If you operate a small business and have the need to control and manage every small detail of that business, you may be inclined to do your business taxes by yourself, without the help of a tax professional. While preparing your own tax is no fun and time consuming, the process becomes simpler if you sit down to prepare your taxes armed with a Small Business Tax Checklist. It is better to get it right the first time around, rather than make unnecessary errors and have the IRS breathing down your neck over a simple mistake.
To correctly file your small business tax return, all small business owners must complete the 1120 U.S Corporation Income Tax Return form no later than the 15th of March each year after the tax period ends. To properly file your small business taxes and to avoid delays, provide the following information as well:
● Employer Identification Number/Federal ID Number
● Certificate of Incorporation (copy)
● A brief summary of the products/services offered
● A precise list of all directors; including addresses and telephone numbers. You must also include a key contact person as well.
● Shareholders names and Social Security numbers
● Class and the amount of shares owned
Keeping your documents and receipts organized throughout the year will save you time and money when filing your taxes. The list below includes a run through of the documents you will need to file your taxes; whether, you are doing it by yourself or hiring someone to do it for you.
1. Documents showing Income
● Returns and Allowances
● Sales Records
● Gross Receipts from services and or sales
● Statement or 1099 showing business savings/checking account interest
● Other source of income
2. If you are in the business of sales, you must provide the cost of goods sold
● Inventory
● The total dollar amount of your beginning inventory
● All purchases made
● The total ending dollar amount for inventories
● A list of all items removed from the business for personal use
● Supplies and Materials
3. A list of all the business expenses throughout the year
● Computer and internet
● Telephone
● Advertising
● Travel and transportation related expenses
● Depreciation of business assets. Include the date and cost of the first time the business used an asset. If the asset was used for personal gain, include that as well and also include disposition date and sale prices of all assets sold.
● Complete and file form 1096 as necessary and form 1099-MISC for all commissions paid to subcontractors
● Business insurance
● Interest expenses, such as business loans, business mortgage and investment expenses and interests.
● Accounts and other professional fees, include those fees paid to consultants and lawyers.
● An expense report of all office supplies such as staples, pens and other office consumables.
● Rent paid for all vehicles, office space rented and other rent the business pay for day to day operation.
● If your office is in the comfort of your home, you must include the:
➢ The total square footage of your office and home
➢ Hours of operation if you operate a daycare out of your house
➢ Renters or homeowners insurance
➢ Rent or mortgage interests
➢ Utility bills
➢ The first date your home was used for business operations and the cost of the house and any improvements made for business.
● Employee wages
● W-2 and W-3 forms
● Form 940, form 941 and all others for State and Federal payroll returns such as contractors and employee benefit expenses.
● All other expenses paid for the successful operation of the business. Expenses paid for maintenance and repairs must also be documented and reported. Health insurance, premiums paid to cover sole-proprietor and family and premiums paid on behalf of S corporation shareholders and partners must be reported as well.
Not all business will have a profit or even an income to show at the end of a tax year. If your business does not have an income to report at the end of the season, you must be able to prove that you were actively operating or trying to operate a business or trade in order for you to file business expenses. If you are unable to prove this, the IRS will assume that what you are filing are not business expenses and will not allow you to file these expenses. It also increases your chances of being audited if you have relatively high expenses, but little or no income to show for it.
It may seem difficult at first, but with the proper organization of your business documents and receipts you can save, not only time, but money when filing your small business taxes. The checklist above is a basic run through of what you will need when filing your corporation’s business tax; however, if anything is unclear, the seasoned tax professionals atJames Wells EA MBA Tax Office are here to help you with the process every step of the way.
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