How to Get Tax Reports for Your Business Using QuickBooks
Want to get your business tax returns out of the way as quickly as possible? Getting the right reports to your preparer is key to streamlining the filing process and avoiding costly mistakes. In this guide, we'll walk you through how to generate those reports using QuickBooks. These steps will help ensure your tax preparer can cover a lot of ground on your return quickly and efficiently.
Why Tax Reports Are Critical
Your tax preparer will often request three specific reports to review your financials and complete your tax return:
Trial Balance (in spreadsheet format)
Profit and Loss Comparison Report
Balance Sheet Comparison Report
Why Are These Reports Important?
Trial Balance: This report provides an overview of all account balances and helps your tax preparer make adjusting or tax journal entries. Exporting it in spreadsheet format saves time by eliminating the need to manually input data.
Profit and Loss Comparison Report: This report shows your business’s income and expenses and highlights any trends or anomalies compared to previous years.
Balance Sheet Comparison Report: A side-by-side comparison of your balance sheet with the previous year helps spot discrepancies or unrecorded transactions that could impact your tax filings.
Common Errors to Avoid
Mistakes like recording transactions in the prior year after handing off your books to the tax preparer can create discrepancies. For instance:
Adding invoices to the previous year after the books are closed.
Correcting past errors without consulting your tax preparer.
These errors can result in either underreporting taxable income (leading to penalties) or missing deductible expenses (resulting in overpaid taxes).
Pro Tip: Once you’ve handed off your books, stop recording transactions into the prior year. This ensures clean records and faster tax prep.
Step-by-Step: How to Generate Tax Reports in QuickBooks
Below is a step-by-step guide for generating each report in QuickBooks Online.
1. Generating a Trial Balance
Navigate to the Reports Menu:
In QuickBooks, click on the “Reports” tab in the left-hand menu.
Select the Trial Balance Report:
Choose “Trial Balance” from the list of available reports.
Set the Report Period:
Use the drop-down menu to select "Last Year," or manually input the dates (e.g., January 1 to December 31).
Adjust Display Options:
In the “Display Columns by” drop-down, select “Total Only.”
Ensure you’ve chosen the correct accounting method: Cash or Accrual basis (refer to your tax return to confirm which method to use).
Run and Export the Report:
Click “Run Report”
Click the “Export” button and select “Export to Excel” to download the report in spreadsheet format.
2. Generating a Profit and Loss Comparison Report
Go to the Reports Menu:
Click on “Reports” and select “Profit and Loss Comparison.”
Set the Report Period:
Choose "Last Year" from the drop-down or manually enter the date range (January 1 – December 31).
Enable Comparison:
Under the "Compare Another Period" section, check the box for "Previous Year."
Adjust Accounting Method:
Select “Cash Basis” or “Accrual Basis,” depending on your tax filing method.
Run and Export the Report:
Click “Run Report” and then export the file. PDFs are typically sufficient for this report, but Excel can also be used for added flexibility.
3. Generating a Balance Sheet Comparison Report
Open the Reports Menu:
Navigate to “Reports” and select “Balance Sheet Comparison.”
Set the Date Range:
Similar to the Profit and Loss report, choose “Last Year” or manually input the dates (January 1 – December 31).
Add Comparison Columns:
In the "Compare Another Period" section, check the box for "Previous Year."
Choose Accounting Basis:
Confirm whether the report should be on a cash or accrual basis.
Run and Export the Report:
After running the report, download it in Excel or PDF format.
Pro Tips for Effective Tax Reporting
Use Comparison Reports: Always generate reports with a comparison to the previous year. This provides valuable context for identifying trends and discrepancies.
Avoid Recording Transactions After the Cutoff: Once your books are sent to your CPA or tax preparer, avoid making further changes to the prior year’s data unless they advise you otherwise.
Materiality Matters: For significant adjustments (that impacts taxes or loan applications), consult your tax preparer to determine whether an amendment is needed.
Collaborate with Your Tax Preparer: Open communication with your CPA ensures they can address any unusual transactions and prevent potential IRS issues.
Final Thoughts
Generating accurate tax reports using QuickBooks doesn’t have to be daunting. By following the steps above, you’ll equip your tax preparer with the essential information they need to prepare your return efficiently.