"Death, taxes, and childbirth! There's never any convenient time for any of them!" - Scarlett O'Hara, Gone With the Wind
Scarlett O’Hara speaks the truth. It’s never fun to file a federal income tax return for your small business, but we’ve made it a little easier by creating this checklist of things you’ll need to do before you prepare your return or see your accountant.
Collect all your business records, including anything that affects your business earnings and expenses. If you use a computer program or a spreadsheet to organize your finances, calculating your income and deductions and importing them directly into your tax return should be easy.
If you don’t have an accounting system, you’ll need to gather the following documentation:
· Gross receipts from sales or services
· Sales records (for accrual based taxpayers)
· Returns and allowances
· Business checking/savings account interest (1099-INT or statement)
· Other income
· Cost of Goods Sold (if applicable)
· Beginning inventory total dollar amount, inventory purchases, ending inventory total dollar amount
· Items removed for personal purposes
· Materials and supplies
· Phones (landline, fax or cell phones related to business), computer & internet expenses
· Transportation and travel expenses
· Commissions paid to subcontractors
· Forms 1099-MISC and 1096 as necessary
· Cost and first date of business use of assets
· Records relating to personal use of assets
· Sales price and disposition date of any assets sold
· Business insurance
· Casualty loss insurance
· Errors and omissions
· Interest expense
· Mortgage interest on building owned by business
· Business loan interest
· Investment expense and interest
· Professional fees
· Office supplies
· Rent expense, repairs, maintenance of office facility, etc.
· Wages paid to employees
· W-2 and W-3 forms
· Federal and state payroll returns (Form 940, Form 941, etc.)
· Employee benefit expenses
· Forms 1099-MISC for contractors
· Forms 1096 for contractors
· Estimated tax payments made
· Other business related expenses
· Health insurance
· Premiums paid to cover the sole-proprietor and family
· Premiums paid on behalf of partners and S corporation shareholders
· Information on spouse's employer provided insurance
Determine the correct IRS tax form to use by how you operate your business. If you’re a sole proprietorship or an LLC and you are the sole owner, you can report all of your business income and expenses on a Schedule C attachment to your personal income tax return.
If you’re a corporation or treat your LLC as one, you will need to prepare a separate corporate tax return on Form 1120.
Fill out your schedule C by selecting all the expenses you can claim from the set list, then subtract your expenses from your business earnings to determine your net profit or loss. Transfer this number to your personal income tax form and include it with your other personal income tax documents.
If you use a Form 1120, you’ll calculate your taxable business income in the same way as you would with a Schedule C, but you’ll have to add more details.
Don’t miss the deadline! If you’re using a Schedule C, you must file it along with your personal income tax forms by the Monday, April 18, 2016 deadline.
If you’re filing a Form 1120, you must file it by Tuesday, March 15, 2016. Any tax due must be paid at this time as well. If you want an automatic 6-month extension, file Form 7004 and deposit what you estimate you owe.