Small Business Tax Preparation: A Practical Checklist

Work out which return you file

The form depends on your structure: sole proprietors file a Schedule C with their personal return, while partnerships, S corporations and C corporations file their own business returns.

Also expect state returns, payroll filings, sales tax returns and information returns such as 1099s. Our guide to business tax return forms goes through them. Confirm current form numbers and deadlines on IRS.gov.

Get your books ready

Reconcile every account, categorize all transactions and produce a profit and loss statement and balance sheet before sending anything to a preparer.

Do this first, because everything else depends on it:

1. Reconcile bank, card and loan accounts through year end.
2. Review uncategorized transactions and fix the miscoded ones.
3. Record year-end items such as depreciation, inventory counts and owner draws, with your accountant's help.
4. Run a profit and loss statement and a balance sheet and sanity-check them.

See how to close the books and bank reconciliation. A preparer who receives clean books spends less time, which usually lowers the bill.

Assemble the documents

Gather income records, expense records, payroll reports, asset purchases, loan statements and last year's return.

• Last year's tax return
• Profit and loss statement and balance sheet
• Forms 1099-NEC, 1099-K and 1099-MISC you received
• Payroll reports, Forms W-2 and W-3 and quarterly payroll filings
• Receipts for large purchases and equipment, with dates and costs
• Mileage logs and home office details
• Loan statements showing interest paid
• Estimated tax payments made during the year
• Sales tax filings and state account numbers

We list what preparers ask for in what your accountant needs. A shared folder named for the tax year keeps everything in one place.

Know the deadlines and estimated payments

Returns and payments have set due dates that vary by entity type. Owners without withholding generally pay estimated tax each quarter.

Deadlines differ for individual returns, partnerships, S and C corporations, payroll deposits, 1099 filings and state taxes. Extensions give more time to file, but not more time to pay, so estimate and pay what you owe by the original date. Check IRS.gov for the current calendar and your state's site for its own dates.

Put every date in a shared calendar with reminders two weeks ahead. Our guide to filing quarterly taxes shows how to estimate payments. Late filing and late payment penalties add up, so set the reminders even if you plan to use a preparer.

Set a personal deadline well before the legal one, so you have time to fix missing records without paying rush fees.

Find deductions and credits legitimately

Review the common deductions and ask your preparer about credits that fit your business. Support every claim with records.

Go through your expense categories and make sure nothing is missing: rent, supplies, software, insurance, marketing, professional fees, business mileage, interest, depreciation and the owner-related deductions your accountant recommends. Ask about retirement contributions and credits you may qualify for.

Do not claim personal expenses as business ones, and do not guess at numbers. Read small business tax deductions and tax credits for small businesses as a starting list, and confirm each with a professional.

Decide between DIY, software and a preparer

Simple sole proprietor returns may suit software. Employees, multiple states, inventory, an S corporation or past issues are good reasons to hire a professional.

Software is fine when your return is straightforward: one owner, limited expenses and no payroll. Bring in a CPA or enrolled agent when you have employees, multiple owners, inventory, vehicles and equipment, sales in several states, or a recent big change such as a sale, loan or new entity.

Ask how they charge, what is included, who handles notices from the IRS and whether they will advise you year-round. Our guide to hiring a tax preparer lists questions to ask. A good preparer often pays for themselves in missed deductions and avoided penalties.

Plan cash for the tax bill

Set aside tax money all year in a separate account, and know your likely bill before the deadline. Surprises create cash crunches.

Illustrative example: your accountant projects $18,000 of total federal and state tax. By saving $1,500 each month into a tax account, the bill is covered on due day. Without it, a business with $20,000 in the operating account might have to choose between taxes and payroll.

If a bill arrives with thin cash, first ask the IRS or your state about payment plans; they can cost less than borrowing. If you do need short-term cash while waiting on customer payments, ROI Funder's working capital is available to businesses with 6+ months in operation and $20,000+ monthly revenue. See the payback and cost before you accept.