Small Business Tax Preparation Checklist

When it is tax time you don’t have time for messing around, being the owner of a small business. Your taxes must be done quite fast. Fortunately, you are not the only one for fulfilling the filing deadline for this year. This particular guide on the small business tax preparation checklist will show you the way to become fully prepared for the tax season.

In this article, we will cover everything needed by you for preparing for your tax filings. We will mention how to update your accounting software prior to filing, the accounting reports that will be required by you for filling out the tax forms, essential filing information, and so on.

WHAT IS NEEDED BY YOU TO DO FOR PREPARING SMALL BUSINESS TAXES?

It is not imperative for the tax season to be stressful. The whole process will be broken down by us into 6 simple steps so that it is possible to prepare the taxes for your small business without any problem at all. Get prepared to file your small business taxes in the most effective way by following the steps mentioned below.

1. HAVE GENERAL BUSINESS AND PERSONAL INFO AVAILABLE TO YOU

Basic personal info will be required for filing the taxes. You would like this available to you for use on the tax forms or they must be written down for the tax professional or accountant provided one has been hired by you for filing your tax return. The info needed will be quite simple; however, it is essential to make sure that the correct info is provided by you for preventing any delays. This information consists of the following:

Basic personal info – This includes your name and legal address. If there has been a recent change in your legal name (like, after getting married), make certain that your legal name has been modified through the Social Security Administration. It is important for the name to match what is on file with the organization to prevent rejection or delay of your return.
Basic business info – In case your small business is operating under some other name than your own, it is important to provide your company’s full business name on the tax return of yours. Your business address also has to be provided.
Social Security Number – This number will be needed for filing the taxes. Similar to other info, make sure that there are no errors that might delay the return.
Employer Identification Number – You might be having a Federal EIN issued by the IRS depending on your company’s legal structure. In case your company comes with an Employer Identification Number, make sure to add it to your tax return.

2. BE AWARE OF WHICH TAX FORMS SHOULD BE FILED

Completing and submitting the correct forms to the IRS will be one of the most vital steps when it comes to filing taxes. The forms needed by you for filing will depend on the type of business that you are running: Partnership, Sole Proprietorship, LLC, Corporations, or S Corporation. You will be informed by the IRS site regarding the tax forms required by you for filing which will, of course, depend on the business. Amongst the most common forms mention may be made of 1099-MISCs, Schedule Cs, W-2s, in addition to W-4s.

In case an accountant has been hired by you for doing the taxes, he will be able to inform you regarding which forms should be filed. On most occasions, accountants will be charging by the hour, and thus, having the required info in place will help them to save their valuable time and will save you money as well. It is essential to be prepared for getting the best results.

Apart from knowing which forms should be filed, you must also be aware of the deadlines. For instance, while it is possible for Schedule C to be filed along with your income tax return to be due on 15th April, other forms might be having different due dates.

3. RECORD INCOME AS WELL AS EXPENSES

It is very important to be accurate while reporting your expenses and incomes. Stay away from audits, fees, and penalties by managing your expenses and income precisely. For this, it will be advisable to get hold of accounting software which will make it quite simple to monitor your expenses and income all through the year. Features like receipt scanning can be used by you for your convenience. You can use these records while filing the tax return.

It is essential to bear in mind several things while recording and also reporting your expenses and income. First of all, ensure that your personal expenses and business are kept aloof. Although an easy way to get this done will be by maintaining different bank accounts, your accounting software can also be used for separating transactions.

While using the accounting software, make it a point to ascertain what kind of accounting will be used by you for your company: accrual or cash-basis. This will affect how your income will be reported by you. A transaction is going to post once it happens with accrual accounting even though no cash has been exchanged. For instance, a transaction is going to be recorded after a bill has been received or an invoice has been sent. On the contrary, with cash-basis accounting, you will be recording transactions once there has been the payment of a bill or a payment has been received from a client.

Your accounting method makes a huge difference in terms of filing taxes. Finally, ensure to maintain your essential documents like receipts, bills, and canceled checks such that you will be prepared in case your return is audited.

4. RUN FISCAL REPORTS

The whole process will become faster as well as easier in case your fiscal reports become ready when it is time for filing your taxes. It will be easier to run financial reports in case you make use of accounting software.

The reports that you ought to prepare will consist of the following:

Balance Sheet
Income Report
Mileage Log
Expense Report
Asset Depreciation Log
Total Cost Of Goods
Sales Tax Summary
Inventory Valuation
Payroll Summary
Profit & Loss Statement

It is essential to note here that you must be holding on to the above-mentioned records even after filing your taxes since they will come of use if IRS wants to audit you at any given time.

5. FIGURE OUT YOUR DEDUCTIONS

Every small business owner likes to save cash. You will be able to save cash by using the deductions to your advantage which have the ability to lessen your taxable income, thus minimizing your tax burden as well. The process of tax filing can be simplified by monitoring your deductions all through the year.

Some deductions that might apply to your small business will consist of the following:

Home office – It will be possible to become entitled to home office deduction provided there is a dedicated space in your residence which you can use for your business exclusively. A part of your expenses can be deducted such as insurance, utilities, as well as repairs.
Rent – it will be possible to deduct rent payments for the commercial space of yours from the tax return.
Marketing and advertising – Apart from attracting fresh clients as well as more revenue, marketing and advertising are likewise fully deductible during the tax time.
Supplies – Office supplies, as well as other supplies for operating your small business, are also considered to be deductible expenses.
Automobile expenses – In case a truck or a car is used by you for running your small business, the expense can be deducted from the tax return (such as gas, insurance, and maintenance).
Software – Any software which is related to the business of yours, including the accounting software, can also be deducted from the tax return.
Employee expenditures – Bonuses, employee salaries, educational expenses, as well as benefits are all deductible in the long run.

All these above-mentioned deductibles are only several of the many deductions which will assist in lessening your tax burden in an effective manner.

One thing that you ought to bear in mind right here is that you ought to maintain all your records as well as receipts so that it will be feasible to back up these deductions in case there is an audit.

6. USE THE ACCOUNTING SOFTWARE TO YOUR ADVANTAGE

In case the taxes are filed by you on your own, it is of prime importance to conduct lots of research and use any resource available to your advantage, which includes your accounting software. Some level of tax support is offered by the majority of the accounting software businesses out there. You will come across quite a few tax resources for small businesses for all those who are in need of some support. This includes the following:

IRS Virtual Workshops – Take the help of the IRS whenever you are in some sort of doubt. The IRS comes with as many as 9 videos for the owners of small companies which will provide information on tax filing.
Careful Cents – This is a blog which is run by Carrie Smith, a tax expert, and provides a couple of useful books for the benefits of the taxpayers.

CONCLUSION

In case you are tempted to wait until the eleventh hour for filing your taxes, it will not be a good idea after all. Do not wait and become prepared for filing the taxes so that you will be able to emphasize on the other essential aspects of the business. Hopefully, this article mentioned above will allow you to do so.