket produce a required allowance of $32,250.

| Aging bucket | Balance | Loss rate | Allowance |
| --------------------- | ---------- | --------- | --------- |
| Current | $800,000 | 1% | $8,000 |
| 1–30 days past due | $150,000 | 3% | $4,500 |
| 31–60 days past due | $60,000 | 10% | $6,000 |
| 61–90 days past due | $25,000 | 25% | $6,250 |
| Over 90 days past due | $15,000 | 50% | $7,500 |
| Total | $1,050,000 | | $32,250 |

The allowance currently holds $25,000, so you debit credit loss expense $7,250 and credit the allowance $7,250.

### 5. True up accruals

Replace year-end estimates with actual amounts wherever you have them: bonuses, commissions, vacation, audit fees, and invoices received in January for December work. Reverse accruals that no longer have support. The guide to [accrued expenses](https://emptyspaces.ai/resources/blog/accrued-expenses) shows how each estimate is built.

Example

You accrued $420,000 of bonuses during the year, and the board approves $465,000 in January. You debit bonus expense $45,000 and credit accrued bonuses $45,000, dated December 31, 2026.

### 6. Roll forward prepaid expenses and deferred revenue

A roll-forward explains the year's movement in a balance sheet account and proves the ending balance. Use the same formula for both accounts:

- **Prepaid expenses** Opening balance + new prepayments − amortization = ending balance
- **Deferred revenue** Opening balance + billings − revenue recognized = ending balance

Example

Prepaids: $60,000 + $144,000 − $150,000 = $54,000. If the ledger shows $57,000, a $3,000 prepayment wasn't amortized or was booked to the wrong account. Deferred revenue: $480,000 + $2,400,000 − $2,310,000 = $570,000, which should match both the ledger and your contract-level schedule.

The guides to [prepaid expenses](https://emptyspaces.ai/resources/blog/prepaid-expenses) and [deferred revenue](https://emptyspaces.ai/resources/blog/deferred-revenue) cover the monthly entries behind these schedules.

### 7. Roll forward debt and test covenants

Roll forward each loan (opening balance + draws − repayments = ending balance), tie it to the lender statement, and accrue unpaid interest. Classify principal due in the next 12 months as current. Then calculate each covenant on final numbers, because a breach can change the debt's classification and trigger a disclosure.

Example

Your covenant caps total debt at 3.0 times EBITDA. Debt is $9,000,000 and EBITDA is $3,300,000, so the ratio is 2.73x. EBITDA can fall to $3,000,000 before you breach, which gives you $300,000 of headroom.

### 8. Reconcile and eliminate intercompany balances

Match every intercompany receivable to the other entity's payable, clear the differences, and post eliminations before you consolidate. Year-end differences usually come from invoices in transit, currency rates, and entries booked on one side only. The guide to [intercompany accounting](https://emptyspaces.ai/resources/blog/intercompany-accounting) covers the full method.

Example

The parent shows a $250,000 receivable from its subsidiary, and the subsidiary shows a $238,000 payable. The $12,000 difference is a December 30 invoice the subsidiary hasn't booked, so the subsidiary records it before eliminations run.

### 9. Review full-year flux

Compare every income statement and balance sheet line with the prior year and the budget, and explain each variance above your threshold. The explanations become your draft analytics for the audit, and the method is in the guide to [flux analysis](https://emptyspaces.ai/resources/blog/flux-analysis).

### 10. Close the year to retained earnings

Close revenue, expense, and dividend accounts to retained earnings, or confirm your accounting system rolls them forward when the new year opens. Only temporary accounts close; assets, liabilities, and equity carry forward. Then run the [post-closing trial balance](https://emptyspaces.ai/resources/blog/post-closing-trial-balance) and tie retained earnings to last year, as the equity section below shows.

### 11. Draft the statements and support the audit

Draft the balance sheet, income statement, cash flow statement, statement of stockholders' equity, and footnotes from the closed trial balance. Deliver PBC items by their due dates, and answer sample requests within the turnaround you agreed with your auditors.

### 12. Post audit adjustments and lock the year

Until audit adjustments post, limit posting in 2026 to the controller and log every late entry. Post approved audit adjustments, update the tax provision and the statements, then lock the fiscal year and archive the checklist, reconciliations, and sign-offs. How each adjustment is built and reviewed is in the guide to [adjusting entries](https://emptyspaces.ai/resources/blog/adjusting-entries).

## What are the W-2 and 1099 deadlines for 2026 forms?

For 2026 forms, W-2s and 1099-NECs are due to employees, contractors, the SSA, and the IRS by Monday, February 1, 2027, because January 31 falls on a Sunday. The 1099-NEC threshold rises from $600 to $2,000 for payments made in 2026.

| Form | Due to recipients | Due to the SSA or IRS | Source |
| ----------- | ---------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------- |
| W-2 and W-3 | February 1, 2027 | February 1, 2027 to the SSA, paper or electronic. The W-3 goes only to the SSA; employees get the W-2 only | IRS General Instructions for Forms W-2 and W-3 (2026) |
| 1099-NEC | February 1, 2027 | February 1, 2027 to the IRS, paper or electronic | IRS Instructions for Forms 1099-MISC and 1099-NEC (Rev. December 2026) |
| 1099-MISC | February 1, 2027, or mid-February if you report amounts in box 8 or 10 | March 1, 2027 on paper (February 28 is a Sunday), or March 31, 2027 electronically | IRS Instructions for Forms 1099-MISC and 1099-NEC (Rev. December 2026); General Instructions for Certain Information Returns (2025) |

The statutory dates are January 31 and February 28. The IRS moves any due date that falls on a Saturday, Sunday, or legal holiday to the next business day, and the SSA applies the same rule to W-2s.

The "$600 rule" was the old 1099 threshold. For payments made in 2026, the IRS instructions raise it to $2,000 for nonemployee compensation and for 1099-MISC rents and other income. The threshold may be adjusted for inflation starting in 2027. Important exceptions include attorney gross proceeds, which stay at $600, royalties, which stay at $10, and separate rules for cash payments for fish, substitute payments, and fishing boat proceeds. Backup withholding can require a form regardless of the payment amount.

Example

Your AP register shows these 2026 payments to unincorporated vendors.

| Payee | 2026 payments | Reportable? |
| ---------------------------------------------------- | ------------- | ------------------------------------- |
| Freelance designer Form 1099-NEC | $1,200 | No, under $2,000 |
| IT contractor Form 1099-NEC | $1,999 | No, under $2,000 |
| Bookkeeping contractor Form 1099-NEC | $2,000 | Yes, at $2,000 |
| Consultant Form 1099-NEC | $8,000 | Yes |
| Attorney, settlement proceeds Form 1099-MISC, box 10 | $900 | Yes, the $600 threshold still applies |
| Landlord Form 1099-MISC, box 1 | $24,000 | Yes |

Three more rules from the same IRS instructions shape your prep:

- **E-filing** You must e-file if you file 10 or more information returns in total, counting W-2s and 1099s together
- **W-2 extensions** An extension with the SSA isn't automatic. You request one 30-day extension on Form 8809, the IRS grants it only for extraordinary circumstances, and it doesn't extend the date you furnish W-2s to employees
- **New W-2 codes** Box 12 has new code TT for qualified overtime compensation and code TP for cash tips, and new box 14b reports tipped occupation codes

If you miss a deadline, file the late or corrected forms as soon as you can. Late information returns carry per-form IRS penalties that rise the longer you wait. The W-2 instructions say higher penalty amounts apply to returns required to be filed after December 31, 2026.

What AP and payroll should do in November and December:

- **AP, November** Export 2026 vendor payments, collect W-9s, validate TINs, and apply the $2,000 threshold
- **AP, December** Exclude card and payment-app payments, which are reported on Form 1099-K, and reconcile the 1099 list to the AP ledger
- **Payroll, November** Verify employee names, addresses, and Social Security numbers, and reconcile year-to-date wages to the general ledger
- **Payroll, December** Process fringe benefits and final payroll, reconcile the payroll register to Forms 941, and confirm support for overtime and tips reporting

## What goes on a year-end audit PBC list?

A year-end audit PBC (prepared by client) list is the set of schedules and documents your auditors request: the trial balance, reconciliations, roll-forwards, contracts, payroll, equity, tax workpapers, and board minutes. The controller owns delivery, and each item gets one preparer and one reviewer.

Many auditors split the work into interim fieldwork in the fall, which tests controls and transactions through a date such as September 30, and year-end fieldwork after the close. Agree the list in October and track each item from requested to preparing, in review, submitted, and accepted by the auditor. In the table, D is the first day of year-end fieldwork, February 16, 2027 in the example timeline, and the offsets are a common working baseline rather than an auditing standard.

| PBC item | Owner | Ready by |
| ---------------------------------------------------------------- | ------------------------ | ----------------------- |
| Board minutes, legal letters, and significant new contracts | Controller with legal | D-21 |
| Trial balance and general ledger detail | Controller | D-14 |
| Bank reconciliations and bank confirmations | Staff accountant | D-14 |
| AR aging, allowance calculation, and subsequent cash receipts | AR lead | D-14 |
| Inventory count sheets and count reconciliation | Cost accountant | D-14 |
| Fixed asset roll-forward, additions support, and impairment memo | Senior accountant | D-14 |
| Accrual, prepaid, and deferred revenue roll-forwards | Senior accountant | D-14 |
| Revenue contracts for significant customers | Revenue accountant | D-14 |
| Debt agreements, roll-forward, and covenant calculations | Treasury lead | D-14 |
| Cap table and equity roll-forward | Controller | D-14 |
| Payroll register reconciled to W-2s and Forms 941 | Payroll lead | D-14 |
| Draft financial statements and full-year flux explanations | Controller and FP&A lead | D-7 |
| Tax provision workpapers | Tax manager | D-7 |
| Subsequent events review | Controller | Through the report date |
| Management representation letter | CFO and controller | The report date |

Confirmations go directly between the auditor and your bank, customers, or lenders, and sample requests arrive during fieldwork, so leave capacity for both. Build each schedule during the close in the format on this list, so nothing is rebuilt in February.

## When should you prepare the tax provision?

Prepare the income tax provision during the close, after the annual adjustments post, so auditors can test it in fieldwork. Then update it for every audit adjustment that changes pre-tax income, and finalize it before the statements are issued.

The provision under ASC 740 records current tax payable for the year and deferred tax assets and liabilities from temporary differences, such as depreciation and accruals. Waiting until every audit adjustment is final leaves auditors little time to test the provision, and a late draft pushes the report date.

Example

Draft pre-tax income is $4,000,000, and at an illustrative 25% combined rate the provision is $1,000,000. Auditors propose a $120,000 expense accrual that cuts pre-tax income to $3,880,000, so you true up the provision by $30,000 ($120,000 × 25%) to $970,000 before the statements are issued.

Private companies have one more 2026 item. FASB's ASU 2023-09, issued in December 2023, expands income tax disclosures and applies to entities other than public business entities for annual periods beginning after December 15, 2025. For a calendar-year private company, that makes the 2026 statements the first year it applies, so agree the new footnote format with your auditors in October.

## How do you roll forward retained earnings and equity at year-end?

Roll retained earnings forward as opening balance plus net income minus dividends or distributions, then tie the opening balance to last year's audited balance sheet and tax return. Roll forward common stock and paid-in capital separately, and tie share counts to the cap table and board minutes.

On a C corporation's Form 1120, Schedule L (balance sheets per books) and Schedule M-2 (analysis of unappropriated retained earnings per books) carry the retained earnings figures to tie, unless total receipts and total assets are both under $250,000 and you check "Yes" to question 13 on Schedule K, in which case the return doesn't require them. The beginning balance on your 2026 books should match the year-end balance on the 2025 return, and any difference needs a documented reason, such as a prior-period adjustment.

Example

Here is a 2026 equity roll-forward for a private company with 10,000,000 shares outstanding at the start of the year.

| Line | Common stock and paid-in capital | Retained earnings | Total equity |
| ------------------------------------------------------------------------------------------------------------ | -------------------------------- | ----------------- | ------------ |
| Opening balance, January 1, 2026 Ties to: 2025 audited balance sheet and 2025 Form 1120, Schedules L and M-2 | $5,000,000 | $2,400,000 | $7,400,000 |
| Stock options exercised (250,000 shares at $0.50) Ties to: Cap table and exercise notices | $125,000 | | $125,000 |
| Stock-based compensation Ties to: Equity award expense report | $180,000 | | $180,000 |
| Net income Ties to: 2026 income statement, after audit adjustments | | $1,150,000 | $1,150,000 |
| Dividends declared Ties to: Board minutes | | ($300,000) | ($300,000) |
| Ending balance, December 31, 2026 Ties to: 2026 balance sheet | $5,305,000 | $3,250,000 | $8,555,000 |

The cap table should show 10,250,000 shares outstanding (10,000,000 + 250,000). Retained earnings proof: $2,400,000 + $1,150,000 − $300,000 = $3,250,000. If your system rolls retained earnings automatically, run a balance sheet dated January 1, 2027 and confirm it shows $3,250,000 in retained earnings and zero current-year net income.

## How does year-end close work in QuickBooks Online, Xero, NetSuite, Business Central, and Sage Intacct?

QuickBooks Online, NetSuite, and Sage Intacct calculate retained earnings without a closing entry from you, Xero says no year-end rollover is needed, and Business Central creates closing entries you review and post. In every system, you still reconcile, adjust, and lock the year.

| System | Retained earnings at year-end | How you lock the year | Late adjustments |
| ----------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------- |
| QuickBooks Online Source: Intuit, "Lock your books in QuickBooks Online" (updated September 15, 2026) | "QuickBooks Online moves last year's net income to the retained earnings account" when the new fiscal year starts | Set a closing date of December 31, 2026, with a warning or a warning and password | Keep the password with the controller, so audit adjustments post only with approval |
| Xero Source: Xero, "Checklist: Complete your financial year end in Xero" (undated, Australian edition, accessed November 7, 2026) | "There is no need to roll over your Xero file for the new year" | Set a lock date of December 31, 2026 | Record year-end adjustment journals, such as declared dividends, before you set the lock date |
| NetSuite Source: Oracle NetSuite Help, "Year-End Closing" and "Adjustment Periods" (undated, accessed November 7, 2026) | Calculated for reporting from cumulative prior-year net income. NetSuite "doesn't post the balance to retained earnings" | Close every period in the year through the Period Close Checklist. NetSuite "automatically closes year-end after you close all of the periods in your year" | Check "One-day Year-End Adj. Period" in Set Up Full Year. Only journal entries can post to it |
| Business Central Source: Microsoft Learn, "Close income statement accounts" (updated August 21, 2025) | The Close Income Statement batch job "creates entries that cancel out" each income statement account against the retained earnings account you choose | Set Allow Posting From and Allow Posting To on General Ledger Setup and User Setup to stop posting to 2026. Closing the fiscal year, which the batch job needs first, doesn't block posting | You can post to the prior year after closing, then run the batch job again. You post its journal yourself unless you use an additional reporting currency |
| Sage Intacct Source: Sage Intacct Help, "Retained earnings calculation during virtual close" and "Close books" (last modified October 23, 2026) | A virtual close calculates retained earnings "as the sum of all income statement accounts." Closing doesn't "zero out income and expense accounts" | Close the books, which blocks posting to any date in the closed periods. Restrict the Open books permission to your accounting manager, controller, or CFO | Don't post directly to retained earnings. Sage says to use a separate retained earnings adjustment account |

In SAP S/4HANA, you run the balance carryforward program instead. According to SAP Learning's "Running the Balance Carryforward Program" (undated, accessed November 7, 2026), it carries balance sheet balances forward and profit and loss balances to a retained earnings account. Dynamics 365 Finance, Dynamics GP, and Sage 50 each have their own year-end close procedure in the vendor's help, so follow it rather than posting a manual closing entry.

Oracle's NetSuite help also says "the manual close method isn't recommended" and points teams that need year-end general ledger entries to its Period End Journal Entries feature. Closing a period in NetSuite blocks posting for everyone, so close December 2026 only after reconciliations and review are done.

To close the year in QuickBooks Online, Intuit's article lists these steps:

1. **Open settings** Select the Settings gear, then Account and settings
2. **Go to accounting** Select the Advanced tab, then Edit in the Accounting section
3. **Turn on Close the books** Enter the closing date, December 31, 2026
4. **Choose the protection** Pick "Allow changes after viewing a warning and entering password"
5. **Save** Select Save

Set the closing date to December 31, 2026, even though you do the work in January 2027, and turn it on only after your year-end adjustments are reviewed and approved.

Whatever your ERP, close it in this order:

1. **Finish the subledgers** Close AR, AP, inventory, payroll, and fixed assets, and agree each to the general ledger
2. **Post approved adjustments** Every annual entry carries support and a reviewer sign-off
3. **Back up and save reports** Export the final trial balance, statements, and subledger reports
4. **Open the new year** Set up the 2027 fiscal year and periods, so January transactions don't wait
5. **Close or lock 2026** Restrict reopening to the controller, and log every change after the lock

## What should I put for fiscal year end close date?

Put the last day of your tax year: December 31 if you use a calendar year, or the last day of the month you chose if you use a fiscal year. Your fiscal year end close date is that same day, even though the close work happens in the weeks after it.

The IRS "Tax years" page (last reviewed January 27, 2026) defines three choices:

| Tax year | IRS definition | Year-end close date |
| --------------- | -------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ |
| Calendar year | "12 consecutive months beginning January 1 and ending December 31" | December 31 |
| Fiscal year | "12 consecutive months ending on the last day of any month except December" | Last day of the chosen month, such as June 30 |
| 52–53-week year | A fiscal year "that varies from 52 to 53 weeks" and doesn't have to end on the last day of a month | A date that shifts slightly each year, so the year always ends on the same day of the week |

According to the same page, you adopt a tax year by filing your first income tax return using it, unless you have a required tax year. You must use a calendar year if, among other cases, you keep no books or records or have no annual accounting period. Changing your tax year later may need IRS approval on Form 1128.

A 12-month accounting period is called a fiscal year or accounting year, and its last month is your year-end month. Companies usually name a fiscal year for the calendar year in which it ends, so fiscal year 2026 for a June year-end runs from July 1, 2025 to June 30, 2026. Choose a year-end that falls after your busy season, such as January 31 for a retailer, so the close and the count happen when activity is low.

## Common year-end close mistakes

The costliest year-end close mistakes are starting in January, missing the February 1 filing deadline, skipping the tax provision update after audit adjustments, and posting a manual closing entry in software that already rolls retained earnings.

| Mistake | What happens | How to catch it |
| ----------------------------------------------------------------------- | ------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------- |
| Starting the close in January | Reconciliation backlogs, filings, and audit requests land in the same weeks | October checklist rows have owners and dates by October 16 |
| Collecting W-9s in January | 1099s go out late or with missing TINs | Every 1099 vendor has a W-9 on file by November 20 |
| Using the old $600 threshold | You file forms for vendors paid $600–$1,999 that no longer need one | The 1099 list is filtered at $2,000 for 2026 payments, except attorney proceeds and royalties |
| Scheduling W-2s and 1099s in a February tax hand-off phase | Forms filed after February 1, 2027 are late | The close calendar shows February 1, 2027 as the due date for W-2s and 1099-NECs |
| Skipping the cutoff memo | December invoices and receipts post in January, or the reverse | Cutoff document numbers are logged on December 31 |
| Not updating the tax provision after audit adjustments | Tax expense and the tax payable don't match final pre-tax income | The provision's pre-tax income equals the final income statement |
| Posting a manual closing entry in software that rolls retained earnings | Net income moves to retained earnings twice, or the 2026 income statement shows zero | Retained earnings on January 1, 2027 ties to last year's balance plus 2026 net income minus dividends |
| Not tying retained earnings to the prior-year return | A difference with Schedule L or M-2 surfaces when the return is prepared | Opening retained earnings matches the 2025 return before the close starts |
| Missing ASU 2023-09 disclosures | Private-company footnotes for 2026 lack the expanded income tax disclosures | The footnote format is agreed with auditors in October |
| Leaving 2026 open after the audit | Late entries change issued numbers | The fiscal year is locked, and a report of entries posted after the report date is empty |

## Year-end close checklist template

A year-end close checklist template needs one row per task with columns for task, owner, reviewer, due date, status, and evidence. Copy this table into Excel or Google Sheets and paste in the 30 tasks from the checklist above. Then set the status column to a dropdown of Not started, In progress, In review, and Done. For the monthly tasks inside task 15, start from the free [month-end close checklist template](https://emptyspaces.ai/resources/tools/month-end-close-checklist).

| Task | Owner | Reviewer | Due date | Status | Evidence |
| --------------------------------------------- | ----------------- | ----------------- | ------------------------------ | ----------- | ---------------------------------------------------------- |
| Collect W-9s for 1099 vendors | AP lead | Controller | November 20, 2026 | Not started | W-9 files and the vendor list |
| Reconcile bank and card accounts for December | Staff accountant | Senior accountant | January 8, 2027 | Not started | Signed reconciliation |
| True up accruals | Senior accountant | Controller | January 8, 2027 | Not started | Accrual schedule with support |
| Roll forward equity | Controller | CFO | January 14, 2027 | Not started | Equity roll-forward tied to the cap table |
| File 1099-NECs | AP lead | Controller | February 1, 2027 | Not started | W-9, payment report, and IRS e-file confirmation |
| Set the closing date | Controller | CFO | After adjustments are approved | Not started | Screenshot of the closing date and the reviewer's approval |

For a small business on QuickBooks Online, the bookkeeper usually owns the tasks and the outside CPA reviews them. Fill in December 31, 2026 as the closing date, and track each 1099 from W-9 collection through the IRS e-file confirmation.

## Which software makes the year-end close easier?

Year-end close software falls into two groups: tools that track the checklist, with tasks, owners, and sign-offs, and tools that do the work, such as calculating an accrual true-up or preparing an entry for review.

Most teams use their ERP for the year-end mechanics in the table above, then add tools for close management, reconciliation and matching, consolidation, or the tax provision. When you compare vendors, ask each to show one year-end task from start to finish. You want to see the accrual true-up with its support, the proposed entry, the reviewer's approval, and the audit trail. The guide to [best month-end close software](https://emptyspaces.ai/resources/blog/best-month-end-close-software) compares the options.

## How we approach it

Our Close Agent reconciles accounts, investigates exceptions, and prepares adjusting entries. It posts approved entries to NetSuite, Oracle, SAP S/4HANA, Microsoft Dynamics 365, Business Central, and QuickBooks only after a named reviewer signs off. The period can't lock until every task is signed off, so you can [explore our Close Agent](https://emptyspaces.ai/product/close) to see December prepared before your team starts on the annual work.

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