Small Business Tax Preparation Checklist

Small Business Tax Preparation Checklist

Small Business Tax Preparation Checklist

Tax time may not be every business owner’s favorite time of year, but business tax preparation is essential to get right. There are a lot of details when you’re filing a small business tax return that can be easy to overlook, especially when you’re doing your own taxes. In this tax prep checklist from Nav, you’ll learn what documents you need to file your taxes, how small businesses file their taxes, and which forms you’ll use (hint: It’s not one size fits all). 

What Do I Need to File My Taxes as a Small Business Owner?

As a small business owner, it’s likely your job to make sure you have your business’s documentation put together. Thus, you need to know exactly what you need to gather to be prepared to file business tax returns. 

Here’s everything you’ll need:

Basic business details

  • Federal tax ID number, like your Employer Identification Number (EIN)
  • Social Security numbers of all business owners
  • Past three years of personal and business tax returns

Business income

  • General ledgers
  • Financial statements, like your balance sheet and income statements. This can also include invoices, bank statements, business credit card statements, and mileage logs.

Business expenses

You’ll need to hang on to receipts for:

  • Office supplies
  • Technology, like computers
  • Office rent and utilities (if applicable)
  • Subscriptions
  • Entertainment or travel expenses for business use
  • Marketing or advertising spend
  • Professional fees, like accountants, lawyers, or consultants
  • Business insurance policies
  • Equipment and assets, including depreciation schedules
  • Interest on small business loans

Employment documentation 

  • Employee forms
    • Form W-9 to certify you can be an employer
    • I-9s that show your employees can legally work
    • W-2s that show employee income
    • 1099s and 1099-MISC that show non-employee (independent contractors, consultants, etc.) income and relevant expenses
  • Payroll reports, including details like hourly rate, hours worked, and how much you paid in payroll taxes
  • Gross pay
  • Total deductions you withheld from employees

In-home office documentation (if applicable)

  • Rent or mortgage cost
  • Total square footage of house vs. total square footage of dedicated office space
  • Utilities
  • Home insurance

Having all of these documents allows you to see how much taxable income your business has every year. Taxable income is how much of your income after deductions are taken out that you can be taxed on. 

How Do Small Business Owners File Taxes for the First Time?

Most small business owners use an accountant to file their taxes, whether that’s through an online tax software or a local certified public accountant (CPA). Business taxes are usually more complicated than your personal income tax return. There are many business tax deductions and tax credits that you can take but might not be aware of if you’re not a tax professional. Turning to a tax pro is usually worth it in the long run, especially because you’re lowering your chances of an audit by using a professional. An accountant may even save you more than their professional fees cost. 

Your tax filing process and the needed documentation will differ depending on your business structure, whether you’re a sole proprietorship, an LLC, an S-corp, or a C-corporation. 

For more, here’s everything you need to know about business taxes

What Are the 4 Basic Types of Business Taxes?

There are four types of business taxes that every small business owner needs to be aware of. Keep in mind that you may not need to file them all. 

  1. Income tax: Tax you pay on what your business earns. 
  2. Estimated tax: Tax paid by sole proprietors, partnerships, and S-corps each quarter when they estimate they will owe $1,000 or more in taxes.
  3. Self-employment tax: Tax taken out for Social Security and Medicare.
  4. Employment tax: If you have employees, this tax will cover their federal unemployment, Social Security, and Medicare.

You may also have to pay an excise tax if your business imports or exports certain chemicals, fuels, or other substances.

Putting due dates in your calendar for each kind of tax helps to avoid missing deadlines.

Small Business Tax Preparation Checklist

Whether you’re going to file your business taxes on your own or use an accountant, it’s necessary to know the steps involved so you can prepare ahead of time. Here are the four basic steps of filing your business taxes.

Step 1: Learn which taxes you need to file

Look through our list of the types of tax payments businesses need to make to see where you fit in. You may need to file multiple types of taxes. For example, if you run a small business where you employ workers, you’ll need to file your business’s taxes and then also file your employment taxes.

Step 2: Find the right tax forms

Here are the most common tax forms you’ll need to finalize your year-end tax returns based on your business entity type. If you elected for your LLC to file as a partnership or corporation, you’ll use the forms for those entities when filing.

It’s a good idea to check with a tax professional even if you’re filing on your own just to make sure you aren’t missing any necessary forms for the upcoming tax season.

Step 3: Prepare your documentation

Once you know which forms you need to fill out based on the type of business you run, check out our list above of the most common documents you’ll need to file. Also, make sure you read through the IRS instructions for each form in case there are additional forms needed. Finalize all year-end bookkeeping before filing.

Step 4: Find all your deductions and credits

Deductions lower your taxable income — so less of the total amount of money you made can be taxed — while credits are dollar-for-dollar discounts on your tax bill. Take a look at the list above of the expenses many businesses deduct on their tax form. The IRS also provides a breakdown of all the expenses businesses can deduct, but it’s in tax speak so it’s a little confusing. Businesses also can get credits, which are detailed in this IRS guide

It is possible to ask for an extension on your tax filing date, but it’s not the best idea to do it multiple times. Asking for an extension several times can be a red flag to the IRS and may make you more likely to get audited.

Business Tax Preparation Frequently Asked Questions

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