Keep advance client payments connected to the work promised
Money arrives before a project starts, or a client pays a retainer while work continues over several months. The bank record establishes the payment. Your agreement and work history explain what it covers and what remains to be done.
Keep those records together before preparing the year. Arkrel helps you review the statement activity by merchant and build your business report. Try one statement free, review its merchants and preview My year. No card needed.
Begin with the payment terms
Save the agreement or approved proposal that explains the payment. Record the work covered, the agreed amount, when it is payable and what happens if the project changes or ends. Retain later amendments with the original terms.
Use the language in the agreement without assuming that a word such as deposit or retainer determines the accounting. A payment for future services and money held subject to a refund condition may need different review. Give your preparer the terms and the actual events.
Keep a separate record of work and applied amounts
In the system you use to manage client work, keep the opening amount received, subsequent receipts, amounts applied to bills, refunds and the remaining balance or work obligation. State the date of the record and preserve the invoices or milestones behind it.
For a simplified hypothetical example, a client pays $2,000 before work starts and a later invoice applies $600 of that amount. The project record shows a $1,400 amount not yet applied, assuming no other changes. This arithmetic describes the client record; your preparer determines the financial and tax treatment.
Preserve the timeline when work crosses a year end
Keep the payment date, invoice dates, work dates and any refund date. If a December payment relates to work done the following year, include the agreement and both years' relevant records in the preparer's review. Avoid moving a payment between years in your notes to match the date you expected to finish.
IRS Publication 538 explains accounting-period and method rules, including treatment of advance payments. Ask your preparer how those rules apply to the method already used for your business. Completion of the work does not by itself determine the tax year for every payment.
Record cancellations and changes against the original agreement
When a project is reduced, postponed or cancelled, save the revised terms and the client's acknowledgement. Keep any refund confirmation or credit with the original payment reference. A change to the scope and money sent back are separate events in the history.
Before year end, review which arrangements still have unresolved balances or work obligations. Your billing or project records should answer that question. Give your accountant that dated list even if no new money moved through the bank during the review period.
Review the statement activity with the client records alongside
Upload or email the relevant bank and card statements to Arkrel. Use your client references when reviewing incoming payments or refunds that need more explanation. Keep any remaining treatment questions for your preparer, who can maintain the necessary balances and adjustments with the complete records.
Free includes one statement upload, merchant review and a My year preview. The full tax report, downloads, exports and accountant sharing require a paid plan. The paid report includes a profit and loss summary, Schedule C totals and likely deductions for review.
Catch-Up is $499 one time per purchased tax year, with a 30-day money-back guarantee. Autopilot is $49 per month with a 14-day free trial and covers the current calendar year only. See Arkrel pricing for your statement-preparation options.
Use the accountant checklist to send the agreement history and dated client balance list with the report. The Schedule C preparation guide explains the statement-to-tax-preparation part of the process.
Questions about advance client payments
Does calling a payment a retainer decide its treatment?
Keep the terms and explain how the arrangement works. Your preparer considers those facts and the applicable accounting method rather than relying on the label alone.
What if the project continues into the next year?
Preserve the receipt date and the work history across both years. Ask your preparer to determine when and how the payment belongs in the records.
Where should I track the amount still available to a client?
Use your billing or project system for applications, refunds and remaining balances. Give your accountant a dated record for review alongside the statements.
What if I refund part of the advance?
Keep the original agreement, the reason for the change and the refund reference together. Preserve both payment dates rather than replacing the history with one net figure.
Can I try the statement review without a card?
Yes. One statement upload, merchant review and a My year preview are free, without a card. Full reports, downloads, exports and accountant sharing require payment.
Choose a statement containing an advance payment whose agreement you can find.