The Complete Small Business Tax Preparation Checklist

January 31^st comes quickly around an accounting firm.  Like many busy business owners, you’re probably juggling your business with tying up last year’s accounting. To make your life easier (and mine) I thought I would give you your small business tax preparation checklist to help you keep on track.

Know Your Tax Preparation Deadlines

The first step is easy. What are the tax filing deadlines for small businesses for the 2019 tax season? This will depend on your business structure, so make sure you know what’s expected of you.

Here are a few common deadlines to note:

• January 31, 2020: Deadline to distribute W-2/1099-MISC forms
• March 15, 2020: Tax deadline for S-Corporations and partnerships
• April 15, 2020: Tax Day; deadline for sole proprietorships, single-member LLCs and C-Corporations
• October 15, 2020: Deadline for extension returns

Small Business Tax Prep Checklist

I won’t lie most of you did not square away your accounting for last year, so it’s time to get started right away so you can get your taxes done on time and make sure you take your maximum deductions  If you need to get this done and just feel overwhelmed, please, schedule an appointment with me and we’ll have you up to date in no time at all.

1. Gather Up Your Year-End Files

If you’re not using any type of accounting system or your system is spreadsheet-based, you might need to gather all your financial statements. If you’ve never run them, you’ll want to start now.

If you have a bookkeeper or accountant, they’ve (most likely) kept great records, which will include your end of year balance sheet, profit and loss statement and payroll reports.  Generating these when you have a good system is both quick and easy. 

Before filling out any tax form to report your business income, you should have all records in front of you that report your business earnings and expenses. It might be a good idea to ask your tax accountant what additional documents are necessary, but in the meantime, here is some information that can be helpful to have on hand:

• Income
• Gross receipts from sales or services
• Sales records
• Returns and allowances
• Business checking/savings account interest
• Inventory
• All expenses
• Commissions paid to subcontractors
• Business insurance
• Business loan interest
• Professional fees
• Office supplies
• Office space rent

2. Gather Up All the Relevant Tax Forms You’ve Received

You’ll receive a lot of tax forms from various institutions in January and some in February, March and maybe even April which you will need to do your tax preparation.  Here are a few of the forms you should have received and when they will most likely head your way.

January

• W-2
• 1099-INT from your bank
• 1099-DIV
• 1099-R

Are the most common though you may see different ones depending on your financial situation.

February 15

You’ll receive 1099-B for interest and dividends from brokers which will calculate stocks and other investments

March and April

If you’ve invested in a business you’ll receive your Schedule K-1s in March or April.  You may need to file for an extension if you’ve invested in a small LLC as they might not get their K-1s together until April.

What to Do if You Don’t Receive Tax Forms or They Get Lost

First things first, contact your previous or current employer or financial institution.  The IRS frowns heavily on companies and banks that don’t meet the deadline and will fine them with pretty heavy penalties so you should be able to get your answers quickly.

As a small business owner, you may be getting a lot of 1099s from various clients and customers so don’t assume that you don’t need to report this income even if you didn’t receive a 1099-MISC.  The IRS receives these from your clients and will most likely have a record of this income.

If you’re not sure you might want to grab a copy of your IRS transcript.  This is a record that the IRS received under your name, social security number and EIN.  You can check out how to get a free online copy here.

Frequent Mistakes Made During Tax Preparation and How to Fix Them

Not keeping your personal/and businesses expenses separate

Let’s face it it’s quite a common place to categorize these wrong even when you have a separate bank account.  Make sure you review all your statements to disallow any personal expenses that might have made it to your statement.

Misplacing Your 1099s

You’ve probably already issued and received 1099s for 2019 tax season.  Make sure you have them and they are correct against your sales and income.  If you need some help figuring out 1099s check out how to Cracking the 1099-Misc Code.

Not Taking Enough Deductions

Most small business owners don’t take enough deductions.  I know the 20% pass-through is great but make sure that you take ALL the deductions you can.  If your not sure Check out the Big Fat List of Tax Deductions.

Underpaying Estimated Tax and Payroll Deposits

If you’ve been making estimated income tax payments or payroll deposits throughout the year, make sure you balance these funds against your total income tax liability. Failing to do so will mean overpaying—a simple error that’s easy to avoid with a little planning.

Ruling Out an Extension

Extensions exist for a reason. If you’ve put off your small business tax planning, the above steps might take you a bit longer than you thought. An extension will give you until the fall to get your return submitted. But keep in mind that you’ll still need to pay your taxes on time, even with a legitimate extension.

Putting it All Together

Tax preparation can be hard especially when you haven’t tracked your income and expenses.  While many small business owners think doing their own taxes is cost-effective.  You’d be surprised at how much money can be saved when your taxes are done by a professional.  They can keep an eye on your bottom line while your busy building a solid business.  Make sure you’re prepared for next year, this year.

Cheers!

Andrea

P.S. If you need some help making some tax plans. Schedule an Appointment Today!

Happy Holidays!

Andrea