Find an overview of each below, or visit the page “How to Start a Professional Tax Practice” for more details. The form of business you operate determines what taxes you must pay and how you pay them. Your previous year’s return also is a great comparison tool once you think you have completed your current-year tax return.

• More complicated tax returns also bring higher price tags for TurboTax software.
• Those in the Southeastern U.S. pay the lowest costs, while those in New England and the West Coast pay the highest.
• Preparing taxes is no fun for most small business owners, but it has to be done.
• You can get away with the bare minimum rate if all you need the tax preparer to do is place figures where they belong.
• When preparing a statement of income and expenses (generally, your income tax return), you must use your books and records for a specific interval of time called an accounting period.
• Net earnings figured using the regular method are also called actual net earnings.

We will send you a letter with either a request for more information or a reason why we believe a change to your return may be needed. You can respond by mail or you can request a personal interview with an examiner. If you business tax preparation checklist mail us the requested information or provide an explanation, we may or may not agree with you, and we will explain the reasons for any changes. Please do not hesitate to write to us about anything you do not understand.

Self-Employment (SE) Tax

And, depending on your business structure, there’s different dates to keep track of. To help you get a jump on tax season and make filing your small business taxes as painless as possible, we’ve put together this straightforward tax preparation checklist. This is a state tax paid on selling certain goods and services. You’ll typically collect sales tax from a customer at the time of purchase and send your sales tax payments to the state. Usually, you’ll send it quarterly and complete a sales tax return to submit with your payment.

• For an explanation of the number of credits you must have to be insured and the benefits available to you and your family under the social security program, consult your nearest SSA office.
• Tax preparation software is more convenient for small businesses than filing manual, paper-based returns.
• It also does not allow you to file multiple state returns, so beware if that applies to your tax situation.
• A 0.9% Additional Medicare Tax may apply to you if your net earnings from self-employment exceed one of the following threshold amounts (based on your filing status).
• Gather your receipts, bank statements, credit card statements, and payroll records to back up your work.
• This could suggest an effort to streamline billing rates or that services are being bundled.

Schedule C is the form used by sole proprietors to report income and losses. Unlike the other two, you must file Schedule C with your individual tax return due date of April 15. TAS can provide a variety of information for tax professionals, including tax law updates and guidance, TAS programs, and ways to let TAS know about systemic problems you’ve seen in your practice. This tool lets your tax professional submit an authorization request to access your individual taxpayer IRS online account. If we inquire about your return or select it for examination, it does not suggest that you are dishonest.

File away!

You occasionally have to drive to your clients to deliver your completed work. You can deduct the cost of the round-trip transportation between your home and your clients. If you use your car or truck in your business, you may be able to deduct the costs of operating and maintaining your vehicle. You may also be able to deduct other costs of local transportation and traveling away from home overnight on business. For more information about business bad debts, see chapter 10 of Pub.

Figure your gross profit by first figuring your net receipts. Figure net receipts (line 3) on Schedule C by subtracting any returns and allowances (line 2) from gross receipts (line 1). Returns and allowances include cash or credit refunds you make to customers, rebates, and other allowances off the actual sales price.

Gather your financial records.

Your inventory practices must be consistent from year to year. Under an accrual method of accounting, you generally deduct or capitalize a business expense when both the following apply. The following are special rules that apply to advance payments, estimating income, and changing a payment schedule for services.

The best way to avoid this problem in future years by using a separate bank account and credit card just for business expenses. Whether you outsource your bookkeeping or keep it in-house, your bookkeeper is a valuable resource when it comes to small business tax preparation. That’s why meeting with your bookkeeper tops our small business tax preparation checklist.

Small Business Tax Preparation Checklist

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