7 Documents Your Accountant Needs for Small Business Taxes

As your business grows, your taxes become increasingly complex. Avoid the headache of complicated calculations and worrying about errors on your tax return by outsourcing your tax preparation to a professional CPA. An accountant can help you reclaim your time to grow your business. 

You can help your CPA prepare accurate tax filings by providing your business financial records. 

To ensure a smooth tax season, gather the documents your accountant needs for your small business taxes. The checklist in this article will help you understand what you should provide.

Identifying Your Business Tax Return Form

Before compiling your tax return support, determine which tax form your business should file. Your tax form depends on your business entity type, as detailed in the following summary.

• Sole proprietorship or single-member LLC: Form 1040, Schedule C, Profit or Loss from Business (Sole Proprietorship)
  
• C corporation or LLC with a C corp election: Form 1120, U.S. Corporation Income Tax Return

• S corporation: Form 1120-S, U.S. Income Tax Return for an S Corporation
  
• Partnership or LLC with a partnership election: Form 1065, U.S. Return of Partnership Income

If you operate a sole proprietorship, your accountant will prepare IRS Form 1040, Schedule C, to report your business taxable income. Your accountant will submit your business tax return with your personal income tax return, so you should provide your IRS Form 1040 support. (Corporation and partnership owners file business tax returns separately from their personal tax returns.)

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7 Documents Your Accountant Needs for Your Small Business Tax Return

Your accountant will need accurate bookkeeping and financial records to prepare your business tax returns. You should also provide the identification and business structure information detailed in this article.

Your accountant may need additional documents depending on your industry and business structure. 

#1. Identification Information

Your accountant will need your personal and business identification documents to prepare your business tax returns. Gather the following records:

• Personal identification information

• Legal name and address
  
• Social Security number
  
• Dependents’ personal identification information

• Business identification information
  
  • Business entity type
    
  • Business name and address
    
  • Employer identification number (EIN)

#2. Last Year’s Tax Forms

Prior year tax returns and supporting documents help your accountant understand your business structure. If you’re working with a new tax preparer for the first time, gather the previous year’s tax return. Include additional prior years, if possible. 

Your CPA will review your prior year’s taxable income, tax liability calculations, and any tax credits reported. Be sure to notify your accountant about any business changes since last year’s return.

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#3. Business Income and Receipts

Your accountant will review your business receipts for your taxable income calculation. 

Small business owners should compile the following documents – your records may vary depending on your income.

• Invoices and customer billings for the year
  
• Monthly or annual revenue reports

• IRS 1099 forms reporting rental income, freelance wages, and payments received through apps and online marketplaces:
  
  • Form 1099-MISC, Miscellaneous Information
    
  • Form 1099-NEC, Nonemployee Compensation
    
  • Form 1099-K, Payment Card, and Third-Party Network Transactions

Entrepreneurs with multiple income streams should gather tax forms from all other income sources. Collect tax packages you receive from investment accounts, such as the following: 

• Schedule K-1s reporting income distributions from partnerships, S corps, estates, or trusts.

• IRS 1099 forms reporting income from investments and real estate transactions. Examples include the following:
  
  • Form 1099-B, Proceeds From Broker and Barter Exchange Transactions
    
  • Form 1099-DIV, Dividends and Distributions
    
  • Form 1099-INT, Interest Income
    
  • Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
    
  • Form 1099-S, Proceeds From Real Estate Transactions

#4. Expense Records

Help your accountant maximize your tax deductions by providing detailed support for your business expenses. Small business owners should gather the following records for their tax return preparation:

• Employee wage reports and independent contractor payments
  
• Depreciation calculations
  
• Equipment, machinery, and furniture purchase records
  
• Health insurance premium payments
  
• Home office expenses
  
• Inventory records, including purchases, cost of goods sold, and year-end inventory counts
  
• Mileage and business-related vehicle expenses

Additionally, sole proprietors should provide support for certain personal expenses. Itemized deductions on Form 1040, Schedule A, can reduce your taxable income. The following information will help your accountant lower your tax bill:

• Charitable contributions
  
• Education expenses
  
• Home mortgage interest payments
  
• IRA contributions
  
• Medical and dental expenses
  
• Property taxes

#5. Financial Records

Your credit card and bank statements will help your accountant prepare accurate business tax returns. Gather your business loan documents and any investment account statements you received during the year.

Your accountant will refer to your financial records to report correct income and expenses on your tax return.

#6. Proof of Tax Payments

Your accountant will need records of federal tax payments you made during the year. Gather proof of your quarterly income tax payments and any prior year overpayments you applied to the current tax year.

In addition to federal income taxes, provide a list of the payments you made for any of the following:  

• Payroll taxes
  
• Property taxes
  
• Sales taxes
  
• Self-employment taxes
  
• State and local taxes

#7. Financial Statements

Financial statements summarize your business results, assets owned, and liabilities owed at the end of the year. Many bookkeeping and accounting software solutions have financial statement capabilities. If you work with a professional bookkeeper, request a copy of your year-end financial statements.

Compile your financial statements for your accountant. Include your year-end balance sheet, full-year income statement, and your statement of cash flows. 

Systems Your Accountant Needs for Your Small Business Taxes

You can make tax season easier by implementing business systems and processes.

Bookkeeping Software or Outsourcing Solution

Bookkeeping software can automatically track and categorize your business receipts and expenses. Consider outsourcing the work to professional bookkeepers to benefit from specialized experience and real-time reporting. 

Whether you purchase software or outsource to a professional, keep track of your business invoices, receipts, and expenses throughout the year. Have the information readily available before tax season to ensure a smooth tax preparation process. 

Business Bank Account

Keep your personal and business finances separate by opening a business bank account.  Many institutions offer business checking and savings options with varying fees and interest rates. Use a business credit or debit card for all business-related purchases.

Maintaining separate financial accounts will help your accountant report accurate business taxable income. Additionally, a separate business bank account prepares you for a tax return audit.

Benefits of Hiring a CPA for Your Small Business Tax Preparation

Hiring an accountant to prepare your business tax return will save the stress of time-consuming paperwork and complex rules. You’ll also enjoy the following advantages:

• Rely on timely and relevant training. CPAs complete industry-specific training to maintain their professional licenses. You can feel assured your accountant understands how the latest tax rules affect your business.
  
• Get year-round tax advice. Your professional relationship with your accountant doesn’t end after filing your return. Accountants monitor tax law updates and due dates throughout the year. You can get timely advice on quarterly tax payments and form deadlines.
  
• Benefit from tax planning strategies. Your accountant can provide tax advisory and planning services to help you prepare for business structure changes. Tax advisors help evaluate opportunities to lower your tax bill.

• Ensure accurate business tax reporting. Accountants navigate tax rules and form instructions to calculate your taxable income and tax liability. You’ll gain confidence in your tax filing by partnering with professional CPAs.

• Lower your tax bill with business deductions and tax credits. Tax professionals develop specialized knowledge of tax benefits that business owners could overlook. Your accountant can find additional business credits and deductions to reduce your tax burden.

Maximize Your Business Tax Deductions with 1-800Accountant

Small business owners can benefit from professional accounting and tax services without hiring a full-time accountant or bookkeeper. Outsourced bookkeeping and accounting services help you save money on professional fees – and lower your tax bill. 

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Professional CPAs provide year-round advice and help you monitor due dates. Tax professionals offer done-for-you business tax preparation so you can stay focused on your business. Partner with 1-800Accountant to reduce your tax season stress. Schedule a free consultation to learn how you can benefit from outsourced tax and accounting services.