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Year End Accounting Checklist for Online Sellers
Starting your year-end accounting process in November rather than waiting until January gives you time to fix errors, maximize deductions, and prepare organized records for tax filing without the pressure of looming deadlines. The checklist below covers everything an ecommerce seller needs to close out the financial year: reconciling all accounts, counting inventory, reviewing categorizations, preparing 1099s, making last-minute deduction purchases, and organizing documents for your tax preparer or for self-filing.
November: Pre-Close Preparation
Step 1: Reconcile all accounts through November.
Bring every bank account, credit card, and platform reconciliation current through the end of November. If you have months of unreconciled transactions, start with the most recent and work backward. Reconciling November before the December holiday rush gives you a clean starting point and makes the December close much faster. Follow the full reconciliation process for each account.
Bring every bank account, credit card, and platform reconciliation current through the end of November. If you have months of unreconciled transactions, start with the most recent and work backward. Reconciling November before the December holiday rush gives you a clean starting point and makes the December close much faster. Follow the full reconciliation process for each account.
Step 2: Review uncategorized and miscategorized transactions.
Run a report in your accounting software showing uncategorized or "Ask My Accountant" transactions for the entire year. Categorize every one. Then scan major expense categories for items that look out of place: a supplier payment accidentally categorized as advertising, a personal charge on a business card, or a refund recorded as an expense instead of a revenue reduction. These errors affect your reported profit, your COGS accuracy, and your tax deductions.
Run a report in your accounting software showing uncategorized or "Ask My Accountant" transactions for the entire year. Categorize every one. Then scan major expense categories for items that look out of place: a supplier payment accidentally categorized as advertising, a personal charge on a business card, or a refund recorded as an expense instead of a revenue reduction. These errors affect your reported profit, your COGS accuracy, and your tax deductions.
Step 3: Collect W-9 forms from contractors.
If you paid any contractor, freelancer, or service provider $600 or more during the year, you need their W-9 (or W-8BEN for international contractors) to prepare 1099 forms. Common recipients include freelance designers, photographers, virtual assistants, bookkeepers, consultants, and marketing agencies. Send W-9 requests now so you have them before the January 31 filing deadline. If a contractor refuses to provide a W-9, you are required to withhold 24% of their payments as backup withholding.
If you paid any contractor, freelancer, or service provider $600 or more during the year, you need their W-9 (or W-8BEN for international contractors) to prepare 1099 forms. Common recipients include freelance designers, photographers, virtual assistants, bookkeepers, consultants, and marketing agencies. Send W-9 requests now so you have them before the January 31 filing deadline. If a contractor refuses to provide a W-9, you are required to withhold 24% of their payments as backup withholding.
Step 4: Review fixed assets and depreciation.
List all business equipment purchased during the year: computers, cameras, printers, warehouse equipment, vehicles, and any other assets. Determine whether each qualifies for Section 179 immediate expensing (most do) or needs to be depreciated over its useful life. Verify that prior-year assets have correct depreciation recorded. If you disposed of, sold, or retired any equipment during the year, record the disposition and any gain or loss.
List all business equipment purchased during the year: computers, cameras, printers, warehouse equipment, vehicles, and any other assets. Determine whether each qualifies for Section 179 immediate expensing (most do) or needs to be depreciated over its useful life. Verify that prior-year assets have correct depreciation recorded. If you disposed of, sold, or retired any equipment during the year, record the disposition and any gain or loss.
December: Final Actions Before Year End
Step 5: Conduct a physical inventory count.
Count every unit of inventory in your warehouse, storage, and any other location you control. Compare the physical count against your accounting records. If your books show 1,200 units of Product A but you count 1,178, record a 22-unit shrinkage adjustment. The cost of those 22 units moves from your inventory asset to an inventory shrinkage expense. For Amazon FBA inventory, use Amazon's Inventory Adjustments and Inventory Health reports as your count source, since you cannot physically count units in Amazon's warehouses. Reconcile Amazon's reported quantities against your accounting records.
Count every unit of inventory in your warehouse, storage, and any other location you control. Compare the physical count against your accounting records. If your books show 1,200 units of Product A but you count 1,178, record a 22-unit shrinkage adjustment. The cost of those 22 units moves from your inventory asset to an inventory shrinkage expense. For Amazon FBA inventory, use Amazon's Inventory Adjustments and Inventory Health reports as your count source, since you cannot physically count units in Amazon's warehouses. Reconcile Amazon's reported quantities against your accounting records.
Step 6: Write down obsolete or damaged inventory.
Identify any inventory that is damaged, expired, obsolete, or unsellable at its recorded cost. Write down these items to their estimated net realizable value (what you could actually sell them for, which may be zero). If you have 200 units of a discontinued product recorded at $12 each ($2,400 total) that you plan to liquidate at $3 each, write down the inventory by $1,800 (the difference between $2,400 cost and $600 liquidation value). This write-down increases your COGS for the year, reducing taxable income.
Identify any inventory that is damaged, expired, obsolete, or unsellable at its recorded cost. Write down these items to their estimated net realizable value (what you could actually sell them for, which may be zero). If you have 200 units of a discontinued product recorded at $12 each ($2,400 total) that you plan to liquidate at $3 each, write down the inventory by $1,800 (the difference between $2,400 cost and $600 liquidation value). This write-down increases your COGS for the year, reducing taxable income.
Step 7: Maximize deductions before December 31.
If you need business equipment, software, or supplies, purchase them before year end to claim the deduction in the current year. Make your fourth quarterly estimated tax payment if due. Contribute to a SEP-IRA or Solo 401(k) to reduce taxable income (SEP-IRA contributions can be made until your tax filing deadline, but Solo 401(k) employee contributions must be made by December 31). Prepay January expenses if your accounting method allows (cash basis can deduct prepaid expenses within certain limits). Review the full deduction list to ensure nothing is missed.
If you need business equipment, software, or supplies, purchase them before year end to claim the deduction in the current year. Make your fourth quarterly estimated tax payment if due. Contribute to a SEP-IRA or Solo 401(k) to reduce taxable income (SEP-IRA contributions can be made until your tax filing deadline, but Solo 401(k) employee contributions must be made by December 31). Prepay January expenses if your accounting method allows (cash basis can deduct prepaid expenses within certain limits). Review the full deduction list to ensure nothing is missed.
Step 8: Verify sales tax compliance.
Confirm that all sales tax returns have been filed and payments made for every jurisdiction where you have nexus. Check your sales tax liability account balance. It should equal the tax collected in December that has not yet been remitted (typically due in January). If the balance is significantly higher, you may have missed a filing in a prior period. Resolve any discrepancies before year end to avoid penalties and interest accumulating into the new year.
Confirm that all sales tax returns have been filed and payments made for every jurisdiction where you have nexus. Check your sales tax liability account balance. It should equal the tax collected in December that has not yet been remitted (typically due in January). If the balance is significantly higher, you may have missed a filing in a prior period. Resolve any discrepancies before year end to avoid penalties and interest accumulating into the new year.
January: Close and Prepare
Step 9: Complete December reconciliation.
Once all December bank statements are available (typically by January 5 to 10), reconcile every account for December. Match all platform payouts, verify that year-end deposits and charges posted to the correct year, and resolve any outstanding items. This is the final reconciliation before generating your annual financial statements, so accuracy matters more than speed.
Once all December bank statements are available (typically by January 5 to 10), reconcile every account for December. Match all platform payouts, verify that year-end deposits and charges posted to the correct year, and resolve any outstanding items. This is the final reconciliation before generating your annual financial statements, so accuracy matters more than speed.
Step 10: File 1099 forms by January 31.
Prepare and file 1099-NEC forms for every contractor you paid $600 or more during the year. You can file electronically through the IRS FIRE system, through your accounting software (QuickBooks handles 1099 filing), or through a service like Tax1099.com. Send copies to the recipients by January 31 and file with the IRS by January 31 (for 1099-NEC). Missing this deadline results in penalties that increase the longer you delay: $60 per form if filed within 30 days, $120 if filed by August 1, and $310 if filed after August 1.
Prepare and file 1099-NEC forms for every contractor you paid $600 or more during the year. You can file electronically through the IRS FIRE system, through your accounting software (QuickBooks handles 1099 filing), or through a service like Tax1099.com. Send copies to the recipients by January 31 and file with the IRS by January 31 (for 1099-NEC). Missing this deadline results in penalties that increase the longer you delay: $60 per form if filed within 30 days, $120 if filed by August 1, and $310 if filed after August 1.
Step 11: Reconcile 1099-K forms you receive.
You will receive 1099-K forms from Stripe, PayPal, Shopify Payments, Amazon, and any other payment processor. Compare the gross payment volume reported on each 1099-K against your accounting records for the corresponding platform. The 1099-K reports gross volume, not net deposits, so it should match your gross revenue plus shipping and tax collected through that processor. Document any differences and their explanations. Your CPA will need this reconciliation when preparing your tax return.
You will receive 1099-K forms from Stripe, PayPal, Shopify Payments, Amazon, and any other payment processor. Compare the gross payment volume reported on each 1099-K against your accounting records for the corresponding platform. The 1099-K reports gross volume, not net deposits, so it should match your gross revenue plus shipping and tax collected through that processor. Document any differences and their explanations. Your CPA will need this reconciliation when preparing your tax return.
Step 12: Generate final financial statements and organize tax documents.
Run your annual Profit and Loss, Balance Sheet, and Cash Flow Statement from your accounting software. Review each for reasonableness: does net income make sense given your business activity? Does the balance sheet inventory value match your physical count? Is cash flow directionally correct? Save these reports as your official annual financial records. Organize all supporting documents your tax preparer needs: 1099-K forms received, 1099-NEC forms filed, home office measurements and expenses, vehicle mileage log, major purchase receipts, loan statements, and retirement contribution records. Deliver this package to your CPA or use it for self-filing.
Run your annual Profit and Loss, Balance Sheet, and Cash Flow Statement from your accounting software. Review each for reasonableness: does net income make sense given your business activity? Does the balance sheet inventory value match your physical count? Is cash flow directionally correct? Save these reports as your official annual financial records. Organize all supporting documents your tax preparer needs: 1099-K forms received, 1099-NEC forms filed, home office measurements and expenses, vehicle mileage log, major purchase receipts, loan statements, and retirement contribution records. Deliver this package to your CPA or use it for self-filing.
Key Filing Deadlines
- January 15: Q4 estimated tax payment due
- January 31: 1099-NEC forms due to recipients and the IRS
- January 31: 1099-K forms issued to you by payment processors
- March 15: S-corp (Form 1120-S) and partnership (Form 1065) tax returns due
- April 15: Individual tax returns (Form 1040 with Schedule C) due
- April 15: Q1 estimated tax payment for the new year due
- April 15: SEP-IRA contribution deadline (or filing extension deadline)
If you need more time, file an extension (Form 4868 for individuals, Form 7004 for businesses) by the original due date. An extension gives you six additional months to file but does not extend the payment deadline. Estimate your tax liability and pay at least 90% by the original deadline to avoid underpayment penalties.
Organizing Documents for Your Tax Preparer
Delivering a well-organized package to your CPA saves time and money because CPAs charge by the hour, and time spent sorting through disorganized records is time you pay for. Prepare a folder (digital or physical) containing:
- Annual P&L and balance sheet from your accounting software
- All 1099-K forms received from payment processors
- Copies of 1099-NEC forms you filed for contractors
- Year-end inventory valuation report
- Home office square footage and total home expenses
- Vehicle mileage log with business and total miles
- Records of equipment purchases over $500
- Loan statements showing interest paid during the year
- Retirement contribution confirmation (SEP-IRA, Solo 401(k))
- Health insurance premium records (for self-employment deduction)
- Prior year tax return for reference
- Notes on any unusual transactions or changes from prior year
If you maintained clean books throughout the year using the weekly bookkeeping routine, most of this information is already organized in your accounting software. The year-end process is primarily verification and packaging rather than catch-up data entry.