Updated
Converting the statement is not the hard part
Search for "convert bank statement" and you will find dozens of tools that turn a PDF into a spreadsheet. You may not need one: most banks let you download CSV, OFX or QFX files directly.
Either way you end up with rows of dates, merchant names and amounts. That is where the real work starts.
What a row does not tell you
- What it was for. A flight is a client visit or a holiday. The row looks the same.
- Whether it is business for your trade. A new camera is a work tool for a photographer and a personal purchase for most accountants.
- Which rows belong together. A flight, a hotel, four meals and two rideshares in one city are one trip, not eight separate expenses.
- What never became a row. Business miles you drove (your commute does not count), the home-office share of household bills, and cash you paid.
- What is missing. A month's statement you never downloaded, or a three-night trip with no hotel charge.
- The record behind it. A record generally needs to show what you paid and that it was for the business (IRS Publication 583). Travel, meals and car costs also need the date, place and business purpose and, for a meal, who was there and their business relationship to you. See what a receipt must show.
Categorizing a statement by hand
- Gather every statement for every account you used for work in the year.
- Mark each business row and note its business purpose.
- Group the business rows into categories. The Schedule C categories guide lists them.
- Add the expenses that are not on any statement: a mileage record, the home office share, cash receipts.
- Match receipts and other records to the rows, and note what is missing. See lost receipts.
- Hand it to your CPA with the rest of your tax prep checklist.
If you are a year behind, our catch-up bookkeeping guide helps you decide how far to go.
How Amy approaches it
Amy starts from the statements you already have, as they are: email them to her or bring them to her on the web. She finds your likely business expenses for the work you do, including the ones that never became a row, tells you which records are missing, and asks about the rows only you can explain.
You review and confirm. Your CPA sees where every number came from and makes the call.
See how Reapt works, or read how to find tax deductions you missed.
