In short. Closing the year for a private practice is the December close done once more against the full year, with every account reconciled through December 31, EHR payments tied to deposits, Forms 1099-K matched to gross revenue, W-2 and contractor totals settled, and the year locked in QuickBooks Online. A few steps, such as getting an S corporation owner's health insurance figure into the last payroll, cannot wait for January. The books are bookkeepz, LLC work; the tax decisions and 1099 filings belong to our affiliated CPA firm, PizzelloCPA, PLLC, under a separate engagement.
Most of a year-end close is the same work the books get every month, done once more for December and then checked against the whole year. The difference is that the December close feeds the W-2s, the 1099s, and the tax return, and this article covers the bookkeeping side of closing 2026 in the order we work through it. The tax side of the same season, meaning which decisions to make before December 31 and what they are worth, is covered by our affiliated CPA firm, PizzelloCPA, PLLC, in its companion article on year-end tax planning for private practices.
The year-end close at a glance
| Area | What has to be true before the handoff | When |
|---|---|---|
| Bank, card, and loan accounts | Reconciled through December 31, with loan interest and principal matched to the lender's year-end statement | January |
| EHR payments and receivables | Payments tied to deposits, Undeposited Funds cleared, and receivables reviewed | December and January |
| Forms 1099-K received | Gross amounts tied to the books month by month | When the forms arrive |
| Payroll | Owner health insurance, planned owner wages, and any planned 401(k) deferrals in a 2026 payroll | Before the last 2026 payroll |
| Contractors and rent | W-9s on file, with totals and payment method by contractor | W-9s by December, totals in January |
| Fixed assets | Invoices and placed-in-service dates | January |
| Owner transactions | Personal spending reclassified and reimbursements paid | Reimbursements by December 31, reclassifications in the close |
| Mileage and home office | Mileage log, odometer reading, and home expense records | At or near December 31 |
| Inventory | Physical count, with the inventory account adjusted to it | As of December 31 |
| QuickBooks Online | Closing date set and package handed to the CPA | After the adjustments are booked |
Reconcile every bank, credit card, and loan account through December 31
Every balance sheet account with an outside statement gets reconciled to that statement through December 31, including the clearing accounts that card processors and payroll providers run through. December gets the same treatment as every other month, plus one check, which is that the ending balance on each reconciliation report agrees with the balance sheet at December 31.
A credit card statement that closes before December 31 leaves the last charges of the year on the January statement, and in the books those charges are still December expenses, so after reconciling the December statement we confirm the late-December charges are recorded and dated in December.
A monthly loan payment covers interest and principal together, and booking the whole payment to the loan or to interest expense leaves both the balance sheet and the P&L wrong. We use the lender's year-end statement or the amortization schedule to adjust the loan balance to the principal owed at December 31 and the interest expense to the interest the lender reports for 2026.
Tie EHR payments to deposits and clean up receivables
Each month we tie the EHR's payments report to the deposits that hit the bank, and at year-end we do the same thing for the full year. The client and insurance payments the EHR recorded for 2026 should reconcile to revenue in the books, with every difference explained, such as card processing fees taken out of payouts, refunds, and insurance recoupments.
In QuickBooks Online, payments recorded but not yet matched to a bank deposit sit in Undeposited Funds, which Intuit's help pages also call Payments to Deposit. At year-end, anything left there should be a real deposit in transit. An older item may be a payment recorded twice, once from the EHR or an invoice and once from the bank feed, or a deposit never matched to the bank, and we resolve each one before the year is closed.
Receipts at the very end of December need the same care. Card payments taken in the last days of December that the processor pays out in January are a timing difference against the bank, and the books record them in December through a clearing account so the EHR and the books agree. A check received in December is recorded in December through Undeposited Funds even when it reaches the bank in January. How receipts that straddle the year are treated on the return is confirmed with PizzelloCPA, PLLC.
Practices that keep receivables, in the ledger on accrual-basis books or in the EHR's aging report on cash-basis books, should review them before the year closes and write off what will not be collected under the practice's own policy. On accrual-basis books the write-off comes out of receivables in the ledger in 2026. On cash-basis books it is made in the EHR only and creates no expense, because that revenue was never recorded. The owner decides what to write off, and we confirm the EHR and the books agree afterward.
Match the books to the Forms 1099-K the practice will receive
Card processors and payment apps report what they paid the practice on Form 1099-K, due to the practice by January 31, which moves to Monday, February 1, 2027 for 2026 forms because January 31 falls on a Sunday. Card payments have no minimum, since the IRS says there is no threshold amount that must be met to receive a Form 1099-K for payment card transactions. Payment apps and online marketplaces are required to file for 2026 only when payments to the practice exceed $20,000 and the number of transactions exceeds 200, the threshold P.L. 119-21 retroactively reinstated, although an app may still send a form for less and some states set lower thresholds.
The form reports gross amounts for each month, without regard to fees, refunds, or other adjustments. Books that record card payouts at the net deposit show less revenue than the form, while books that record card revenue gross, with fees as an expense and refunds as refunds, tie with only timing differences left. We tie each form to the books month by month and send the tie-out to PizzelloCPA, PLLC.
Close out payroll before the last run of the year
For a practice with payroll, the deadline that matters most is the Form W-2. The IRS instructions set February 1, 2027 as the date for furnishing 2026 Forms W-2 to employees and for filing them, with Form W-3, with the Social Security Administration, because the usual January 31 falls on a Sunday. A payroll provider builds the W-2s from the year's payroll records, so anything that belongs on a W-2 has to be in payroll before the last run of the year.
For an S corporation owner, the item to watch is health insurance. IRS Publication 15-B defines a 2% shareholder as someone who directly or indirectly owns, on any day during the tax year, more than 2% of the corporation's stock or voting power, and the W-2 instructions include the accident and health insurance premiums an S corporation pays for these shareholder-employees in box 1 wages. We total the premiums the practice paid or reimbursed for 2026 from the books and get that figure to the payroll provider before the final payroll, so it is on the W-2. Premiums the owner paid personally are reimbursed against proof of payment before December 31, since only premiums the practice pays or reimburses in 2026 belong on the 2026 W-2. Their tax treatment is decided by PizzelloCPA, PLLC.
The books also confirm that payroll ran the way the owner's salary and any 401(k) deferrals were planned with PizzelloCPA, PLLC. Before the last December payroll we compare the owner's year-to-date wages and any 401(k) deferrals on the register to the plan, so a year-end bonus, an adjustment, or a remaining deferral can still be run in a 2026 payroll.
Last, the year's payroll registers are tied to the ledger. Wages, employer taxes, and payroll liabilities in QuickBooks Online should agree with the provider's year-to-date reports, with the liabilities at zero or at what the provider will remit in January for December's payrolls. An unexplained liability balance can mean a tax payment was coded to an expense account, and it is worth finding before the W-2s are final.
Finish contractor tracking and collect the W-9s
1099 contractor tracking is bookkeepz, LLC work; the 1099 filings themselves are prepared and filed by PizzelloCPA, PLLC, our affiliated CPA firm, under a separate engagement. The IRS suggests requesting a Form W-9 from each U.S. payee for the legal name and taxpayer identification number, and we ask for missing W-9s in November and December, while contractors are still easy to reach.
For payments made in 2026, P.L. 119-21 raised the Form 1099-NEC threshold from $600 to $2,000 in a calendar year, and the IRS says the figure will be adjusted for inflation for years after 2026. Because a contractor's total is only known once the year is over, we track every contractor from the first payment. Rent belongs in the same tracking, since the IRS instructions for Forms 1099-MISC and 1099-NEC list office rent among the payments reported on Form 1099-MISC at $2,000 or more, with exceptions such as rent paid to a real estate agent or property manager, and PizzelloCPA, PLLC decides which payments are reportable.
How each contractor was paid matters as well. The same instructions say payments made with a credit card or payment card, and certain other payments including third-party network transactions, must be reported on Form 1099-K by the payment settlement entity and are not subject to reporting on Form 1099-MISC or Form 1099-NEC. Payments by credit card, or through a payment app that processes them as third-party network transactions, therefore fall on the Form 1099-K side, while payments by check or ACH from the practice's bank account stay on the practice's side if the other requirements are met. Apps differ, so the books record which one was used and the method of every contractor payment, the year-end report splits each contractor's total by method, and PizzelloCPA, PLLC decides which side each payment falls on.
For clinicians and other health care vendors, a W-9 showing a corporation does not end the question, because the same instructions say the usual exemption for payments to corporations does not apply to payments for medical or health care services provided by corporations.
Equipment and other fixed asset purchases
Equipment, furniture, computers, and buildout work bought during 2026 need the invoice and the placed-in-service date on file before the handoff. The date matters because IRS Publication 946 says depreciation begins when property is placed in service, meaning ready and available for a specific use, which is not necessarily the date it is first used.
We code larger purchases to fixed asset accounts with the invoice attached and the placed-in-service date in the memo, rather than to supplies or repairs. Financed equipment is recorded at its full cost with the loan recorded separately, and equipment sold, traded in, or scrapped during the year is noted so it comes off the books. Whether a purchase is deducted in full for 2026 or depreciated is decided by PizzelloCPA, PLLC when it prepares the return.
Owner draws, distributions, and reimbursements
Personal spending that went through the practice's accounts is reclassified at year-end to owner draws, or to shareholder distributions for an S corporation, so the P&L shows only practice costs. Money the owner put into the practice is recorded as a contribution or a loan from the owner rather than as revenue, and practice expenses the owner paid personally are reimbursed rather than left out of the books.
For an S corporation owner, reimbursements generally run through an accountable plan. The W-2 instructions say accountable-plan payments are generally not reported on Form W-2, while nonaccountable-plan payments are wages, and whether a plan qualifies is a question for PizzelloCPA, PLLC, whose article on accountable plans for S corporation practice owners covers it. We collect the owner's out-of-pocket expenses with receipts monthly or quarterly through the year, because an accountable plan has to have each expense substantiated within a reasonable period, and pay the last reimbursement before December 31, so December's expenses and that reimbursement are both recorded in 2026.
Mileage logs and home office records
IRS Publication 463 says a mileage log kept on a weekly basis counts as a timely kept record and that car expense records include the total miles for the year, so we ask owners who drive for the practice to note the odometer reading on December 31 and send the year's log in early January. Owners with a home office need records of, among other things, the part of the home used for business and its expenses, as IRS Publication 587 explains, so we gather the square footage of the office and the whole home and the year's rent or mortgage interest, utilities, insurance, and repairs. Whether the home office is claimed on the owner's return or reimbursed by the practice is decided by PizzelloCPA, PLLC.
A December 31 inventory count for practices that carry inventory
Practices that sell products need a physical count of inventory as of December 31, which means frames, lenses, and contact lenses in an optical shop, pharmacy stock, food, and retail products in a veterinary practice, and hearing aids and accessories in an audiology practice. We list the count by item at cost and adjust the inventory account to it, with the difference going to cost of goods sold.
Under the approach we describe in why hearing aid trial periods belong on your balance sheet, on accrual-basis books a hearing aid dispensed in December whose trial period is still open on December 31 is carried as a deposit liability at year-end rather than as revenue, so the open trials are listed alongside the count.
How inventory is treated for tax purposes is decided by PizzelloCPA, PLLC. The bookkeeping side is covered in more depth in optical shop inventory for optometric practices and pharmacy and inventory tracking in veterinary practices.
Lock the year in QuickBooks Online and hand it to the CPA
Once the reconciliations are done and the year-end adjustments are booked, we lock 2026 with a closing date. Following Intuit's help article, a primary or company admin goes to Settings, then Account and settings, selects the Advanced tab, selects Edit in the Accounting section, turns on Close the books, enters a closing date, chooses a security option, and saves. Intuit says the closing date stops changes to transactions on or before that date without approval.
Of the two security options, one allowing changes after a warning and one that also requires a password, we use the password option with a closing date of December 31, 2026, so nothing in the closed year moves without the password after the books have gone to the CPA. Adjusting entries PizzelloCPA, PLLC proposes after its review are booked behind the password with a clear memo, and the reports are rerun so the books match the return. QuickBooks Online needs no closing entry for net income, because Intuit notes that when a new fiscal year starts it moves the prior year's net income into retained earnings on its own.
The handoff package then goes to PizzelloCPA, PLLC under its separate tax engagement. It includes the year-end financial statements, every reconciliation, the lenders' and payroll provider's year-end reports, the contractor totals with W-9s, the 1099-K tie-outs, the fixed asset, inventory, mileage, and home office records, and a list of anything still open. Owners gathering their own personal documents for the same return can use our free tax prep checklist, and the problems we find most often in books that are not ready for this handoff are described in the signs a therapy practice's books aren't tax-ready.
Key takeaways. Reconcile every account through December 31, tie the year's EHR payments to deposits, and record late-December receipts in December. Keep card revenue gross so the books tie to the Forms 1099-K. Get an S corporation owner's health insurance, planned wages, and any planned 401(k) deferrals into the last 2026 payroll. Track every contractor with a W-9 and the payment method, because card and network payments are the payment settlement entity's to report on Form 1099-K under section 6050W, subject to that form's thresholds, and are not reported on Form 1099-NEC. Then lock the year and hand the package to PizzelloCPA, PLLC.
Common questions
What year-end bookkeeping has to happen before December 31?
Most of the close happens in January, but a few steps cannot wait. An S corporation owner's health insurance figure, any planned year-end owner wages, and any 401(k) deferrals the owner still plans for 2026 need to be in a 2026 payroll so they appear on the W-2, and the last owner reimbursement of the year should be paid before December 31. Missing W-9s are easiest to collect while contractors are still working with the practice, inventory is counted as of December 31, and owners who drive for the practice should note the odometer reading at year-end.
When are 2026 Forms W-2 and 1099-NEC due?
Both are due February 1, 2027. The normal due date is January 31, and because January 31, 2027 falls on a Sunday, the deadline moves to the next business day. For payments made in 2026, Form 1099-NEC applies to a contractor paid $2,000 or more during the year under P.L. 119-21, up from $600 for payments made in 2025.
Why doesn't our Form 1099-K match the revenue in our books?
Form 1099-K reports gross card and payment app transactions by month, without subtracting fees, refunds, or other adjustments, so books that record card payouts at the net amount deposited show less revenue than the form. Recording card revenue gross, with fees as an expense and refunds as refunds, leaves only timing differences, such as a card payment taken in late December and paid out in January.
What does closing the books in QuickBooks Online do?
Setting a closing date stops changes to transactions dated on or before that date without approval, and users can then change them only after a warning, or after a warning and a password, depending on the security option chosen. We set it to December 31 once the year-end adjustments are booked and use the password option, so the numbers handed to the CPA stay put. QuickBooks Online moves the prior year's net income into retained earnings on its own when the new fiscal year starts.
Keep reading
The tax side of the season is covered by PizzelloCPA, PLLC in year-end tax planning for private practices, with related articles on health insurance for S corporation practice owners and accountable plans. For the monthly routine that keeps year-end short, see what monthly bookkeeping does for a therapy practice, and for contractor tracking, W-2 vs 1099 clinicians. S corporation owners setting next year's salary can start with reasonable compensation for S corporation owners, and how we keep books for clinical practices is on our private practice bookkeeping page.
Talk it through with us
If your practice needs its 2026 books closed out, or wants year-end handled from the first month of 2027, book a free 30-minute consult. Bring your latest bank reconciliation and a year-to-date P&L, and we will show you what stands between those books and a clean handoff.