The close for a practice where every dollar already landed

What does a close still do when nobody owes you money?

It reconciles what the practice collected against the record of what it charged, and then it stops. Under the cash method, income is reported in the year it is received and expenses are deducted in the year they are paid 1Ref 1Internal Revenue Service (2024).Publication 583 (Rev. December 2024) — Starting a Business and Keeping Records.The cash-method rule that income is reported in the year received and expenses deducted in the year paid, and the IRS list of documents that show gross receipts (bank deposit slips, credit card charge slips, receipt books, invoices) as the raw material a monthly close reconciles., so nothing in the month waits on a payer's decision. The IRS's own list of documents that show gross receipts names the raw material: bank deposit slips, credit card charge slips, receipt books and invoices 1Ref 1Internal Revenue Service (2024).Publication 583 (Rev. December 2024) — Starting a Business and Keeping Records.The cash-method rule that income is reported in the year received and expenses deducted in the year paid, and the IRS list of documents that show gross receipts (bank deposit slips, credit card charge slips, receipt books, invoices) as the raw material a monthly close reconciles..

Three of the steps a billing practice runs have nothing to reconcile here. No claims went out, so nothing aged in accounts receivable, nothing came back denied, and no timely-filing clock is running against a date of service. Those steps come off the list and stay off.

But the money still arrives on somebody else's schedule.

A card charge is not a deposit. A processor collects a period of charges, sends one transfer, and reports a figure at year end that is larger than either. Between the charge and the bank line sit processing fees, refunds, chargebacks and a settlement calendar the practice does not set, and every one of them has to come back out somewhere.

Reconcile the deposits before the month's detail scrolls away

Start at the bank and work backward to the charges. Regulation CC sets the floor on the last leg of the trip: once a bank receives an electronic payment for deposit, and a processor's settlement transfer is one, the funds must be available for withdrawal no later than the next business day 2Ref 2Federal Reserve Board / U.S. Government Publishing Office (2024).Code of Federal Regulations, Title 12, Part 229 — Availability of Funds and Collection of Checks (Regulation CC), Subpart B, §229.10 Next-Day Availability.The next-business-day availability floor for an electronic payment such as a processor's settlement transfer, and the next-day/second-day split for cash and certain checks, which bounds only the deposit-to-availability leg of the close.. Cash deposited in person carries that same next-day floor, while cash deposited other ways and certain checks can run to a second business day 2Ref 2Federal Reserve Board / U.S. Government Publishing Office (2024).Code of Federal Regulations, Title 12, Part 229 — Availability of Funds and Collection of Checks (Regulation CC), Subpart B, §229.10 Next-Day Availability.The next-business-day availability floor for an electronic payment such as a processor's settlement transfer, and the next-day/second-day split for cash and certain checks, which bounds only the deposit-to-availability leg of the close..

The earlier leg has no public rule behind it. How fast a processor closes a day's batch and puts it into that transfer is governed by private card-network and clearing-house operating rules and by the merchant agreement the practice signed, so the schedule to reconcile against is the one printed in that agreement and on the processor's own statement.

The month-end cut is where this bites. A charge run on the last business day of the month commonly settles into the next month's bank statement, which means the bank total and the charge total disagree by design, in a direction that reverses the following month. Write the amount down at the seam and let it reverse.

The gross figure and the subtraction list

The number a processor reports to the IRS is bigger than the money that arrived. Form 1099-K Box 1a carries the gross amount of reportable payment transactions without regard to any adjustments, which leaves processing fees, refunds, discounts and chargebacks sitting inside it 3Ref 3Internal Revenue Service (2026).Instructions for Form 1099-K (Rev. December 2026) — Payment Card and Third Party Network Transactions.The Box 1a definition of gross amount, reported without regard to adjustments for fees, refunds, discounts or chargebacks, and the two-part de minimis exception threshold of more than $20,000 in gross reportable payments and more than 200 transactions.. Reconciling to the bank deposit alone will never reproduce that figure. Build the subtraction list in the same sitting, while the processor's transaction detail for the month is still in front of you.

A third-party settlement organization is required to file the form once both conditions are met for the calendar year: gross reportable payments above $20,000 and more than 200 transactions 3Ref 3Internal Revenue Service (2026).Instructions for Form 1099-K (Rev. December 2026) — Payment Card and Third Party Network Transactions.The Box 1a definition of gross amount, reported without regard to adjustments for fees, refunds, discounts or chargebacks, and the two-part de minimis exception threshold of more than $20,000 in gross reportable payments and more than 200 transactions.. But the IRS says plainly that a payee may receive a Form 1099-K even when total payments or transactions fall under that threshold 4Ref 4Internal Revenue Service (2026).Understanding Your Form 1099-K.The IRS's own hedge that a payee may receive a Form 1099-K even when total payments or transactions fall below the reporting threshold, used to stop the reader reading the form's arrival or absence as a fact about practice size.. The form's arrival, or its absence, says nothing reliable about the size of a practice.

Schedule C is where the two numbers meet. The Line 1 instructions tell the filer to check any Forms 1099 received for business income reported on that line, 1099-K named among them 5Ref 5Internal Revenue Service (2025).Instructions for Schedule C (Form 1040), Profit or Loss From Business.The Line 1 instruction to check Forms 1099 received against gross receipts, 1099-K named, and Line 2 sales returns and allowances as the line that nets a refund back out, including the instruction's own returned-merchandise wording that limits how far it can be read., and Line 2, sales returns and allowances, is where a refund is subtracted back out of gross receipts 5Ref 5Internal Revenue Service (2025).Instructions for Schedule C (Form 1040), Profit or Loss From Business.The Line 1 instruction to check Forms 1099 received against gross receipts, 1099-K named, and Line 2 sales returns and allowances as the line that nets a refund back out, including the instruction's own returned-merchandise wording that limits how far it can be read.. Read Line 2's own wording before assuming it fits a practice: the instructions describe a cash or credit refund to customers who returned defective, damaged or unwanted products, which is merchandise language.

Two steps here rest on convention: treating a refunded visit or an unused package the way the instructions treat a returned product is common tax-prep practice, and no IRS document in this set assigns card-processing fees to a particular expense line. Ask your preparer which lines they want before the year ends, and either way record the gross charged figure and the fee separately instead of booking the net deposit as revenue.

Prepaid packages and memberships are taxed when the card runs

Money for visits that have not happened yet is income in the month it arrives. Under the cash method an amount enters gross income once it is constructively received, which Publication 538 defines as credited to your account or made available to you without restriction 6Ref 6Internal Revenue Service (2022).Publication 538 (Rev. January 2022) — Accounting Periods and Methods.The general cash-method income rule and the definition of constructive receipt (credited to the account or made available without restriction), from which the timing of a prepaid package or membership charge is inferred; the publication does not discuss health-practice packages.. Applied to a prepaid package or a monthly membership, the charge is generally taxable in the month the card runs rather than spread across the months the visits occur.

That publication states the general income-timing rule and never discusses health-practice packages, so the application is an inference from the general rule and worth confirming with a preparer. It also runs against the way the practice thinks about the same money. The package is a promise of eight visits, and seven of them are still owed on the day the deposit clears.

Many practices carry a second schedule alongside the tax number, drawing each package balance down as sessions are used, so the owner can see what the month earned separately from what it collected. That is a bookkeeping convention with no regulator's document behind it. It earns its place anyway, because the unused balance is both an obligation to a patient and the refund exposure the practice is carrying.

Count unused sessions per patient at the close, while the appointment record and the ledger still agree.

Paying yourself is a step in the close

The month's profit becomes the owner's money only when something moves it, and the order matters when the practice is taxed as an S corporation. The IRS position is that wages for services performed by an owner-employee run through payroll before any non-wage distribution is taken, and it may reclassify distributions as wages where that ordering is not followed 7Ref 7Internal Revenue Service (2026).S Corporation Compensation and Medical Insurance Issues.The ordering rule that an S-corporation owner-employee's wages for services run through payroll before any non-wage distribution, and the IRS's ability to reclassify distributions as wages when that ordering is not followed.. What the close owes the file is narrow: what was paid, in which form, and on what date it cleared.

Which entity the practice files as, and what compensation figure is defensible inside it, are determinations to run with a CPA against last year's return. The monthly routine only has to capture the payroll run and its tax deposits where there is payroll, the draw where there is not, and the date on each.

A common convention is a second account that takes a fixed share of each month's collections, so the estimated tax payment is funded before it comes due. The share itself is a number to set with a preparer, since it turns on the practice's own expenses and on the owner's other income.

The sequence, and the five numbers it leaves behind

Run it in one sitting, in the same order every month, and finish each step with a document. This is the cash-pay version of the 90-minute monthly close: the same sequence with every step removed that exists because a payer owes money. Five steps, four documents, and one number at the end of each step that a preparer could check a year later without calling to ask what it meant.

Those five outputs are the whole of the solo dashboard for a practice with no claims: collected, subtractions, unused prepaid balance, paid expenses, owner pay. Keep one row per month in a single sheet and the trend arrives free. A sixth number, collections per clinical hour, needs nothing but the calendar and is worth the extra minute.

Keep the month's documents in one folder named for the month: the bank statement, the processor's settlement and transaction detail, the package ledger, and the payroll record or draw log. Two of those, the record of deposits and the card charge detail, are categories Publication 583 names as evidence of gross receipts 1Ref 1Internal Revenue Service (2024).Publication 583 (Rev. December 2024) — Starting a Business and Keeping Records.The cash-method rule that income is reported in the year received and expenses deducted in the year paid, and the IRS list of documents that show gross receipts (bank deposit slips, credit card charge slips, receipt books, invoices) as the raw material a monthly close reconciles.. File it before the next month's charges start arriving.