Tax Checklist for Small Business Owners

Tax Checklist for Small Business Owners

Tax season, dreaded by many, comes around the corner annually and never fails to prove to be a true pain in the neck. Forgetting slight details or making simple mistakes can easily create tax return delays – no vigilant taxpayer wants that. To prepare for this season, we assembled a small business tax preparation checklist useful to you, owner of a small business, to effectively reduce the chances of any tax-induced headaches.

Small Business Tax Preparation Checklist

Make Sure to Choose an Adequate Form

It is good to know that, in the U.S., single-member limited liability companies (LLCs) and sole holders must state income and expense balance through Schedule C on Form 1040 Individual Income Tax Return.
Now, if you declare your business as a Multi-Member LLC or a Partnership, you will choose Form 1065. The S-corporations state the activity of their businesses through Form 1120-S. Furthermore, shareholders receive Schedule K-1 forms that report the entities’ income, credits, deductions, etc. Of course, as this checklist regards small businesses (sole proprietors and single-member LLCs), it will use Schedule C, attached to Form 1040.
tax time

The Matters of Your General Info

It makes no difference whether you hire a person to prepare your tax returns or you choose to do it yourself – basic information, such as your name, SSN (Social Security Number), and physical address need to be provided. If you have one, make sure to provide the Employer Identification Number (EIN) with according legal business name.

Your legal name, if changed within the last year’s period (due to getting married or divorced, or changing your name per se), must coincide with the info at the Social Security Administration.
As people might change their last name when getting married but forget to apply the change at the SSA, the names on the tax returns fail to match and the return gets delayed or rejected altogether. Also, make sure to reexamine whether you made any typos – those can lead to refund delay as well.

Stash Your Bookkeeping, Reporting, and Receipts

Rather self-explanatory: keeping profit and loss statements, journal entries, balance sheets, and overall receipts will save you vast amounts of money, whether you use a tax preparer on payroll or deal with taxes on your own.

In case you own a business savings or checking account with interest earning, your bank will likely forward you a 1099-INT Form regarding interests you earned throughout the year. For more details, make sure to visit the IRS website.

Hacking the System with Home Office Deductions

An incredible perk regarding home office deduction can come into action if you use your home only for business and if you use it regularly. Through Form 8829 and contacting the IRS, you can check your eligibility for HOD. In case you qualify, after providing the info about the square footage of your home and office respectively, you are up for deduction through regular or simplified method.

Regular method

You need to take a determined percentage of the expenses of home-owning or home-renting. Then, you will multiply this by the percentage of area (in ft2) of the premises used as your home office. 
For instance, in case your home office takes 200 square feet out of a 2,000 square feet home, you are eligible for a 10% mortgage or rent payment deduction. You can also deduct utilities, homeowners’ association fees and insurance, repairs, etc.

Simplified method

As of 2013, the IRS allows a rather easier option for HOD. Instead of keeping track of all your utility costs, home office and house repairs etc., you are to claim a $5 standard HOD for every square foot of your home office premises. For instance, a 200 square foot home office qualifies for a $1000 deduction.

Business Assets Deductions

Make sure to gather all records of selling/buying assets such as office computers, chairs, supplies etc. Info required might include asset costs, dates of the assets’ first use, dates of assets’ selling, and eventual sale proceeds.
Also, a common expense with small businesses is having a vehicle; fuel costs, repairs, etc. can result in a hefty amount of money. In case of correct record keeping, the IRS will allow a deduction of up to 10% of operating your business vehicle.

Even though tax preparation can take a bit of time and work, carefully considering your options, being organized, and avoiding procrastination can lead to less stress and more money-saving when tax season starts. We suggest visiting the IRS website to learn more about forms and HOD. If you have additional questions regarding tax checklist or rebate check processing, feel free to reach out to our team, today!