Date Published:
Author: Jeremiah
Year-end always seems to sneak up on contractors. One day it is October and you think you have plenty of time. The next day it is December and tax season is right around the corner.
The difference between a smooth tax filing and a stressful one often comes down to what you do in those weeks before the year ends. Getting organized now saves time, reduces errors, and often uncovers opportunities for deductions you might otherwise miss.
Here is a practical checklist for Washington contractors to work through before year-end filings arrive.
Start with the foundation. Reconcile your checking account, credit cards, vendor house accounts, equipment loans, and lines of credit. Make sure everything in QuickBooks matches your bank statements.
Reconciliation catches duplicate entries, missing transactions, and errors that can throw off your entire tax picture. If you wait until after the year ends, these small issues become bigger problems.
Washington does not have an income tax, but it does have a Business and Operations (B&O) tax. Contractors often fall into specific classifications depending on the type of work they do. Retailing, wholesaling, service and other activities, and manufacturing all have different rates.
Make sure you understand which classification applies to your business. A misclassification can cost you money in penalties, so get this right now if there is any question.
Washington sales tax rates vary by city and county. If you have worked in multiple locations during the year, make sure you have been applying the right rate to the right jobs.
Review your invoices and journal entries to verify that sales tax has been handled correctly. This is especially important if you work in urban areas with local option taxes.
Any equipment purchased during the year needs to be properly classified and tracked. Understand whether items qualify for the Section 179 deduction, which allows you to deduct the full cost of certain equipment in the year it is purchased rather than depreciating it over time.
Also verify that all equipment is being tracked and documented. Good asset tracking saves time during future years and helps with insurance and equipment financing questions.
If you hired subcontractors during the year, verify you have W-9s on file. Know the threshold for 1099 reporting in your state and make sure you have all the information you need to file 1099s correctly if required.
Having documentation in place now prevents scrambling in January when 1099 deadline arrives.
Review your payroll records to verify that all withholdings were calculated correctly throughout the year. Check that PTO balances are accurate if you provide paid time off. Verify that all employees and subcontractors are classified correctly.
Also check your L&I classifications if you have employees in Washington. The wrong classification can result in higher premiums and audits.
For any jobs that finished during the year, make sure all deposits have been matched to invoices and all costs have been captured in the books. Do not leave jobs open at year-end if they are truly complete.
This is especially important if you use job costing. Open jobs at year-end make it harder to understand actual job profitability.
If you take draws from the business, make sure they are properly separated from payroll in your books. The way you compensate yourself has tax implications, and it needs to be structured correctly.
If you have a pass-through entity like an S-Corp or LLC, understand what distributions you have taken and what your equity position is in the business.
Do not wait until January to reach out to a tax professional. Year-end conversations are about being proactive, not reactive. A CPA can identify additional deductions you may have missed, discuss tax planning strategies for next year, and make sure everything is set up correctly before tax season gets busy.
These conversations often save more than they cost.
Finally, create a plan for how you will handle bookkeeping in the new year. Will you do monthly reviews? When will invoices get entered? How often will accounts be reconciled?
Do not start next year behind. A monthly bookkeeping rhythm keeps things manageable and prevents the cycle from repeating.
Year-end prep is not about perfection. It is about control and knowing where your business stands. Taking time now to organize your books, verify your tax position, and plan for the year ahead reduces surprises later and puts you in a stronger position when tax season arrives.
