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.
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:
#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.
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:
#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:
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:
#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:
#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:
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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.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.