Did you know that more than 50% of Americans in the workforce are employed at a small business? From the person who does tax preparation for small businesses to the cashiers, small businesses are the backbone of this country.
Learning how to prepare for taxes in the most efficient way enables small business owners to concentrate on other business priorities. It’s important to keep up with the rules and regulations for the IRS and/ or state and local tax authorities for small business taxes.
Is your business ready for the approaching tax season? Keep reading to learn all you need to know to prepare the ultimate small business tax preparation checklist.
1. Which Tax Forms Do You Need?
What is the nature of your business? The answer to this question dictates the tax forms you’ll need to file your taxes. For example, if you are the sole proprietor, you can attach a Schedule C Form to your personal income tax return or file using a 1099-MISC.
Is your business a partnership? If so, you’re required to use Form 1065 and each individual partner’s information goes on a Schedule K-1. The proper form is crucial to filing correctly.
2. Gather Basic Personal and Business Information
Your basic personal information includes your legal name, social security number, and address. If your name has changed, double-check that the Social Security Administration has that information.
The full legal name and address of your business are the basic business information you need for your tax return. If you were issued a Federal Employer Identification Number (EIN) by the IRS, that goes on the tax return as well.
3. Record Income, Expenses, and Costs of Goods Sold (If Applicable)
You should have your gross receipts from sales and/or services, your sales records, documentation of interest on business bank accounts, and any other income.
Gather the records for any of your expenses like internet, advertising, travel, business equipment like computers and phones, insurance, office supplies, payments to subcontractors, rent, lawyer fees, and more.
If your business sells goods, your beginning inventory gets recorded along with the total dollar amount. Purchases, ending inventory, and dollar amounts are also recorded.
4. Know the Timing for Filing
Depending on how you set up your business and what type of business you own, tax deadlines may vary. For many small businesses, it ends up being April 15 like it is for your individual taxes, but there are often other dates of which you need to be aware for tax-related tasks that come up throughout the year.
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Small Business Tax Preparation Checklist
Now that you have the information you need to create your small business tax preparation checklist, you’ll be well prepared for tax day. Gathering the information and documents you need ahead of time takes some of the stress out of it and makes things easier for your tax preparer.
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