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Comparing and Adjusting a Business QuickBooks File to Match a Tax Return

Aug 30, 2021 8:43:00 AM Kathy Dise QuickBooks, Financial Management, Bookkeeping

match tax returnWant to make sure your business QuickBooks (QB) file agrees with your tax return? Best practice is to use your accountant’s adjusting journal entries or an accountant copy update file to bring your QB in line with the tax return. If neither are available, we suggest using the following approach.

Step 1: Generate a Trial Balance from QuickBooks as of the last day of the tax year in the same basis (cash/accrual) as the tax return.
    1. Go to Reports, Accountant, Trial Balance in Desktop  
    2. Go to Reports, type in Trial Balance in QBO
    3. Make sure your dates and cash/accrual basis match your tax return

Step 2: Export Trial Balance to Excel

Step 3: Combine debits and credits into one column.

    • Credit entries should have () format: To quickly do this, multiply fields using -1 absolute value, drag formula down. Copy and paste values in column.

Step 4: Add two columns: Tax Return and Journal Entry.

    • For the Tax Return column, find and enter: Revenue, Expenses, and ending Balance Sheet Account Values. Use () format for credits. This can be tricky when multiple QB accounts are reported on 1 tax line, like bank account and credit card balances. Maintain the integrity of your QB file, use caution.
    • The Journal Entry column is the difference between Trial Balance and Tax Return. 

Step 5: Sum each column. All columns should equal zero when you are done.

Step 6: Prepare a Journal Entry in QuickBooks as of the last day of the fiscal year. Book the journal entry with a line for each account--even income and expense accounts.

You are done when the year-end balance sheet in QuickBooks matches the ending balance sheet in the tax return.   

Have questions about this procedure or need bookkeeping or QuickBooks assistance for your small business? Give BudgetEase a call at 216-333-1303.

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Kathy Dise

Written by Kathy Dise

Kathy has over 30 years experience helping small businesses succeed. As a commercial lender, commercialization expert and now as a QuickBooks diamond level advisor, Kathy understands the challenges small business owners face. Her experience helps business owners quickly accomplish their financial goals. As the owner of BudgetEase, Kathy works with clients to develop a plan to efficiently process 1,000s of small transactions so owners can make informed decisions. She lives in Shaker Heights, OH with her husband Ralph and enjoys golf, curling and walking in Cleveland’s fabulous Metro Parks.