Tax season is upon us and it’s time to check off all the necessary tasks on your checklist. The good news? This easy-to-follow guide will give you everything you need to prepare for your taxes, from what counts as taxable income to how much money you can save with each deduction.

The “small business tax checklist 2020 pdf” is a comprehensive guide for small business owners to help them prepare their taxes. The checklist includes everything from what types of deductions you can take, to how much you should pay in taxes.

It’s getting close to that time of year again: tax season. While tax preparation may seem to be an inconvenient activity that takes time away from operating your company, submitting a proper return might help you avoid incurring fines and penalties in the future.

To accomplish this work, you’ll need a checklist, which you can see below.

This talk covers all you need to know about your business’s tax return and how it affects your personal finances. To submit an accurate tax return on time, use the checklist.

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The fundamentals of business taxes

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Understanding how your company is taxed is the first thing on your tax preparation checklist.

Many taxpayers are confused about how their portion of corporate income is taxed and how that tax impacts their personal tax burden. There are several methods to organize your business, which generates uncertainty among taxpayers.

Consider C corporations (C Corps) vs. all other company models to better grasp the differences:

  • C Corporation: C Corporations are taxed twice. The C Corporation is required to submit a tax return and pay taxes on its net income (profit). The owners have the option of keeping after-tax profits for use in the firm or paying a cash dividend to shareholders. Dividend income is added to other sources of income on the shareholder’s personal tax return if a dividend is paid.
  • Most other business forms distribute the earnings and losses of the firm straight to the proprietors. Pass-through entities include sole proprietorships, partnerships, S Corporations, and a variety of other enterprises. Assume your portion of a partnership’s profit is $10,000, for example. The partnership files a tax return and sends you a Schedule K-1, on which the $10,000 in income is reported, and the $10,000 is added to your other sources of income on your personal tax return. The partnership tax return lists the partners, their ownership percentages, and the partnership’s earnings, but it does not include any tax calculations.

There are occasional exceptions, but in general, a firm that is a C Corp or a pass-through corporation is subject to double taxation.

The tax forms and schedules you’ll need to fill out are determined by your company’s tax structure. As a consequence, it’s critical to comprehend how your company is taxed.

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Components of personal returns

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The next step is to understand how your company earnings affect your personal tax return (Form 1040). As previously said, money from your company might flow into your personal return in a variety of ways, but the three most prevalent are:

  • Dividend income is reported on Form 1040 if you are a shareholder in a company and receive dividends.
  • Income obtained via a partnership is reported on a Schedule K-1, which is sent to partners who earn money through a partnership. Form 1040 is used to report partnership revenue.
  • Self-employed people: The earnings and losses from your firm are recorded on Schedule C of Form 1040 if you’re self-employed.

If you or your spouse gets a Form W-2 for compensation earned as an employee, the W-2 income is added to your Form 1040 business-related income.

Consider these extra tax difficulties after you’ve figured out how your company is taxed and how it affects your personal tax return:

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Checklist for tax preparation

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To submit an accurate tax return that contains the correct amount of company revenue and tax deductions, follow these steps:

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1. Gather your documents.

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Gather your documents and create your year-end balance sheet and income statement reports to begin the tax preparation process. Ideally, you should utilize accounting software that enables you to automatically prepare financial statements.

Many of the line items on your tax return, such as total income and business costs, are based on the income statement.

You may need to view receipts for certain major expenditures in addition to your financial reports. As you begin to prepare your taxes, keep this information in mind. If you hire a tax accountant, you’ll have to provide over these documents to the accountant.

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2. Go through your statements again.

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Examine your bank and credit card accounts one final time to check that your income statement spending are precise. If you chance to detect a deductible item that was not correctly classified in your accounting transactions, this time investment might pay off.

Check your bank account for check amounts and debits, as well as your credit card bills for expenditures. Examine the financial accounts for higher dollar amounts and double-check that each one is recorded as an expenditure on the income statement.

Before you start preparing your taxes, make any required changes and establish a new income statement.

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3. Consult a tax professional.

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Because tax regulations change regularly, you should consult an accountant about your return so that you can apply current tax laws to your company results. You may profit from this sort of talk even if you file your own tax return.

Let’s say your tax accountant advises you that under current tax legislation, you may completely deduct some kinds of machinery and equipment in the year of purchase. You purchased a $3,000 equipment and recorded it as an asset on your books.

Each year, you incur depreciation expenditure when you utilize an asset to generate revenue, and your tax depreciation expense may vary from the expense shown in your accounting records. In this scenario, you may depreciate the full $3,000 computer for tax reasons, whereas depreciation expenditure is recorded over five years or more in your accounting records.

Discussing your financial results with an accountant might help you maximize your tax deductions and lower your tax payment.

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4. Keep track of your projected tax payments.

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During the year, most company owners are expected to submit projected tax payments. Verify that you subtracted the projected tax payments for the year when you finished your tax return and calculated your tax burden. This step lowers your chances of paying more taxes than you owe.

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5. Upload your documents to the internet

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Make the effort to submit your return online so that you may obtain confirmation that it was received before the tax deadline. Electronic filing also assures that your whole tax return is sent, and if you utilize this option, the IRS will process your tax refund quicker.

Fortunately, you may submit your return online using tax software.

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6. Payments vs. extending your filing date

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You may seek an extension if your tax situation is more complicated than usual, or if you are lacking tax paperwork. If your request for an extension is granted, you will be able to submit your tax return beyond the regular deadline.

However, keep in mind that your tax obligation is still payable on the previous due date. You may be charged interest and penalties if you do not pay by the due date.

Depending on your company structure, the deadline date for your tax return will be different.

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Prepare ahead of time.

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Gather your documents, determine your tax deductions, then submit your return using this checklist.

The easiest approach to deal with all of these concerns is to prepare ahead of time for your tax burden. Examine your tax return from the previous year to see how your tax burden was determined. If anything uncommon occurs throughout the year, such as the selling of an asset for a profit, keep track of it so you can find it when it comes time to file your taxes.

Finally, consider engaging a CPA to assist you in estimating your tax due, keeping track of your documents, and preparing your company tax return.

Check out our small company tax guide to learn more.

Related:

This post was syndicated by MediaFeed.org and originally published on the Quickbooks Resource Center.

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The “small business tax preparation near me” is a checklist that has been put together by the IRS and published on their website. The list includes information about what to expect when preparing your taxes, and some of the most common mistakes that can be made during tax season.

Frequently Asked Questions

How do I prepare my taxes for my small business?

A: In order to prepare your taxes for a business, you will need to know what type of entity you are operating under. If the company is registered and organized as an individual or sole proprietorship then self-employment tax can be taken care of by filling out Schedule C. The profit/loss statement should show earnings before expenses in case of income taxation, or loss after expenses if filing with the IRS on a form 1040 EZ (the Business Income Tax Return).

What do I need to complete my business taxes?

A: To complete your business taxes, you will need to file a tax return and pay any outstanding balance due.

What tax documents do I need for a small business?

A: To form a small business, you must file an annual tax return and provide documentation of your sales. This includes invoices that show the total amount of income generated by your company in each year since it was established. If this is not available, then your best option is to use average monthly sales figures.

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