Small Business Tax Preparation Checklist for 2023

More deductions are available if you itemize expenses on Schedule A. All features, services, support, prices, offers, terms and conditions are subject to change without notice. Get direct access to a dedicated tax expert, with unlimited year-round advice, at no extra cost.

Fees charged by lawyers, accountants, bookkeepers, tax preparers, and online bookkeeping services are all examples of deductible legal and professional expenses. Unning a business is hard enough without the added pressure of filing taxes. In a perfect world, you’d be thinking about tax preparation at all times, keeping documents and records organized to help ease the burden come tax time. Indeed, practicing good “financial hygiene” throughout the year removes some of the headaches of filing business taxes. Knowing how to choose the best tax preparation and accounting software for small businesses can be tricky. This is why it’s so essential to cultivate an ongoing professional relationship with your clients — you’ll get to know their businesses better and can provide individualized advice.

Form 1120-S

Take a little extra time to subcategorize these expenses as Travel or Employee meal expenses to maximize your tax deduction. The third tip on our small business tax preparation checklist is to gather your financial records. If you use your personal vehicle for business, deducting the standard mileage rate on your tax return is usually more beneficial than deducting your actual vehicle expenses for the year. The trick, of course, is you have to track your mileage in order to take the correct deduction. Fortunately, the days of keeping a paper log are behind us, and there are a number of mileage tracking apps you can install on your smartphone to make tracking mileage painless.

Just keep in mind that any education expenses that would qualify you for a new profession or expenditures for education outside of your company are not considered business deductions. Properly documenting the taxes you’ve already paid can keep you from overpaying. The IRS needs to know exactly who’s filing and who is covered in your tax return. To do this, you will need Social Security numbers and dates of birth for you, your spouse and dependents. If your business does well enough to support employees, congratulations.

How to Prepare Taxes for Small Businesses

If you need more information or help filing your LLC tax checklist, seek out the advice of a CPA or other tax professional. Many small business owners record the entire amount of their loan payments as a decrease in the liability owed. Not only does this cause the loan balance to be reflected inaccurately on the balance sheet, but it also doesn’t separate out the interest paid. By now, you know all the necessary information you need about how to create your small business tax checklist. Just make sure to stick by it when gathering all the important documentation regarding your tax returns, tax deductions, or the tax credit you’re eligible for. A final piece of advice would be to respect the tax return deadline and prepare your documentation on time.

• Some things may either not apply to your situation or may only apply at certain times of the year.
• This is how you establish yourself as a known small business tax preparation expert in your service area.
• Millions of people use them to help file and pay taxes, track their refunds, find information about their accounts and get answers to tax questions.
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• Generally, you’ll need the following documentation to claim potentially valuable tax credits.

The alternative motor vehicle credit is a tax credit given to individuals who buy cars that are powered by alternative energy sources. If you were the original buyer of a car after January 1, 2006, you may qualify for this type of non-refundable tax credit. When you invest in courses that enhance your skills and help you grow your business, they’re entirely deductible.

Weekend Accounting and Tax Jobs to Boost Your Income

A business’ state income tax varies from state to state and potentially city to city. Depending on where your business operates and where you create economic nexus, you may have filing requirements in different state and local jurisdictions. The rules for economic nexus are complex, and it is best to consult with your business tax preparation checklist tax adviser if those rules apply to you. These entities are known as “flow-through” entities because the income is first reported at the entity level and then “flows-through” to the individual’s tax return on Schedule K-1. In addition, small businesses have other tax-related tasks they’re expected to complete.

However, given the shifting nature of federal and state tax codes, especially as they relate to what is permitted for deductions, it is worth the investment to hire an accountant to consult on these issues. However, failing to take advantage of all available deductions and credits is also a significant mistake to avoid. Without carefully reviewing the data, you could end up forgoing a more advantageous tax filing status. Experienced tax professionals understand that preparing a tax return for small businesses entails much more than number crunching. Taxation for small businesses is an ever-changing landscape where evolving regulations keep you on your toes.