What Does My Accountant Need for My Small Business Taxes?

Preparing your small business taxes can be an overwhelming task. Among all the other “jobs” you have, this one is important and has significant ramifications if it isn’t done correctly and on time. Working with a professional tax preparer can be the solution that saves you time and money in the long run. A CPA who is a small business accountant, such as ours at C.E. Thorn, CPA, PLLC in Raleigh, can make sure you are claiming the credits and deductions available to you.

To help the process go smoothly, having all the required documents on hand for your tax preparer is critical. In this article, we shed light on the documents and information necessary to help you file your small business taxes.

What Documents Do I Need to File My Small Business Taxes?

Gathering all the information you need to file your small business tax returns can be an overwhelming task, so start early. Getting organized and having a good filing system in place will make the tax appointment easier and set you up for success.

Your accountant will need personal information to file taxes on behalf of your small business. There are some slight differences in the information you give your tax preparer depending on the type of business structure you have–Sole Proprietorship, S-Corp, LLC, or C-Corp. (Note: Of these business structures, the S-Corporation is the only business structure that makes it possible for its owners to save on Social Security and Medicare taxes).

What Documents Are Needed to File Small Business Taxes?

Most small business owners either file a Schedule C with their Form 1040, U.S. Individual Income Tax Return, or file both a business and personal tax return. The following list is for both. If you have a “pass-through” business such as a sole proprietorship or a limited liability corporation (LLC), the information needed for your business tax returns includes your personal finance information.

Basic Tax Information Needed to File Small Business Taxes

• Prior Year Return: If you are a new client, having a copy of your last year’s tax return helps your tax preparer gather information and calculate certain tax deductions and credits. If you have worked with this accountant previously, they will already have this information.
• Social Security Numbers: Provide the full names of yourself, your spouse, and dependents (if applicable) as they appear on the Social Security cards, as well as Social Security Numbers.
• Home and Business Addresses: To file small business taxes, the IRS requires you to list a street address on your tax return. Only use a P.O. box if your post office doesn’t deliver mail to your home.
• Future Tax Planning: If you expect to have any significant changes in the coming year, let your tax professional know. They may have ideas for minimizing your tax bill for the following year.
• Employer Identification Number: If your business has a separate EIN, the tax preparer will need this number.

Income Records Needed to File Small Business Taxes

In order to file your small business taxes, you should have your income records handy. Such records include the following:

• W-2s and 1099s: These forms report wages, independent contractor payments, interest, dividends, capital gains, retirement plan distributions, and more. Your tax preparer needs this information to include all taxable income on your return.
• Business Financial Statements: Your tax preparer needs a copy of your balance sheet, income statement, and general ledger, at a minimum. If you use cloud accounting software, it is a good idea to give your tax professional access to your file. This allows them to get into the details if they have questions about balances or business expenses.
• Cryptocurrency Transactions: If you received, bought, sold, or exchanged digital currency during the year, give your tax preparer a schedule of all cryptocurrency transactions or print out transaction reports from each exchange platform you used during the year.

Tax Deductions and Tax Credits for Small Business Taxes

To claim tax deductions and receive tax credits, you will need receipts for the following to file your small business taxes:

• Mileage Log: If you use your personal vehicle for business, get the total business miles and personal miles driven for the year from your mileage log or mileage tracking app. And, bring a copy of the vehicle registration.
• Asset Purchase Details: If you bought any long-term assets for your business, such as furniture, computers, vehicles, equipment, or real estate, your tax preparer needs a description of the item, the purchase price, and the date you placed the item in service.
• Payroll Records: Bring copies of your year-end payroll records or payroll tax returns as well as W-2s issued to your employees and 1099-NECs issued to independent contractors.
• Home Office: If you have a home office, your tax preparer needs the square footage of the office vs. the square footage of your entire home. They also need deductible home office expenses such as mortgage interest or rent payments, utilities, repairs, cleaning, property taxes, and homeowners’ insurance.
• Itemized Deductions: Bring a copy of your Form 1098 Mortgage Interest Statement and other supporting information for itemized deductions such as out-of-pocket medical expenses, receipts for charitable donations, and state and local taxes.
• Self-Employed Health Insurance Premiums: Collect the premiums paid for medical dental, and vision insurance for you, your spouse, and your dependents.
• Dependent Care Expenses: If you paid for childcare, your tax preparer needs your daycare provider’s name, address, EIN, and the amount you paid during the tax year.
• Retirement Plan Contributions: Bring documentation for your contributions to an IRA, SEP-IRA, or other retirement plan.
• Education Expenses: Your tax preparer needs copies of Form 1098-E Student Loan Interest Statement for any student loan interest you paid, as well as Form 1098-T Tuition Statement for college tuition and fees paid for you or your immediate family members. If you contributed to a 529 plan for your dependents, bring your total contributions for the tax year.

Tax Payments Small Business Owners May Owe

If you made estimated tax payments, resulting in overpaying taxes, you should have these payment logs on hand while filing this year's taxes.

• Prior Year Overpayments: If you overpaid your taxes in the prior tax year and have had your overpayment applied to this year’s estimates, you should put that figure on your prior-year return. Be sure to let your tax preparer know if you received a notice from the IRS that they changed your return.
• Estimated Payments: Most small business owners must make estimated tax payments throughout the year. Let your tax preparer know you paid them, how much you paid toward your federal and state taxes, and when you made the payments.
• Extension Payments: If you requested an extension of time to file your return, you should have made an estimated payment with your extension.

Financial Statements

Before filing your small business taxes, your accountant will need basic financial statements, including:

• Income Statement: An income statement, also known as a profit and loss statement, shows how much profit or loss your business experienced over the year in addition to a more detailed look at expenses and incoming revenue.
• Balance Sheet: A balance sheet calculates your assets and liabilities as well as calculating your business’s net worth.
• Cash Flow Statement: Cash flow statements provide a detailed look at the transactions that directly affect cash that is flowing in and out of your business.

At C.E. Thorn, CPA, PLLC, we keep an income statement, balance sheet, and cash flow statement for our monthly business clients. That way, come tax filing season, we can easily access your financial statements.

Financial Records

In addition to your financial statements, your accountant will need more detail to ensure accuracy and to take advantage of any small business tax deductions for which you may be eligible. Note that some of this information is also listed above.

• Loan Information: If you took out a loan in the past year, bring the agreement and any payment or interest records with you.
• Asset Information: Bring receipts for any assets, like equipment, property, or goods you bought or sold over the year.
• Income and Expense Information: Bring sales invoices, bank statements, and receipts for payments for your accountant to verify the income amount.
• Deductible Information: Health insurance, IRA contributions, home office, mortgage interest, travel, and charitable giving can all be deducted from your business taxes (see list under Tax Deductions and Tax Credits). Be sure you provide your tax preparer with the full information to reduce your tax payments.
• Estimated Tax Records: If you’ve paid quarterly taxes, be sure to provide records of what you have already paid.

How to File Small Business Taxes for the First Time

Each business is unique, so we recommend working with a professional accountant to make sure you meet all of your tax preparation requirements. If this is your first time filing small business, here are some tips to help you get started. First things first, you will need to get organized. 

Here are some tips for filing small business taxes for the first time.

Understand Your Business Structure

The structure of your business dictates much of how your business is taxed. The most common are:

• Sole proprietorship
• Limited Liability Corporation (LLC)
• C-Corporation or Corporation
• S-Corporation
• Partnership

Separate Your Personal and Business Expenses

You need to keep itemized records of your taxable income and expenses for your business. Be able to produce your bookkeeping, including bank account records showing all cash inflows and outflows. Even if you use personal funds to keep your business afloat, you should still use separate accounts for personal and business expenses. This can save you time when filing your taxes.

Complete Your Year-End Accounting

When you complete your accounting year-end, you better understand your annual income and expenses. At this point, you can strategically minimize your taxable income by claiming tax deductions. This is accomplished by looking at your expenses.

Understand Deductions

The first step in taking advantage of business tax deductions is to keep accurate records of all incurred expenses during the tax year, e.g., cost of goods sold, mileage deductions, home office, insurance premiums, employee pay, and start-up costs. All of these can be used as tax deductions.

Be Aware of Tax Deadlines

Be sure to brush up on this year's tax deadlines, including quarterly tax payment due dates and other small business tax deadlines to avoid missing a payment or deadline.

Understand and Avoid Common Tax Errors

As a small business owner, you'll want to be informed of the most common tax errors to avoid making them. From selecting the correct business entity to claiming your rightful deductions and making payments on time, you'll want to ensure you're checking all the boxes come tax filing time.

Contact C.E. Thorn, CPA, PLLC for Small Business Tax Preparation

We have filed small business taxes on behalf of business owners in the Raleigh area for decades. To request more information about our tax preparation services in Raleigh, contact C.E. Thorn, CPA, PLLC at  919-420-0092 or fill out the form below.