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Year-end clarification for 3rd party tax preparers as to opening balance reconstruction at Finaloop

Written by Emily Burrows

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This article provides key instructions and important information to help you prepare accurate tax returns based on financials prepared by Finaloop.

Please review the following instructions prior to preparing the tax return and let us know if you have any questions!

Opening balances

For customers who joined Finaloop during the tax year:

Here is some important information about how Finaloop built your opening balances and what to do if there are variances between Finaloop and the tax return balance:

Source of opening balances

Finaloop determined opening balances (closing balances as of December 31 of the previous year) using verified data from independent sources of truth, including:

  • Banks

  • Credit cards

  • Online stores

  • Payment gateways

  • Customer-provided information (if independent data isn't applicable).

Undeposited Funds (UDF) balances were created/updated for each integrated, applicable store and payment gateway that holds available cash. This is based on information received directly from each store and payment gateway. Where applicable, this is reflected in your opening balances adjusted for UTC time zone (Universal Time Coordinated).

Action required for variances

If there are any variances between the opening balances in Finaloop’s books and your prior tax year's closing balances, these variances should be reconciled, and reflected by the tax preparer in this year's tax return as part of the tax filing process or reflected in an amended tax return for the previous year.

Example of variance reconciliation:

Scenario:

  • Asset 1 in the customer's balance sheet in Finaloop on December 31, 2024 as retrieved from an independent source of truth or as provided by the customer (reflecting the “true” balance): $12,000

  • Asset 1 balance as reported in the 2024 tax return: $8,000

Action:

  • The tax preparer should consider including the $4,000 variance ($12,000-$8,000) as additional income in 2025 or amending the 2024 tax return to reflect the accurate balance.

  • Journal entry by Finaloop on December 31, 2024 :

    • D’ Asset 1: $12,000

    • C’ Retained Earnings: $12,000

  • Journal entry pick up as an additional income in 2025:

    • D’ Retained Earnings: $4,000

    • C’ Income: $4,000

For customers who joined Finaloop before the tax year:

Any book-tax adjustments that were made as part of your previous tax filing process and were not reported to Finaloop are not reflected in the books.

If tax positions taken (e.g., accelerated depreciation, liability recognition, equity changes) impact the Balance Sheet ending balance, please report them to Finaloop via email ([email protected]). These adjustments will not be reflected in the books unless reported directly by you or your tax preparer.

Accessing financial reports

In the Year-end Hub, once your books are ready, you'll see your final Profit & Loss, Balance Sheet, Bank reconciliation report, and Trial balance. Each can be exported directly from the hub.

To access key reports before they are finalized:

  • Profit & Loss and Balance Sheet: Reports section on your navigation menu> Profit & Loss or Balance Sheet.

  • Trial balance: More from your navigation menu>Export Trial Balance. Then select the Report period and click Export.

If you have any questions at all, feel free to reach out to support at [email protected] for more help.

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