Tax Preparation Checklist for Business Owners

As a small business owner, you have many things on your plate. Not only do you need to run the daily operations of your business, but you must make sure to stay on top of your taxes. To help you with that, you can create a tax preparation checklist.

To learn more about the necessary documents needed to file your taxes properly so that your business stays compliant, please continue to read below. This brief tax preparation guide will cover all you need to know and who you can contact for more help. 

Business Tax Preparation

Having a tax preparation checklist well before you file your taxes will help make the entire process go as smoothly as possible. If you plan on filing taxes on your own or with the help of your accountant, you should have your business federal tax identification number.

This unique set of numbers helps the IRS identify and keep track of your business. In addition to your business tax ID information, you will need to provide the IRS with your social security number.

Other important documents to have on hand:

  • Bank account statements
  • Checkbook
  • Marketing costs
  • Entertainment and travel expenses
  • Insurance policy information
  • Employee forms
  • Subcontractor forms
  • Mortgage interest 
  • Rent payments
  • Square footage of office space

Make sure that you also have any business income taxes documents on hand. This includes accounting ledgers and journals, bank deposit slips, invoices received and paid, and credit card statements. 

Select the Correct Tax Forms

Because not all small businesses are the same, there is no one-size-fits-all tax form. Depending on your business structure, you may need Form 1120 or Form 1099 to report any losses, deductions, losses, or credits.

Some of the most common forms include:

  • Schedule C: Report income as a sole proprietor
  • 1099-MISC: reports self-employed income as an independent contractor or business owner
  • Form 1120: reports income for a C corporation
  • Form 720: for reporting excise taxes

There are other IRS forms that you may need to use that are not listed here. If you have any questions bout what forms you need to use or how to fill them out, you may need to speak with a tax professional. Tax software can be helpful, but you may benefit more from a reputable tax professional

Create a Tax Calendar

As a small business owner, you are already busy with your day-to-day operations, so you may not remember to keep track of important tax dates. It is imperative that you stay on top of these significant tax due dates because the IRS doesn’t take failure to pay on time lightly. 

Important dates to keep in mind:

  • Jan 31: deadline to send independent contractors a 1099-MISC and W-2s to employees
  • Feb 28: paper deadline for 1099 or 1096
  • Mar 15: multimember LLCs, S corps, and Partnerships must file by this date
  • Apr 1: electronic 1099 or 1096 due
  • Apr 15: C corporations, Single-member LLCs, and sole proprietors filing deadline
  • Apr 15: First estimated payment due
  • Jun 15: Second estimated payment due
  • Sept 15: Third estimated payment due
  • Jan 15: final payment due

If any of these dates fall on a holiday or a weekend, payments are due the following business day. If you cannot meet these deadlines, you can file an extension with the IRS. You will need to file form 7004

Research Tax Credits and Possible Deductions

Many small business owners don’t know about the many excellent deductions or tax credits available to reduce your tax liability. Did you know that you can deduct health insurance and investments from your taxable income? This will help reduce how much you owe. 

Standard small business tax deductions:

  • Mileage
  • Rent
  • Interest
  • Internet services
  • Phone services
  • Legal services
  • Bookkeeping services
  • Employee benefits
  • Meals and entertainment for business dealings

There are other potential credits you may not be aware of, such as the investment credit. If you invest in qualifying reforestation, energy, or other similar projects, you can use that as a deduction.

If you drive an electric or hybrid vehicle for business, that can also work as a potential write-off. You should reach out to your tax professional for more information on other possible deductions. Every business is unique; one company may have more deductions than another. 

Ask for an Extension

As mentioned earlier, if you need to, you can ask the IRS for an extension. Filing your taxes on your own can be a complicated feat, especially if you are extremely busy.

To help with that, you can use Form 7004 to ask for a six-month extension. It is important to note that this extension only provides you an extension on submitting your tax forms. It does not give you an extension on estimated payments. 

Make sure that you keep up with your estimated payments, or you may face steep fines. If you know that you won’t be able to pay the IRS, reach out to them as soon as you can. 

Create Your Personal Tax Preparation Checklist

Let’s face it, paying our taxes each year isn’t necessarily something we look forward to. There is a lot of paperwork that you must gather and fill out to ensure that you stay compliant with the IRS.

If you miss any important documents, you could face delays or penalties. To avoid all of that stress, you can partner with a reputable tax professional to help with your tax strategies and provide you with top-tier bookkeeping services. If you are looking for help with your tax preparation checklist or you need someone to help you with the entire process, contact us now