The SyncLedgers Essential Small Business Tax Checklist
Quarterly tax filings can be a huge burden for any small business, but it goes a lot smoother if you have everything organized ahead of time. To help you with that, we’ve put together this Small Business Tax Checklist. We’ve tried to make it as comprehensive as possible. The first step will make sure that you don’t miss anything unique to your situation.
First, Coordinate With Your CPA and Your Bookkeeper
Unless you really have the expertise and the time needed to fill out all of your tax forms yourself, you can’t afford to skip this step. Your tax preparation professional will have specific questions to ask you. They’ll want you to present certain forms and reports to indicate your financial position. Your bookkeeper will be familiar with all of these, and may even be able to prepare them ahead of time.
CPAs and other tax preparation professionals are much more familiar with the most recent changes in tax law than you’re likely to be. They can therefore help you maximize your deductions and minimize your payments. They also help you avoid the terror of an IRS audit, so make sure you work with them! This small business tax checklist is just a starting point.
To start with the nitty-gritty of the small business tax checklist, you’ll need to first gather documented proof of your business income. The most obvious of these will reflect gross sales receipts, as well as services rendered. If you pay taxes on an accrual basis, You’ll need all of your sales records. This includes those still counted in accounts receivable. Be sure to account for returns and allowances, interest on business checking or savings accounts, and any other income sources you may have.
Cost of Goods Sold (COGS)
These costs will offset your income, but it’s sometimes necessary to keep them in a separate category from expenses. Your tax preparation professional will indicate whether and how to include them. They include records of your current inventory, the dollar amounts of both your beginning and ending inventory, and inventory purchases between them. You’ll also need to note the presence of other materials and supplies associated with your business.
This is the biggest and most detailed part of your tax reporting process. It’s worth it, though, to make sure you can maximize your deductions. Many of these items can be written off against your tax burden.
Make sure to carefully record the costs of advertising. Company communications equipment also incurs costs. Note what you pay for business phone and fax lines, computers and internet connection fees.
Take into account all of the travel costs incurred by your business. That includes local transportation, for which you should keep a mileage log and all of your parking, public transit, and toll receipts. For trips further from home, record your airfare or mileage, taxi receipts, hotel and meal expenses, and additional internet costs.
Interest payments on debts owned by the company are also important expenses that can help you. If the company owns a building, you’ll need to report the mortgage interest. You should include any other interest-bearing business loans and investments, as well.
One huge and important category of expenses relates to the office space itself, and everything filling it up. Write off all your consumable office supplies like pens, paper, staples, paper clips, rubber bands, etc. You should include the cost to rent office space and vehicle leases. If you operate out of an in-home office, you’ll need to know the square footage of your office space as a fraction of your total home square footage. Note the date you started using it for business. Based on those numbers you’ll be able to write off that fraction of your mortgage, homeowner’s or renter’s insurance, and utilities. You’ll need to note the cost of the home itself, and records relating to any other improvements you’ve made to it.
Obviously, if you have any employees, they need to be paid, and you need to include those payments in your expense reporting. Important forms to have on hand are the W-2 and W-3, as well as those relating to federal and state payroll returns. Also keep records pertaining to employee benefit expenses, and all work done by paid outside contractors.
Other important expenses to note are commissions you pay to subcontractors, asset depreciation, and business insurance. For depreciation, it’s important to note the initial cost and the date of purchase of the asset. Record how the asset has been used (maintenance logs are useful here). If it was sold, report when and for how much.
You will want to include the expenses made on professional fees for legal and consulting services, including (especially) for the CPA who prepares your taxes! It’s the IRS making you go to all this trouble, so you should get something back for it!
Lastly, there’s a myriad of other little expenses you’ll need to note. Some are not so little, like repairs and office facilities maintenance, which should be separate from rent and wages. You’ll also need to separately note health insurance costs, including premiums. As a small business owner, if your spouse doesn’t work for your company, but has their own employer-provided insurance, you’ll need to make a note of that, too.
SyncLedgers Helps Keep it All Straight
SyncLedgers professional bookkeepers are intimately aware of all these details that make or break your tax reporting. Contact us today so you don’t have to keep track of all the transactions on this small business tax checklist by yourself ever again!