Tax season has officially begun, and every business owner should start preparing to file their corresponding taxes. With millions of small and medium businesses starting every year, having a clear and simple tax checklist for small businesses should be of great help for everybody. Whether you are filing your taxes on your own or working with a tax consultant, these are five essentials we can’t forget about.
To begin with, we should always make sure all our personal and business information is correct and mistake-free. Also, depending on the structure of our business, different tax forms will apply. Preparing your bookkeeping documents beforehand will make the job of your tax professional easier. For those who work from home, understanding home office deductions is key. Going over any other deduction eligibility will ensure we maximize our tax return, too. These are five essential tips for a useful tax checklist for small businesses.
One of the most essential items that must be on the top of any tax checklist for small businesses is checking your information. When filing our company’s taxes, make sure your legal name, social security number, address, and legal business name are correct. We must also confirm our Employer Identification Number is properly written, too. Any typos or mistakes could cause a significant delay in our refunds, and that’s the last we want.
Depending on the structure of our business, different forms will be required by the IRS. That’s why it is extremely important that we make sure we are filing the corresponding form for our company. Sole proprietors and single-member LLCs on Schedule C will file the Form 1040 Individual Income Tax Return.
Partnerships and multi-member LLCs should report their income and expenses using Form 1065. Form 1120-S is used by S Corporations. Plus, shareholders of any partnership, LLC, or S Corporation will receive a Schedule K-1 with the company’s income, deductions, and credits.
Remember to double-check with your tax professional before filing or issuing any form. They will help you make sure your company is using the right one.
Having your bookkeeping records ready on a timely manner will make it easier for you and your tax preparer to get your tax return ready. When we take care of our bookkeeping in advance, we can end up saving a lot of money on service fees. Besides, tax preparers can work on submitting your taxes sooner rather than later. This can only mean that we will receive our tax refund sooner, too.
When we use our home as part of our business facilities, we qualify for some home office deductions. However, we must be fully aware of how such deductions work before going any further. The IRS has a list of instructions to follow when filing home office deductions under Form 8829. If we are eligible, we will need to get the square footage of our entire home, and the part that we use for home office. Then, we need to calculate the percentage of all the expenses and multiply it by the percentage of space used for our business.
Many companies are eligible for many different deductions, including vehicle use, health insurance premiums and medical charges, etcetera. Other examples of business deductions include costs of supplies, depreciation, utilities, traveling, and advertising.
Each deduction will come with different instructions and requirements of eligibility. You can always refer to the IRS website to get more details on business deduction eligibility. However, if you are working with a professional tax preparer, they should be able to guide you through this.