Bookkeeping Q&A: Get Ahead Before Tax Season Hits

QuickBooks, 1099s, Affirm, Cars, Chaos.

👉 Bookkeepers and Business owners can’t afford to wait until tax season to get organized.

In this first-ever Q&A episode, Paul Rosenblum — Our Favorite Bookkeeping Mensch — tackles real listener questions about:

✅ When to start fresh in QuickBooks

✅ How to reconcile every account (banks, loans, investments)

✅ What the new 1099 thresholds mean

✅ The right way to handle Affirm loans and vehicle financing

Paul also shares a candid story about client delays and missing access that turned into a last-minute scramble, raising the bigger question: why do bookkeepers stop everything at the wrong time?

 💬 Send your questions anytime at BookkeeperMensch.com

Sound effect: 

old cash register open and close with a bing by clubmydia+ -- https://freesound.org/s/584168/ -- License: Creative Commons 0

Transcript

Season 6, Episode 1

It’s after Labor Day, 2025, so I figured it’s a good time to start a new season, although in the last episode, I did say that we can still talk about my summer projects until at least September 20, which is officially the first day of Autumn.  As advertised, this is our first Q&A show of the series.  And I thank everyone who wrote in and/or left voicemail. I also have to thank the people who I talk to on a regular basis on the phone or through email or zoom for reaching out.  It’s a great feeling to talk to other bookkeepers who are either in or want to be in my world.  Or the ‘island’. And that reference is meant for one specific person up in Canada. Don’t stop reaching out with questions - - we can always have another episode dedicated to questions very soon. Go to the website @ Bookkeepermensch.com and leave voicemail there, or you can always use the ‘Fan Mail’ feature.  So, let’s get started with the first Q&A show of this podcast!  I’m Paul Rosenblum. 

The first question is from Neil. 

Thanks for the question, Neil.  If you are starting with QuickBooks Online or desktop, for that matter, with no other data in it, then I would start at the beginning of 2025, or December 16th in your case, since the statement ends on Jan. 15th.  Enter the beginning balance of the statement and the ending balance of the statement that starts in December and ends in Jan, 2025, and reconcile as usual.  If there is 2024 data in QuickBooks already and the balance isn’t correct, then I’d correct the balance as of Jan when the statement ends and put whatever the reconciliation difference is in “Prior Year Adjustments” in the Equity section of the balance sheet.  -2024 isn’t your responsibility if you were hired to start working on the books as of Jan. 1.  My general instinct, personally, is to go back a few years and fix everything, but in reality, if someone makes it clear to you that they want you to start with 2025 and leave prior years alone, then that’s the thing that you should do after explaining to them what you are doing in a non-technical way.  

Neil has a second part of the question as well --- 

Any account that has a statement should be reconciled to the statement.  So, a loan, a credit line or an investment that all come with monthly or quarterly statements should be reconciled, even if the only transaction is interest earned.  Many tax preparers just look at the annual statement, and add the interest earned to the tax return, but won’t add it to the books.  That’s our job to do.  Just confirming -- the investment account, if in the company’s name, should be recorded in the books.  If it is in the owner’s name, then all of that is personal and should not be entered in the business books.  Very good questions, Neil!   Thank you so much! 

Sticking with the theme of bookkeeper questions, here’s one from Jenny, who wants to know …. 

 Thanks, Jenny! Yes--- pre-tax season. My characterization of it. In September, I run 1099 reports for all of my clients and email them. Even though it’s early, I just want to make sure that we have up to date W9 forms for everyone, and that no one is being left out.  This also includes a report of subcontracted labor to make sure that they are all there. And if nothing changes between now and Jan. – it looks like the threshold of is going up from $600.00 to $2,000 for 1099’s that WE have to produce if not from Venmo or PayPal.  If someone is paid by check or Zelle, and over $2,000.00 for the year, then we have to produce 1099’s. So, this is something that we should start checking and double checking starting now.

 Also, Jenny, I’d make sure that you clean up all the misc. transactions that are in Ask My Client. Don’t wait until the last minute to do that, clean those up now, and then every month, make sure that you keep up with them, so at the beginning of next year, every transaction is categorized in the system. So, the simple answer is to start doing year-end work now in September, so you are ahead of tax season. I call it ‘ramping up’.  After a quiet July and much of August, I am starting to ramp it up myself.  Working a little faster, a little harder, being very organized and efficient. The adrenaline isn’t necessarily flowing yet, but it’s getting ready to. Then in October, one more step in the ramp-up. Then by November, I consider it tax season, and I am on full steam.

 On another note, if you haven’t already, start building relationships with every tax preparer for every client who you work with. Call them, ask any questions that you might have, and let them know, most importantly, that you are accepting new clients. If they know that you are expanding, you will probably get referrals during tax season or in many cases, before. The first tax season for new bookkeepers is one of the most important.  This is the season that you are planting seeds for clients and tax preparers alike to showcase yourself. And the seeds will grow into a thriving business. Also, I’d have a short-term plan and a long term plan on how much money you are going to charge a client, and if it’s a monthly retainer-style billing or per hour like I do. Remember, there are more businesses who need bookkeepers than bookkeepers available these days, and not people who claim they are bookkeepers because they are just “good with numbers”.  

Also, make sure that all of the accountants have your business card, even if you have to put some in an envelope and send them snail mail. Networking is good as well.  Meeting potential clients who might be looking for bookkeepers or maybe businesses who they might know who might be looking for a bookkeeper. I’m sure I left some things out, but I hope that helps, Jenny!   

Third question from Evan -- this is a bookkeeping question – easy to ask, hard to answer! --- go for it, Evan ---- 

For those of you who might not know what Affirm is: It’s a way of making purchases with some vendors by taking out a very short-term loan (or ‘funding’) just for that one purchase.  Their terms are between 3 and 6 months usually to pay off. They have pre-set interest, and pre-set payments which are due on a particular day of the month.  They send reminders to your phone in texts and emails a few days before a payment is due. They also offer credit cards, but what I am talking about is a short-term loan, not a credit card.  

Let me answer this in two ways. Let’s say one makes a purchase for supplies for $1,000.00 for their business and they use Affirm. In QuickBooks at least, you can not use a regular expense function to create this transaction. You would have to create a new payable account which would be a current liability. A journal entry would do it. Debit a ‘supplies’ expense, Credit the payable liability account. As each payment is made, the expense would be subtracting money from the bank account or the credit card account, and the Payable would be debited by the expense transaction. When the payable becomes zero, the supplies are paid for. If however, there is another Affirm funding for another purchase before the original is paid off, I usually make another payable for the new purchase. This way you can track it much better. 

However, there are two potential situations. The first is that the Affirm original transaction has some supplies AND a purchase that is considered an Asset of the business.  Then you would have to split the transaction into supplies and the Fixed Asset section. The payments would be dealt with the same way. Once the Asset is paid off, you’d have to either create an Accumulated Depreciation account for the Asset or Section 179 as an “other” expense on the P&L after asking the tax preparer about what they would like to do. 

The other situation is that the client either has to give you the original receipt or email it so that you know exactly what was purchased and what the interest was, so that the interest can be properly booked into the system. It all comes down to what I have talked about forever here --- relationships. Having a relationship with the client, so that you can get this information from them. 

Clients don’t care about and don’t want to know about these details (most of the time).  So, as a bookkeeper, you just have to ask for the information from them and hope that you get it. There are no real statements from Affirm like a credit card or a bank statement, so bookkeepers are at the mercy of the client to get the correct information from them. 

I have found that once a business owner discovers Affirm, they use it again and again.  Multiple purchases, multiple payments, multiple payment plans and lots of moving parts. It’s very hard to track under the best circumstances because of the mixed Assets and expenses purchased at the same time with the same short-term funding. 

Great Question, Evan --  thank you! 

The last question is something that comes up often with clients and tax preparers who I work with.  And that is …  ‘What is the difference between a car lease and a car being financed for purchase in 24 or 36 months?’.  Leased vehicles are an expense, financed vehicles have to be entered as payables and a fixed asset that will eventually get depreciated, similar to an Affirm payment for something that is purchased as an asset for the company.

The preceding is true if it’s a company vehicle. If there is a personal vehicle that is being paid for by the LLC and the owner is claiming that it is used 100% for business, then that might be an audit waiting to happen.  The trip from home to the office is not deductible, hence that ends the 100% right there. 

The percentage that you claim the use of the personal vehicle is for work would include that percentage of gas, parking, tolls, repairs, maintenance and car insurance. Mileage logs and receipts have to be kept. 

I would be remiss, even in this episode, if I didn’t rant a bit about a client who wasn’t in the office in July and for 2 weeks in August.  Before they left, I sent all the questions that I had through June so that I could clean up the books in their absence.  I heard from them in the middle of August.  They answered about 5 spreadsheets of different accounts that I sent them, paid two invoices from May, and then sent me an email requesting a profit and loss and balance sheet asap so that they could send to their bank.

 I went through and reclassified all the questions that I had for them, and then I started looking at many loans that they had from rapid advance funders.  I ran a balance sheet, highlighted all of them, and asked the finance person what the correct balances were as of June 30th.  Some were paid off but showed incorrect balances.  This happens when the client does not give the bookkeeper access to their bank accounts --- they only send the bank statements and invoices from the loans, without payment plans or balances. 

 As part of this exercise, I wanted to make sure that the balances were correct as of 12/31/2024, since they were on extension and their CPA would soon need to file 2024.  The balances ended up being incorrect as well. So, it took a lot of time for the client to come up with statements from the loan companies, more time to make these correcting entries, all when I should have been working on other things. Moving forward, I have given the client a list of reports, statements and information that I need from them every month!  We’ll see how that works out! 

 By the way, this process started on a Monday, and the CPA and I released the reports to the bank on that Friday at 2pm. So, to keep the theme of this episode... let ME ask a question: WHY DID I STOP EVERYTHING ELSE THAT I AM WORKING ON TO GET THIS DONE?  The answer is that I don’t know. I guess I’m the first patient for ‘The Bookkeeper’s Therapy’ (please listen to the last episode) 😊

Keep those questions coming--- and Happy September 2025!  

I’m Paul Rosenblum