Tax Preparation Checklist for Small Business Owners

Compiling all the necessary documents and IRS forms, and adhering to their various deadlines, can be a daunting task that takes time away from running your business. To help relieve some of the stress around filing, we’ve created a tax preparation checklist for small businesses to follow during tax season. Here’s what you’ll need to gather before you sit down to file. 

Get organized before filing 

Before filing your taxes, it’s important to take the time to get organized and gather all necessary financial documents, receipts, and paperwork. Some key items you may need to collect include your Social Security number (SSN) or Employer Identification Number (EIN), your business name and structure, prior year’s tax returns, and accounting reports. 

Know which taxes you need to file 

There are different types of taxes you may be responsible for, and knowing the differences can help you prepare your tax return accurately. Here’s a breakdown of the different types of taxes that you may need to file:  

1. Income tax: This is a tax on the money you earn, whether from employment, business, or investments.  
2. Estimated taxes: Quarterly payments for self-employed individuals or those with significant untaxed income to avoid large payments at tax time. 
3. Self-employed taxes: Taxes for self-employed individuals that cover Social Security and Medicare, based on net earnings. 
4. Payroll/employment tax: Taxes withheld from employee wages, including Social Security and Medicare, paid by employers to fund employee benefits. 
5. Sales and excise tax: Sales tax on goods and services, and excise tax on specific commodities like gasoline and alcohol, collected at the point of sale and varying by location. 

Know your business structure and required forms

Understanding your business structure before filing is important because it affects things like taxes, liability, and how you run your operations. Sole Proprietorships and single-member LLCs are simplest when it comes to tax reporting. That’s because these types of businesses report income right on the owner’s tax return with Schedule C and Form 1040.  

Corporations are separate legal entities, which means they offer limited liability to the owners and usually file IRS Form 1120. S Corporations let profits flow through to shareholders to avoid double taxes, and they file Form 1120S. Partnerships, including multi-member LLCs, use Form 1065 to report their income and losses, which then gets passed on to the individual partners.  

Gather your tax documents

Before you file, it’s important to organize receipts and records. Gathering all your records ahead of time not only makes the process smoother, but it also cuts down on the chances of making any errors. 

Income records

The first category of documents pertains to your business income. You’ll want to gather any receipts, sales record totals, and bank statements:

1. Gross receipts from sales
2. Sales records
3. Receivables
4. Interest from business bank accounts
5. Any other types of income

Inventory and materials

The second category of things to prepare, if necessary, relates to your inventory, or cost of goods sold (COGS). You’ll want to show the history of activity over the course of the year and how your inventory and materials fit into that equation:

1. Current Inventory
2. Change in inventory total amount
3. Inventory purchases
4. Items removed from inventory for personal use
5. Materials
6. Supplies

Business expenses

Depending on your company, expenses can fall into many different types.

1. Marketing Expenses
   • Email marketing
   • Social media advertising
   • Traditional advertising
   • Business cards
2. Communication Expenses
   • Landline
   • Mobile phones used for work
   • Fax
   • Internet
   • Computers and Accessories
3. Travel Expenses
   • Hotels
   • Airfare
   • Mileage logs
   • Meals
   • Rideshares (Uber, Luft, Taxi)
   • Internet
4. Personnel Expenses
   • Contractors
   • Consultants
   • Accountants
   • Employee wages
5. Operational Expenses
   • Office supplies
   • Office space rental
   • Lease expense on vehicles used for work
6. Legal Expenses
   • Casualty loss insurance
   • Tax errors and omissions
   • Legal Counsel
7. Financial Expenses
   • Cost of assets and the first day of business use
   • Activity on personal use of assets
   • Sales price and sale date of any assets sold
   • Mortgage interest on a building owned by the business
   • Business loan interest
   • Investment expense and interest
8. Home Office Expenses
   • Square footage of home office space
   • Total square footage of the home
   • Hours of use (in-home daycare)
   • Mortgage interest or rent
   • Homeowner’s or renters insurance
   • Utilities
   • Cost of home and separate improvements, and day of first business use

Ready to file? Check out TaxSlayer Self-Employed. It’s specially designed with small business owners like you in mind.