Monthly Bookkeeping Service: What's Included and What Costs Extra

What should a monthly bookkeeper deliver each month?

A monthly bookkeeping service should leave you with books that agree with your bank and card statements, plus an income statement and a balance sheet built from them. The IRS lets you choose any recordkeeping system that clearly shows your income and expenses; no bookkeeping method is required, and the law requires no special kind of records except in a few cases. The table lists what such a system produces. It is not a legal standard.

A case is not simple when all you receive is a profit and loss report, you cannot get a reconciliation for each account, or the same books feed payroll, contractor forms, sales tax or your tax return. Inventory, books months behind, more than one entity and a corporation add work too. Each can sit outside the base package (see "What costs extra on top of the monthly package?" below), and the last three also change what the return needs from the books, so a tax professional should look at them. If all you get is a report, start with "All I get is a report: what should I ask for?" Before comparing packages, gather the engagement letter, the last report you received, access to every bank, card and payment account, and any payroll reports.

Which reports are standard: income statement, balance sheet, others?

Two reports are standard: an income statement and a balance sheet. The IRS describes an income statement as income and expenses for a period and a balance sheet as assets, liabilities and equity on a given date. The Bureau of Labor Statistics lists producing such reports, checking figures and reconciling differences among a bookkeeping clerk's usual duties.

Whether you can open these reports yourself at any time, or receive them once a month, is a term of the engagement. See what an engagement letter should spell out.

What does "reconciled" mean, and how do I see it was done?

An account is reconciled when its balance in the books equals the bank or card statement balance after every difference is explained. Pub. 583 says you should reconcile your checking account each month. Reconciling confirms how much money is in the account, makes sure bank charges are in the books, and corrects errors in the statement, the checkbook or the books.

Ask for the reconciliation report for each account. It should show:

• the statement's ending date and balance;
• the books' balance on that date;
• the uncleared items (checks not yet cashed, deposits not yet posted) that explain any gap;
• a remaining difference of zero.

A connected bank feed is not a reconciliation: software can import transactions without anyone comparing them with the statement. See bank feeds are not reconciliation. A profit and loss report with no reconciliation behind it proves little about whether the cash figures are right. A balanced account still does not prove the categories are right; checking your bookkeeper's work covers that.

What must the books let me prove to the IRS?

The books must support the income, deductions and credits on your return, whoever keeps them. The IRS says everyone in business must keep records, and the duty stays with the business even when a bookkeeper keeps the books.

• A summary of transactions. Your books must show gross income, deductions and credits, usually in journals and ledgers (IRS).
• Support for each entry. Sales slips, invoices, receipts, deposit slips and statements back the books. For an expense, the support should identify the payee, amount, proof of payment, date and what was bought.
• Software records that tie out. If you use a computerized system, its records must reconcile with your books and return and identify the underlying source documents.
• Availability and time. Keep records available for IRS inspection and until the period of limitations for the return ends: generally 3 years after filing, 6 years when income left out is more than 25% of the gross income on the return, and no limit when no return was filed (Pub. 583, Table 3). Keep employment tax records at least four years after the tax is due or paid, whichever is later.

For receipts and retention, see IRS receipt requirements and how long to keep business records.

What does a bookkeeper not do: tax returns, IRS representation, advice?

A bookkeeper records transactions and produces reports. Preparing a return for pay and speaking for you to the IRS are separate services, each with its own IRS rules. Advice on structure, elections or tax planning is usually scoped separately in the engagement letter.

A PTIN alone gives no authority to represent clients, and the IRS list of credentials does not include bookkeepers. A preparer in the Annual Filing Season Program may represent only clients whose returns they prepared and signed, before revenue agents and similar IRS staff, not in collection or appeals. An individual may represent themselves, and a bona fide officer, general partner or regular full-time employee may represent the business (31 CFR 10.7). Settle in advance who would answer an IRS letter or attend an audit, and what authority that person has. See bookkeeper, accountant or CPA.

What costs extra on top of the monthly package?

Work that has its own filing or its own dates is the work most likely to sit outside a base package. The engagement letter should say, line by line, what is in the monthly fee and what is billed on top.

Sales tax collected from customers is kept apart from sales. In the IRS's sample records, it is subtracted from receipts before net sales are figured, because the owner only collected it for the state. For what drives a monthly fee, see what bookkeeping costs per month.

What does monthly payroll work involve, and which dates matter?

Payroll adds work every pay period and on fixed federal dates: figuring pay and withholding, depositing the tax, filing quarterly and annual returns, and issuing wage statements. The employer stays responsible for the filings and deposits even when a third party performs them.

Depositing the tax and filing the return are separate duties. A late deposit can carry a penalty of 2% to 15% of the unpaid amount, depending on how late the deposit is and whether the IRS has sent a notice (IRS). Tax withheld from pay is held for the government. A responsible person who willfully fails to pay it over, such as an owner, an officer or an accountant who signs checks or controls spending, can owe 100% of the unpaid amount personally, the trust fund recovery penalty (IRS; Pub. 15). The IRS generally has 3 years to assess it, counted from the later of filing the return or April 15 of the following year, and has no limit while no return is filed (IRM 5.7.3).

Payroll records include wage amounts and dates, withholding certificates, deposit dates and amounts, and copies of returns filed (Pub. 15). Which deposit schedule applies, the next-day deposit rule and the small-employer exceptions are in setting up payroll. State withholding and unemployment accounts have their own dates; if deposits were missed, see behind on payroll taxes.

Which contractor payments need a Form 1099-NEC, and who files it?

The business that paid the contractor files Form 1099-NEC and sends the contractor a copy when, in the course of its business, it paid that person $2,000 or more for services in this page's tax year. Payments made through 2025 used a threshold of $600, and later years are inflation-adjusted (IRS). The rule reaches individuals, partnerships and LLCs taxed as either. Payments to corporations (attorneys excepted) and payments made by card or payment app are generally not reported on this form, and backup withholding can require a form at any amount (IRS instructions; IRS). The forms are due January 31 after the payment year, to the IRS and to the contractor. For payments in this page's tax year the date is February 1, 2027, because January 31 falls on a Sunday.

The payer files, even if the bookkeeper prepares the forms; whether the monthly fee covers that is a scope question. Get a completed Form W-9 from a US contractor before the first payment: it is how a payer obtains the payee's name and taxpayer identification number. A foreign contractor gives a Form W-8 or Form 8233 instead, with different reporting and withholding; see paying contractors abroad. Who counts as a payee, backup withholding and e-filing follow their own rules; see which contractors get a tax form and collecting tax IDs from contractors.

What do I have to send my bookkeeper each month?

Send access to every bank, card, loan and payment account, answers to the bookkeeper's questions, receipts or a note for each flagged transaction, payroll reports, and a note on owner draws and personal spending. Pub. 583 says to use the business account for business purposes only, so mixed spending needs an explanation. The full list is in what your bookkeeper needs from you.

All I get is a report: what should I ask for?

Ask for the work behind the report, since the report is only as good as it. Request these in order:

1. The reconciliation report for each bank and card account for the latest closed month, showing a zero difference.
2. The open-items list: uncategorized, unmatched and suspense items (amounts parked in a holding account until someone decides where they belong).
3. The balance sheet, not only the income statement.
4. Payroll and sales tax balances matched to the deposits and returns actually filed.
5. The written scope: what the monthly fee includes, what is extra, and the delivery date each month.
6. View access to the accounting file, so reports are available when you want them.

A report with no reconciliation or open-items list behind it has nothing to check it against. See checking your bookkeeper's work and, if the answers do not improve, replacing your bookkeeper. If the books and the returns may not agree, see bookkeeping services.

Example

These examples are illustrative. Amounts are in US dollars.

Salon LLC with four employees

A salon LLC has two bank accounts, one card and about 120 transactions a month. The monthly package is three reconciled accounts, an income statement and a balance sheet. Payroll for the four employees is a separate line: pay each period, tax deposits, Form 941 four times a year, then Forms 940, W-2 and W-3 by January 31, or the next business day when that is a weekend.

Eight freelancers

A shop pays eight freelancers US$3,000 each for services in this page's tax year, all by check or bank transfer. None is a corporation, and all are US persons. The shop collects a completed W-9 from each before the first payment. Each is above the $2,000 threshold, so the shop owes eight Forms 1099-NEC, US$24,000 in total, due February 1, 2027 because January 31 falls on a Sunday. Paid by card instead, a freelancer would be reported by the card processor, and a freelancer who is a corporation would generally need no form.

Large profit, little cash

An owner's monthly report shows US$18,000 of profit, yet the bank balance is US$4,000. Profit is not cash: loan principal payments, owner draws, unpaid customer invoices and inventory purchases can all explain a gap. Before paying the next invoice she asks for the bank reconciliation and the list of uncategorized items, which show whether the cash figure is right and what is still unexplained.

Different for you?

• You pay a monthly fee and see only a profit and loss report, or you cannot get a reconciliation for each account. The scope, the reconciliations and what is billed separately are what to settle first. See bookkeeping services and checking your bookkeeper's work.
• Your books also feed payroll, sales tax and a tax return. The engagement letter, the payroll and sales tax balances and the return all have to agree, and someone must be named for each. A professional who reads the letter and the last report against your filings can see where they do not. See bookkeeping services.
• The books are months or years behind. See catching up on overdue books and bookkeeping services.
• You are comparing quotes before you sign. See what bookkeeping costs per month and what an engagement letter should spell out.
• Payroll deposits or returns were missed. See behind on payroll taxes.
• A contractor may really be an employee. See contractors who may be employees.
• You collect sales tax in more than one state. See filing sales tax returns and outsourcing sales tax filing.
• You received an IRS notice or audit letter. Who may speak for you to the IRS depends on that person's credential. See bookkeeper, accountant or CPA.
• You run an S corporation. See S corporation bookkeeping.
• The business has owners or accounts in two countries. Which books support which country's return is a question for a professional. See cross-border tax services.
• You want to do the books yourself instead. See doing your own books or hiring a bookkeeper.