The tax preparation checklist for small businesses
Tax filing requires a very organized and accurate approach otherwise a business owner may end up paying penalties due to a mistake. Accurate Tax & Bookkeeping, a full-service tax, accounting, and consulting firm located in Brandon offers tax preparation services for small businesses. They share a useful checklist that small business owners can use to stay on top of their tax preparation and filing process.
The right form
The first step is knowing which IRS tax form to complete. Every business entity requires a different form. There is no standard tax form for all small business owners.
- A sole proprietor or single-member LLC owner – Use Schedule C, Profit or Loss from Business, and attach it to the personal income tax return (Form 1040).
- A partner in a partnership or part owner in a multi-member LLC – File Form 1065, U.S. Return of Partnership Income, and attach Schedule K-1 (Form 1065).
- Corporate – Tax Form 1120, U.S. Corporation Income Tax Return. Multi-member LLCs taxed as corporations also use Form 1120.
- S Corporation – Form 1120-S, U.S. Income Tax Return for an S Corporation.
The correct deadline
The filing deadline depends on the business structure.
- April 15: Sole proprietorships, single-member LLCs, multi-member LLCs taxed as corporations, and corporations that end their tax year on December 31 must file by April 15. This is the same due date as personal tax returns.
- March 15: Partnerships, multi-member LLCs, and S Corps have a tax filing deadline of March 15.
- Next business day: If March 15 or April 15 falls on a weekend or holiday, businesses have until the next business day to file.
Gather and analyze records
One of the lengthiest, most intricate, and crucial steps is filling out tax information, which requires hard facts to complete an accurate return.
- Taxpayer identification number: A social security number or a Federal Employer Identification Number (FEIN) is necessary for the IRS to identify the business entity.
- Balance sheet and income statement: An income statement details the business’s income, expenses, and bottom line across the year. The balance sheet shows the assets, liabilities, and equity.
- Supporting documents: Documents such as receipts, bank statements, credit card statements, and payroll records must be collated to back up the tax filing.
- Tax payments and returns: Gather copies of the estimated tax payments as well as the previous year’s business tax return.
4. Watch out for tax deductions and credits
Business tax credits and deductions are a great way to lower tax liability. While preparing for taxes, it is worth finding out the tax breaks a business is qualified for.
Here are a few tax credits a business may qualify for:
- Small employer health insurance
- Disabled access
- Work opportunity
Some examples of expenses businesses can claim a tax deduction for:
- Home office
- Business use of car
- Charitable contributions
- Bad debt
Any credits or deductions claimed must be backed up by records. An understanding of the IRS’s rules is crucial to file these claims. For instance, a home office tax deduction can be claimed only if the business meets certain IRS requirements.
Deduct estimated tax payments
Self-employed individuals must make estimated tax payments to cover the liabilities. Since business owners pay estimated taxes quarterly, these estimated payments can be deducted from total tax liability to avoid overpayment of taxes.
Request a filing extension
Sometimes, filing a tax return in a rush may prove detrimental. Therefore, if there is an expected delay in tax preparation, requesting a filing extension is a bright idea. It allows more time to file the taxes accurately.
However, one must submit the IRS Extension form filled with information about the business and the taxes due, before the tax return due date.
Know the alternatives
Estimated tax payments help keep things on course but a miscalculation of liability is not unheard of. If the expense at the tax time becomes overwhelming, there are alternatives to consider. If that’s the case, businesses must understand all possible options so they can pursue the one that meets their business’s needs.
The IRS gives you a few options in case payment of taxes is unaffordable when the tax due date arrives:
- IRS installment agreement (monthly payment plan)
- Offer in compromise (tax debt settlement)
- Temporary delay (postpone payment until the financial condition improves)
Irrespective of the IRS option, a timely tax return must be filed (unless a filing extension has been approved).
Consult the accountant
After the records are collated and decisions around tax deductions and credits have been made, it is wise to consult with an accountant to verify the accuracy of the tax returns.
The accountant may make better suggestions regarding deductions or credits and can ensure the filing process and return is accurate and beneficial.
The last check on the list is filing the tax return. Once the accountant gives a thumbs-up, e-filing or paper filing of tax returns can be facilitated. E-filing is always more efficient and swift.
Accurate Tax & Bookkeeping provides tax services for small businesses and takes care of all these baffling tax and other accounting tasks for its clients effectively.
Accurate Tax & Bookkeeping Services specializes in handling financial needs for businesses of all sizes.
Greg J. Menia founded the tax preparation service company in 2010, having worked in business tax services since 1995. The team performs tax services for small businesses and large businesses alike, serving all areas around Tampa, FL.
Call (813) 655-9702 today for “accountants near me” in Brandon, Florida. Alternatively, contact Greg and the team at Accurate Tax & Bookkeeping Services by emailing [email protected] or visiting the offices at 710 Oakfield Dr. Suite 159, Brandon, FL 33511.