Business Tax Preparation Checklist for Small Businesses

Business tax preparation can be overwhelming. There are a lot of documents to collect and calculations to do to fill out and file taxes. Business or corporation owners can ask for business tax preparation help from professional accountants.

Whether you want to file taxes on your own or seek assistance, it’s still necessary to prepare for taxes. Check out the article we prepared about data and documentation businesses have to collect to file taxes for 2022 successfully.

Gather Information

A small business has a lot of documents to prepare to calculate income, expenses, deductions, etc. A responsible person should collect basic and business information so the accountant can do necessary calculations, deductions, fill out forms, etc. A company has to provide the following information.

General information and documents:

  • Social Security number.
  • Federal tax ID number.
  • Previous year’s tax return — may need up to three years based on the IRS rules.

Business income taxes information and documents:

  • Accounting journals and ledgers.
  • Financial records, including balance sheet and single-step or multi-step income statement.

Financial record documents also include:

  • Financial transactions support documents;
  • Bank account statements and deposit slips;
  • Received and paid invoices;
  • Business’s checkbook;
  • Credit card financial records;
  • Vehicle and mileage logs.

Business-related costs information and documents:

  • All receipts are categorized as follows: supplies, general office supplies.
  • Entertainment and travel expenses include any business-related costs that can be written off as deductions.
  • Recurring business operational costs. Includes expenses needed to operate a business and generate income, such as rent, utilities, subscription-based services, like accounting software, antivirus, etc.
  • Marketing and advertising costs. Includes any expenses a small business uses to promote the company’s services.
  • Fees paid to get professional services, including accountants, bookkeepers, consultants, lawyers, etc.
  • Equipment, machinery, other assets. Documentation should include depreciation schedules of each asset to deduct depreciation costs.
  • Insurance policy documents. Collect documents, including individual, group plans, company vehicle, track insurance, and any other company insurances.

Employment tax documents:

  • W-9 Form on every employee and employee tax withholding certificates.
  • I-9, Employment Eligibility Verification that provides the IRS with information about employee legal working status.
  • All W-2 Forms on wage and tax statements for all employees.
  • 1099 Form on all contractors/subcontractors, professional services.
  • 1099-MISC that includes a summary of fees and payments for contractual workers.
  • Payroll reports.
  • Gross monthly payroll.
  • Total deductions collected from employee gross wages.

Home office data and documents:

  • Total office square footage used to perform business activities.
  • Total square footage of the house or apartment.
  • Mortgage interest or rent payment costs.
  • Utilities (like phone bills).
  • Home insurance policy.

The easiest way to avoid stress when filing taxes is to keep data in order. Consider available accounting software if you want to make the process easier.

Business Tax Preparation Checklist for Small Businesses

Income Sources

When creating a schedule or a business tax preparation checklist, include documents proving all sources of income. Accuracy, in this case, is essential. Add income from regular sales and even income generated by any investments.

Here are some examples to consider:

  • Accounts receivable for accrual-based taxpayers that record sales.
  • Gross receipts generated by sales or services.
  • Any allowances and returns.
  • Company’s checking or savings account interest (could be found in an income statement).
  • Other sources of income — federal or state gas or fuel tax reimbursement, or revenue generated from rent (passive income).

Make sure your corporation, partnership, or other types of business can back up all these income sources.

Tax Deductions and Credits in Business Tax Preparation

Experts encourage small businesses to calculate their expenses and file as tax deductions. That way, they significantly reduce their tax burden. Take time and research what expenses are deductible. Each industry has typical deductions, so consider self-educating on that topic to get the most out of your legal right.

Small business deductions may include:

  • advertising;
  • car mileage;
  • legal services;
  • some types of insurance policies;
  • rent (home or standard office);
  • internet and phone services;
  • depreciation of assets as long as they meet the IRS requirements;
  • salaries and benefits spent on employees;
  • tuition and training of staff;
  • travel and entertainment;
  • business meals;
  • licenses.

Consider some tax credits as well:

  • work opportunity — if a business hires specific people such as including veterans or ex-felons;
  • small business health care tax — if a business doesn’t have more than 25 employees;
  • investment tax, including investments in reforestation, qualifying energy, etc.;
  • disabled access — when a business builds specific constructions to make their office, shop, etc., more accessible.

Most small businesses prefer asking for professional help to keep documentation in order. Bookkeepers and accountants make sure your business has everything in order so that you can take care of other essential aspects.

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