As a small business owner, managing your taxes can feel a bit overwhelming, especially as tax deadlines approach. You want to stay on the right side of the Internal Revenue Service, of course, but you also want to be sure you’re not paying more in taxes than you need to. You certainly don’t want to make any mistakes that may attract unwanted attention from the IRS.
The best way to keep the IRS happy (and off your back) is to be sure you’re ready to file as tax time approaches. Prepare for tax time by getting organized with a clear list of what tax preparation for business requires.
Here’s a handy checklist to help you make sure you and your small business are ready for tax season.
- Determine your tax form and deadline
- Gather business records
- Identify tax deductions and credits
- Deduct your estimated tax payments
- Request an extension if needed
- Plan for your federal tax obligation
- Review your tax forms
- File your taxes
We’ll explore each step in more detail below. Ready to get started?
Determine your tax form and deadline
Not all businesses are created equally. Everyone has to pay up, but how and when you need to file is determined by your business type. Sole proprietor? You’re filing Schedule C by April 15. S Corporation? You’re filing IRS Form 1120-S by March 15.
Start the tax filing process by understanding your form and deadline.
Tax Filing Forms and Deadlines
|Business Type||Tax Form||Tax Filing Deadline|
|Sole Proprietor||Schedule C||April 15|
|Single Member LLC||Schedule C||April 15|
|Partnership||Form 1065 and Schedule K-1||March 15|
|Multi-Member LLC||Form 1065 and Schedule K-1||March 15|
|Corporations||Form 1120||April 15 (If fiscal year ends December 31)|
It’s worth noting that you do get a brief extension if April or March 15 falls on a weekend or a federal holiday. Taxes will be due the following business day.
Gather business records
Be prepared: you will spend a bit of time on this step in your tax filing preparation. That’s simply because this is the step that requires the most accuracy.
Gathering these documents should be relatively painless if you have been keeping up with bookkeeping tasks throughout the year. You’ll simply use your accounting software to run the reports and print them out.
If you’ve let bookkeeping slide while you focused on other business tasks, it’s going to be a bit more work. On the bright side, you can use this scramble for records as an opportunity to find a great bookkeeping or accounting system to use going forward.
To file your business taxes, you will need:
- Your taxpayer identification number (EIN or SSN)
- Your business income statement
- Your balance sheet
- Receipts for all business purchases, including cash purchases
- Your business bank statements
- Your personal bank statements if you haven’t yet opened a dedicated business bank account
- Credit card statements
- Payroll statements
- Your tax return from the previous year
- The amount paid in estimated tax payments throughout the year
- Any 1099 forms you have received or sent
Once you’ve gathered your documents, it’s time to crunch the numbers. Or, if you’ve been crunching numbers all year long with regular bookkeeping, double-check them.
Identify tax deductions and credits
A business income tax return is different from an individual tax form, so give yourself plenty of time to find, sort, and calculate all the possible tax deductions and credits you might have.
You should pay careful attention to these as tax deductions and credits can significantly lower your tax burden—and the IRS pays careful attention to your business tax deductions and credits too. Unfortunately, this is an area some unscrupulous business owners get a bit creative.
There are a few items in particular that you’ll want to pay extra attention to. Take your time to get these numbers exactly right and ensure you have the documentation to support them.
Business mileage - If you drive for business reasons, you can deduct that mileage. Be sure you’re tallying mileage that directly relates to your business tasks, not mixed or personal ones.
Home office deduction - If you have a space in your home entirely (not partially) devoted to business, you can deduct the costs associated with that space. Be careful in how you determine this space, however, as it is a common IRS trigger and can draw a tax audit.
Travel and entertainment deductions – If you travel for business or entertain clients or employees as part of your business, those entertainment expenses can be deducted from your business taxes. Be sure to separate any business or personal costs if your travels include both work and pleasure.
Small employer health insurance tax credit – If you pay for employee health insurance, you may be qualified for the health insurance tax credit.
Disabled access credit – If you have created access for employees with disabilities, you may be qualified for a disabled access tax credit.
Charitable contribution deduction – If your business has made charitable contributions for the year, these can be deducted. Again, be careful to check your records on these as charitable contributions can be an IRS audit trigger.
Deduct your estimated tax payments
Depending on your business type and income, you have likely made small business tax payments throughout the year.
Self-employed business owners must make estimated tax payments throughout the year to cover their estimated tax burden. Other business owners may have made quarterly tax payments.
Be sure to deduct the money you’ve already sent to the IRS for tax payments. There’s no need to pay more in business taxes than you owe.
Helpful resource: How to Calculate & Pay Estimated Taxes (Free Calculator)
Request an extension if needed
Tax preparation for business can be time-consuming, but it’s essential that you get it right. It’s important to understand the steps required to file your small business taxes correctly and fill out the corresponding paperwork. If the tax deadline is approaching and you’re not confident in your ability to file on time, you can request a business tax return extension.
If you are requesting an extension on your business taxes, you will need to complete and file IRS Form 7004 before the tax filing deadline. You do have an option to e-file Form 7004 or send in a paper copy.
Note: Don’t make the mistake of assuming that an extension gives you extra time to pay—it doesn’t. If you owe any taxes, you’ll have to pay those when you file for your extension. Otherwise, you’ll end up owing penalties and interest on any tax due.
Plan for your federal tax obligation
As you finish your tax forms, check out the bottom line. How much do you owe in business taxes? Now, how are you going to pay? If you’ve calculated your estimated payments correctly, you should have already paid a large portion of your tax obligation over the course of the year.
However, there is a chance that the bottom line you’re looking at now is more than you can afford to pay in a single lump-sum payment. If that is the case, the IRS does offer other options for paying your taxes, including installment plans. You may also be eligible to delay your tax obligation temporarily or negotiate an offer in compromise.
Review your tax forms
If you have outsourced your tax preparation to an accountant, you will be the second set of eyes on the numbers. Be sure to review the numbers and forms that have been prepared for you. When you file, your signature will go alongside theirs along with their PTIN, or preparer tax identification number.
If you have completed your own tax forms, congratulations—that’s a big job! It may be worth it, though, to hire a CPA, an accountant, or a tax professional to review them on your behalf.
Bookkeepers do not typically prepare tax documents but may be available to double-check the numbers on the original business forms that you have used to prepare your tax forms.
File your taxes
The final step may be the easiest. Once you have prepared, checked, and double-checked your tax forms, it’s time to submit them.
The IRS process for e-filing business taxes is fairly streamlined, especially if you’ve used tax preparation software. When you submit the forms online, the IRS can confirm receipt easily.
If you have been working with an enrolled agent, they may also file your completed taxes on your behalf.
You can also file your taxes by mail—just be sure they are postmarked on or before the filing date.
How Bench can help
You can’t file your taxes if you don’t know your numbers—that’s why accurate and up-to-date books are essential. At Bench, we take bookkeeping off your hands so you can focus on running your business.
We can help organize your records, update your bookkeeping, and provide the year-end financials you need to make filing your taxes quick and easy.
If you’re looking for a bit more support with your taxes, we’ve got you covered. Bench also offers year-round tax advisory and tax preparation services—we’ll even file your taxes for you. Learn more.