Tax Preparation Checklist For Small Businesses

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Tax season can be quite a stressful time for small businesses. You must gather all your documents and accurately fill out your forms while closely monitoring your operations. It’s a meticulous process that demands your full attention. Fortunately, you can make the tax filing process easier by creating a tax preparation checklist.

In this blog, we’ll discuss four things you must include in your small business’s tax preparation checklist. We’ll also explore other tips that can help you improve your process. 

Read on to learn how to streamline your tax filings this coming season.  

Four Things to Include in Your Tax Preparation Checklist

A comprehensive tax prep checklist should include the following: 

Personal Information

Your personal information is the first thing you must prepare before filing your taxes. This includes:

  • Name
  • Social security numbers (SSNs) or tax ID numbers
  • Date of birth 
  • Filing status
  • Address and contact information
  • Bank account number
  • Tax returns from the previous year

This information lets the IRS know who you are and ensures your filings are processed properly. 

Income 

Once you have your personal information ready, you must collect records documenting the income your small business has received throughout the year, such as:

  • Income statement
  • Invoices received and paid
  • Bank deposit slips
  • Other supporting documents for your transactions 

You must also submit 1099 forms if you received income from other sources. These tax forms are used to report various types of earnings. 

There are various 1099 forms that you could get depending on the nature of the payment you received. Some of the most common types include:

  • 1099-DIV: This form reports the dividends you’ve received throughout the year. 
  • 1099-G: This form documents the money you’ve received from the local, state, or federal government. 
  • 1099-NEC: This form is designed to report the compensation paid for contract work. 
  • 1099-MISC: This form is for any miscellaneous income you received for services rendered, rental income, or royalties. 

Before you file your taxes, you must review your 1099 forms and check if they’re accurate. This way, you can avoid making errors on your tax return. 

Expenses

Keeping track of your business expenses is also crucial in determining your taxes. Collect your receipts, invoices, and other proofs of transactions, and separate them according to the following categories:

  • Office Supplies
  • Operational costs
  • Entertainment/travel costs
  • Marketing/advertising costs
  • Professional fees
  • Equipment and assets
  • Employee wages
  • Other business-related expenses

Proper documentation is vital when claiming tax deductions or credits. You have to keep your records in order to easily access them in case of an audit. 

Tax Deductions and Credits

After you gather your expenses, you can start itemizing tax deductions and credits. These are some of the more popular tax breaks small businesses can claim:

  • Retirement Contributions: You can deduct certain contributions to your traditional IRA account from your tax bill. 
  • Charitable Donations: If you’ve made charitable donations for this year, you can deduct them from your taxable income. 
  • Business Expenses: There’s a wide range of business expenses that you can deduct from your taxes, like rent, utilities, office, supplies, and equipment purchases. 
  • Business Meals & Entertainment: Small businesses can deduct 50% of their business-related meals and entertainment costs. 
  • Startup Costs: If your small business is relatively new, you can deduct up to $5,000 of your startup costs from your taxable income within your first year of operations. 

Besides tax deductions, you may also be eligible to receive credits like:

  • Work Opportunity Tax Credit: This tax incentive is granted to employers who hire individuals from target groups that face employment barriers. 
  • Research & Development Tax Credit: This credit is available to businesses of all sizes participating in qualified research to innovate their processes or products. 

Tips For A Stress-free Tax Season

Aside from creating a comprehensive tax preparation checklist for your small business, there are other strategies you can do for a stress-free tax season: 

Know Your Deadlines

The deadlines for filing tax returns vary from one business structure to another. 

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For instance, partnerships, S corporations, and multi-member LLCs must file yearly tax returns on March 15, 2024. Meanwhile, single-member LLCs, sole proprietors, and C corporations should file tax returns by April 18, 2024.  

If you’re having trouble keeping track of your deadlines, we suggest that you create a tax filing calendar. This way, you can pay your taxes and submit your forms on time. 

Know Your Forms

Like filing deadlines, there are tax forms designated for each business structure. 

For example, sole proprietors must report their tax returns using the 1040 Form, while partnerships should use the 1065 Form. C-Corporations and S-Corporations can use the 1120 and 1120-S forms for their tax filings. 

The IRS has provided resources for each form with a detailed guideline on properly filling them out. 

Hire A Tax Preparer

Hiring a tax preparer is one of the best strategies for ensuring a smooth tax season. Tax preparers specialize in assisting small business owners like you to file your taxes properly. 

They can guide you in filling out your forms and reviewing your financial records to ensure accurate tax returns. 

Aside from this, they can also help you maximize tax deductions and credits. Tax preparers keep themselves updated with the latest changes in tax laws, allowing them to identify new opportunities for you to reduce your taxes. 

Having a tax preparer by your side can save you time and reduce the stress of the tax season. 

Hire A Tax Professional Today

If you need help creating a tax preparation checklist for your small business, look no further than NCH. 

NCH is a business formation service provider in Nevada that offers various tax services, including tax preparation. 

Our team of tax preparers will ensure that your tax returns are accurate and filed on time. We will help you organize and review your financial documents to lower taxes and maximize your savings.

Whether you’re a sole proprietor or an LLC member, NCH will tailor its services to meet the specific needs of your business. 

To learn more about tax preparation services, visit our website here or call us at 1-800-508-1729 to schedule a consultation.

Disclaimer: The above material has been prepared for informational purposes only, containing opinions of the provider, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.

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