After we wrap up the most wonderful time of the year, it’s time to start thinking about…taxes. As busy business owners, we head into January with long to-do lists and big goals that we want to tackle in the new year. It’s hard to take a step back and prep for taxes; however, by doing so, you can save time, eliminate fees and avoid nasty penalties.
My goal is to make the process as painless as possible for you by walking you through what documents you will likely need to gather for your tax preparer and how to avoid any errors before submitting your tax return.
Partnering with a Small Business Tax Professional
This resource is for educational purposes only. Make sure to speak with your tax professional for specific guidance. As state tax laws, federal tax laws, and the small business deductions change, it’s critical that a professional with a solid understanding of the current tax law assist you with filing your taxes. Now, onto your tax prep checklist!
5-Step Business Owner Tax Prep Checklist
These are the five action steps to take while preparing your tax information. A comprehensive list depends on your business and how you are filing. However, the more prepared you are, the smoother your tax preparation will go.
1.) Create Your Tax Calendar
Document when you need to submit your tax forms and payments. You can use your preferred calendar software (Outlook, Google, etc) to create reminder events or write them on your printed calendar to ensure you give yourself plenty of time to perform your tax actions. The IRS offers an online tax calendar here that you can use.
2.) Access Proper Tax Forms
Which tax forms you will need depends on how your business is structured! You can access the IRS database of business tax forms here. You’ll need to file business income tax forms, estimated tax, and self-employment tax. If you have employees, you’ll also file employment tax. In some instances, you may also file for excise taxes.
3.) Gather Supporting Financial Income Documents
Now that you have your necessary forms, you’ll need to find your numbers. The following documents support your financial income and will be used to fill out your tax forms. Think of any financial document that shows money coming into your business.
Financial Documents:
Sales Records
Invoice Summaries and Receipts
Bank Statements
P&L Statement
Previous Year’s Tax Return (up to 3 years, if applicable)
4.) Gather Supporting Business Expense Documents
We have your income, so now we need to find your expenses. The following documents are used to support your expenses and any write-offs you can take advantage of on your tax return. Think supplies, software fees, professional services, mileage, insurance policies, and any other money coming out of your business.
Expense Documents:
Expense Reports
Payroll Reports
Receipts
Professional service invoices
Mileage Reports
5.) Gather Supporting Documents for Extraordinary Assets
With your income and expenses taken care of, there’s one more category that we need to think about, and that is extraordinary transactions made throughout the year. It’s important to document and report these as they are accounted for differently than traditional income and expenses. Think about any sales or purchases of any business assets such as real estate, vehicles, equipment, or anything else. Did you purchase or sell commercial space? Perhaps you bought a new laptop?
Reviewing Your Business Documentation and Financial Statements
Full disclosure, I spent years auditing financial statements in my corporate life, so I am very much in tune with reviewing documentation and financial statements and understand why it’s so important. Ensuring that all your tax forms are correct is crucial to avoid submitting incorrect forms that result in fees and penalties.
To avoid any mistakes on your forms, I highly recommend following this process. After filling out your forms online, print them out to review everything for accuracy before submitting them. By printing and reading these documents on paper, you can better spot any errors. You still need to review everything for accuracy before submitting, even if you’re submitting to an accountant.
Your accounting will perform your taxes with the documents presented to them.
In fact, you will need to review what’s been prepared on your behalf as well. Why? Well, think of celebrities with tax issues that claimed they had no idea their accountant wasn’t filing their taxes. It’s ultimately your responsibility to ensure your information is correct and submitted.
Make Next Year’s Tax Prep Easier
Now that you’ve gone through the process of prepping for this year’s taxes, you can reflect on how to equip yourself better to make it easier next year. Can you create a calendar event around January 1st to start the prepping process? Maybe you can save essential logins somewhere easy to find. Perhaps, you realize these tasks would be much easier if you had better support in your business.
How a Business Consultant Can Help with Taxes
As a financial business consultant, I am not a tax professional; however, I’m able to help my clients during tax prep season by ensuring all their financial documents are complete and organized. Correcting, filing, and paying your taxes is your responsibility, but you can invest in the right support to help you stay on track.
Finding business financial support can be challenging. That’s why I offer a free 45-minute consultation. This no-pressure call is an opportunity for us to connect and answer any of your questions. If you’re still feeling unsure, I highly recommend watching the recording I did previously, where a potential client asked a few questions.
