Guide · 11 min read

The year-end close in QuickBooks, step by step

The year-end close in QuickBooks means reconciling every account for the full twelve months, correcting categorization, filing 1099s, recording fixed-asset additions, and handing a clean trial balance to your tax preparer. The retained-earnings roll happens automatically once the file is right — this guide walks the whole sequence in order.

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Last reviewed October 2026 by a Certified QuickBooks ProAdvisor

Inventory, payroll forms and the lock

Inventory: count what is on hand at year-end, adjust QuickBooks to the count, and check that the Inventory Valuation Summary equals the Inventory Asset account.
Payroll year-end: W-2s go to employees and, with the W-3, to the Social Security Administration by January 31; the IRS says the amounts on related employment forms should agree with the W-3 (IRS, checked October 2026). Contractors paid $2,000 or more in 2026 get a 1099-NEC (IRS).
The lock: Settings → Account and settings → Advanced → Close the books in QuickBooks Online, with the closing date at year-end (Intuit); Desktop has its own closing date and password.

A year-end close is a sequence, not a scramble. Work it in order — reconcile first, adjust second, hand off last — and the books arrive at tax time already trustworthy, with nothing left for your preparer to untangle.

The year-end sequence

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Six ordered steps: reconcile the full year, correct categorization, prepare 1099s, record fixed-asset additions, review the trial balance, then hand clean books to the tax preparer. Reconciliation comes first and the final state is books ready for the preparer. An illustrative sequence, not a measured statistic.

The year-end close runs in one direction — reconciliation first, handoff last — and each step depends on the one before it. Illustrative sequence, not a measured statistic.

1 · Establish the year-end period and back up the file

Before you reconcile anything, confirm the fiscal year you're closing and take a fresh backup of the company file. Everything before the year-end date is what you're about to finalize; everything after stays current.

You'll set a closing-date password at the very end — not now, because you still need to post adjustments. Confirm the fiscal-year-end setting matches the business's actual tax year (in QuickBooks Online this lives under Settings, Account and settings, Advanced; in Desktop under Company, My Company). Gather every bank and credit-card statement for the twelve months in one place before you begin — having them ready is what keeps the reconciliation moving month by month instead of stalling.

2 · Reconcile every account for the full year

Reconcile every bank and credit-card account for all twelve months, tying each month's ending balance to the statement until the difference is zero. Unreconciled months are the single most common reason a year-end file can't be trusted at tax time.

Work forward one month at a time and never skip a month — a gap hides duplicated deposits, missing checks, and transactions the bank feed dropped. If a month won't tie out, stop and find the difference before moving on; carrying an error forward only multiplies it. Loan accounts, lines of credit, and merchant-processor clearing accounts get reconciled too, not just checking. This is the bulk of the work, and it is what a full QuickBooks year-end cleanup spends most of its time on.

3 · Clean up categorization and clear suspense accounts

With balances tied out, fix how transactions are classified and empty the accounts where uncertainty piles up — Undeposited Funds, Uncategorized Income and Expense, Ask My Accountant, and Opening Balance Equity. Left alone, these distort the profit-and-loss the preparer will read.

Undeposited Funds should be empty or match deposits genuinely in transit; a stale balance overstates revenue. Opening Balance Equity should be zero by year-end — anything sitting there is an unresolved entry that needs a home. Reclassify personal charges out of business expense, remove duplicates, and confirm each vendor and customer is mapped to a real account. Consistent categorization is what makes the P&L mean something rather than just balance.

4 · Square up receivables and payables

Review the accounts-receivable and accounts-payable aging so the balance sheet reflects what is truly owed to and by the business. Phantom invoices and bills that were paid but never marked distort both the balance sheet and the year's income.

Chase down invoices marked open that were in fact collected, and write off genuinely uncollectible receivables only with the owner's sign-off and a documented reason. On the payables side, clear bills that were paid outside QuickBooks and confirm nothing is double-counted. The aging reports are the fastest way to spot a receivable or payable that has been stuck for the whole year.

5 · Prepare and file 1099s

Identify every unincorporated vendor you paid $2,000 or more for services during the year (the IRS threshold for payments made after 2025; it was $600 before), confirm you hold a completed W-9 for each, and file Form 1099-NEC.

Both the recipient copy and the IRS copy are due by January 31, so this step can't wait until the rest of the close is leisurely finished. Run QuickBooks' 1099 vendor review to confirm each contractor is flagged as 1099-eligible and that payments are mapped to the right boxes — payments made by credit card or third-party processor are reported separately and should be excluded. A mismatched name or taxpayer ID is the most common reason a 1099 has to be corrected, so verify against the W-9 before filing. The IRS explains who receives a 1099-NEC and how to file it on its About Form 1099-NEC page. If your vendor records are a mess, a focused QuickBooks 1099 cleanup gets them filing-ready first.

6 · Record fixed-asset additions — and leave depreciation to the CPA

Record the year's equipment, vehicle, and other capital purchases to the correct fixed-asset accounts so the balance sheet shows what the business owns. Then stop: the depreciation schedule itself belongs to your tax professional, not the bookkeeping.

Booking an asset to a fixed-asset account is bookkeeping; deciding how it depreciates is tax work. Section 179 expensing, bonus depreciation, and the recovery period all turn on tax rules a CPA applies on Form 4562 and IRS Publication 946 — not something to guess at in QuickBooks. We're bookkeepers, not CPAs: we get the file clean, reconciled, and reconcilable to the penny, but the depreciation entry, the tax adjustments, and the return itself are your CPA's or EA's. Clean books make their work faster and their fee smaller; they don't replace it. Leave the current-year depreciation as an adjustment your preparer posts, and note it so nothing is double-recorded.

7 · Review the year-end trial balance and statements

Run the year-end trial balance, balance sheet, and profit-and-loss and read them the way the business actually ran. Every reconciled account, a balance sheet that balances, and a P&L with no surprise negatives is the sign the close is sound.

Scan for accounts with the wrong sign, a suspense or clearing account that still holds a balance, and equity that doesn't reconcile to prior-year figures. Compare the year against the one before it — a line that moved far without a business reason usually points to a categorization error you can still fix. This review is the same discipline behind our cleanup methodology: nothing is finished until it's been verified against a source.

8 · Let retained earnings roll and hand off to your preparer

You do not post a closing journal entry in QuickBooks. On the first day of the new fiscal year, QuickBooks automatically rolls the prior year's net income into Retained Earnings.

Your job is to make sure the year is correct before that roll happens, then lock it. Once the trial balance is clean, set a closing date with a password so the finished year can't be quietly changed, and give your preparer what they need: a backup or accountant access, the trial balance, and the year's balance sheet and P&L, plus a short note of any material adjustments. That documented handoff is the difference between a return that files smoothly and one that generates a week of questions. If you'd rather not run the sequence yourself, a free, view-only review tells you exactly what your file needs first.

Questions about closing the year in QuickBooks

Do I need to make a closing journal entry in QuickBooks?

No. QuickBooks rolls the year's net income into Retained Earnings automatically on the first day of the new fiscal year — there is no manual closing entry to post. Your job is to make sure the year is reconciled and correct before that roll happens, then set a closing-date password so the finished year can't be changed.

Can a bookkeeper close my year, or do I need a CPA?

A bookkeeper can do the close — reconcile every account, clean the categorization, prepare 1099s, and produce a trial balance the preparer can rely on. The depreciation schedule, tax adjustments, and the return itself belong to a CPA or EA. Clean books make that work faster and the fee smaller; they don't replace it.

When are 1099s due?

Form 1099-NEC is due to both the recipient and the IRS by January 31. Verify each vendor's W-9 and confirm QuickBooks has tracked their payments before you file, because a wrong name or TIN is the most common reason a 1099 has to be corrected.

What do I hand my tax preparer at the end?

A backup of the reconciled company file (or accountant access), a trial balance, the balance sheet and profit-and-loss for the year, and a note of any material adjustments you made. The cleaner and more documented the handoff, the less back-and-forth the return takes.

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The year-end close in QuickBooks, step by step

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