It’s that time of year again – tax season. If you’re a small business owner and you haven’t started getting everything together for your annual trip to your accountant, now is the time. While the due dates for small business tax returns vary depending on the type of business you own, deadlines for filing most 2019 business tax returns are fast approaching.
- Sole proprietorship and single-member LLC tax returns on Schedule C are due along with the owner’s personal tax return by April 15, 2020.
- Partnerships are required to file a partnership tax return on Form 1065 with Schedule K-1 for each partner by March 16, 2020.
- Multiple-member LLCs filing as partnerships must be filed on Form 1065 for the partnership and give Schedule K-1 to each member by March 15, 2020.
- S corporation tax returns must be filed on Form 1120 S with Schedule K-1 for each member by March 15, 2020.
- For corporations that aren’t Scorporationa and have a fiscal year ending other than December 31, the filing deadline is the 15th day of the 4th month after the end of the fiscal year.
Keep in mind, the filing dates can change from year to year due to weekends and holidays. In some instances, there may be opportunities to file for a small business tax extension. It’s recommended you consult with your accountant if you think you may need an extension. Now that you know when to file, it’s time to gather and organize what you need to take to the accountant.
Small Business Tax Basics
While tax season can be stressful, making sure you are well-prepared before meeting your accountant can make the process much easier. Below is a list of the necessities. If you’ve been using the same account year after year, they may already have some of this information on file. If this is your first visit to the accountant, make sure to bring this information with you.
- Personal Information – Even if you’ve used the same accountant for years, they will need to verify your personal information. This includes your legal name, current address, and social security number. When meeting with your accountant, it’s best to simply provide your driver’s license and social security card.
- Employer ID Number (EIN) – Your EIN serves as an identifier for business tax purposes. Certain types of business such as sole proprietorships or qualified joint ventures with no employees aren’t required to have an EIN. However, an EIN may still be required if you want to open a business checking account or apply for a loan from a bank or through the Small Business Administration.
- Last Year’s Tax Return – If your account doesn’t keep a copy of your tax return from the previous year on file, be sure to bring it with you. It can provide them with a better understanding of your business. It will also allow them to review your previous deductions and see if there are any others you should be taking.
- Business Financial Reports – Bring copies of the basic financial reports listed below.
- Profit and loss report or income statements – This documents your company’s profits or losses for the year.
- Balance sheet – This documents your company’s current assets and liabilities.
- Cash Flow Statement – This documents all transactions affecting your company’s cash account.
- Detailed Asset Information – You will need to provide your accountant with a complete list of any assets that were bought, sold, or depreciated during the last year as well as any receipts, documents, or reports related to your assets and fixed assets.
- Income Documentation– For verification of the income amount on your profit and loss report or income statement, your accountant will need thorough documentation of your income for the last year, including copies of bank statements, deposit slips or sales invoices.
- Expense Records – To verify your company’s expenses and identify the appropriate deductions, your accountant will need complete documentation of your expenses including all receipts, bills, bank statements, credit card statements, mortgage interest, and property tax form 1098.
- Loan Information – If you’ve taken out any loans during the last year, your accountant will need the loan agreements as well as documentation of loan payments and accrued interest to ensure the accuracy of your balance sheet.
Specialized Small Business Tax Deductions
When it comes to tax deductions, there are some specialized deductions that require very specific documentation.
- Meals, Travel, and Entertainment Expenses – Some businesses require traveling for training, meetings or conferences. The expense incurred to attend these can be a tax deduction, within reason. Expenses that seem too extravagant can get the attention of the IRS. To avoid this, make sure you have complete documentation of these expenses including travel tickets, lodging accommodations, and meal receipts for your accountant.
- Mileage – If you use your own vehicle for business purposes, this may also qualify for a deduction. You will need to keep a log of your mileage for each use, the purpose of those miles and any receipts related to the vehicle. Your accountant will need this information to determine the eligibility and appropriate amount of the deduction.
- Home Office – If you work from home and have a room dedicated to business, you may be eligible for a home office deduction. This will require extensive documentation, including the square footage of your home and the office itself, as well as the annual dollar amount of your mortgage or rent, insurance, and utilities. Your account will know how to evaluate this information and determine if your home office is eligible for a deduction and how much.
- Donations – Be sure to keep track of any charitable donations your company makes and provide your accountant with any related receipts or documents.
Your accountant will need to have all your payroll information including copies of employee’sW-2s, W-3s, and 1099-MISCs. You will also want to provide them with health insurance payment and bonus information as these are considered business tax deductions.
There are several tax forms that require a COGS (cost of goods sold) closing balance for the year. Your account will need the current closing balance as well as the previous year’s to properly complete your small business tax forms.
Stocks and Bonds
Has your business purchased or sold any stocks or bonds during the year? Were there any owner investments or withdrawals? This includes any withdrawals made by the owner of a sole proprietorship or LLC as a form of salary. If there were, be sure to provide these records to your accountant.
It is strongly recommended once you have gathered all the documentation we’ve listed, you contact your accountant before your appointment to see if there is anything else they need. The better prepared you are, the easier tax season will be. If you struggled with the task of compiling all this information, it may be time to think about investing in software to streamline the process.
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