4 Key Steps for Small Business Tax Preparation
No matter how many times you've been through the process of preparing your small business taxes, the start of a new tax season can feel overwhelming. Making sure you have everything on your small business tax preparation checklist can help you feel confident about filing and less stressed as the tax deadline approaches. Here's a step-by-step list of what you need to do to set yourself up for a smooth experience with your business taxes this year.
1 Plan ahead
The work necessary to file your taxes will often take time and foresight, and tax day can vary depending on what type of business you run. Small businesses set up as S corporations or partnerships generally have a tax deadline of March 15. Sole proprietorships, single-member limited liability companies or C corporations have a deadline of April 15.
It's also smart to put other important deadlines on your small business tax preparation checklist. For example, January 31 is the deadline to file and provide employees with W-2 forms and contractors with 1099-NEC forms.
2 Find the forms you'll need
Not all businesses file taxes using the same form. Ensuring you have the right tax form from the beginning can ensure you're gathering the correct information for your tax filing. Here are the forms each type of business uses to file taxes:
- Sole proprietor businesses file using Schedule C, filed with the business owner's personal 1040 tax return
- C corporations file using Form 1120
- S corporations use Form 1120-S to file their taxes
- Partnerships need to file using Form 1065 for the partnership, and each partner must also file using Schedule K-1
3 Gather your financial records
Traditionally, this is the most onerous step in the small business tax preparation checklist. Any business that hasn't kept organized records over the previous year may need to set aside time to track down and organize all of its income records. In particular, you'll need to have records of all gross receipts from sales, as well as records of any interest or investment income from accounts held in the business's name. If you've had to issue any returns or refunds, having those records is also important. This helps ensure you don't count income that was ultimately refunded.
You'll also need to gather up any receipts or other documentation of business expenses that may reduce your business's taxable income. Taking the time to find all of your financial documentation and records will ensure an accurate tax return.
4 Partner with your tax professional
Meeting with your tax preparer early on in the process can be a big help. Not only will your tax professional be up to date on any changes in tax laws that may affect your filing, but they can also help identify what information, forms or other documentation you need to file your taxes correctly.
Meet with your tax professional three to four months before tax season so you can ensure you know what you'll each need to do for the coming tax prep. Then, schedule when you'll connect again closer to the tax filing deadline to confirm all necessary forms are complete and accurate.
Filing business taxes doesn't have to be stressful
Planning ahead and following the steps in this small business tax preparation checklist can help make this annual task less daunting. With everything you need in place, you can put tax prep behind you and get back to the work of running your business.
Financial insights for your business
This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.