How to Prepare Your Business for Tax Season

Tax season can be stressful for small business owners, but with proper preparation, you can file confidently and maximize your deductions. This comprehensive checklist will help you organize your financial documents and streamline your tax preparation process.

Start Early: Don't Wait Until April

The key to stress-free tax filing is starting your preparation early. Ideally, you should begin organizing in January for an April deadline. This gives you time to gather missing documents, correct errors, and explore tax-saving strategies.

Organize Your Financial Records

Income Documentation

• Bank statements for all business accounts
• 1099 forms from clients (typically arrive by January 31)
• Sales records and invoices
• Credit card merchant statements
• Cash receipts

Expense Documentation

• Receipts for business purchases
• Vendor invoices and bills
• Credit card statements
• Mileage logs for business vehicle use
• Home office expense records
• Travel and meal receipts

Employment Records

• Payroll records and summaries
• W-2 forms for employees
• 1099-NEC forms for contractors
• Quarterly payroll tax payments
• Employee benefits costs

Review Your Books for Accuracy

Before tax preparation begins, ensure your bookkeeping is accurate and up-to-date:

• Reconcile all bank and credit card accounts
• Review and categorize uncategorized transactions
• Verify accounts receivable and payable balances
• Check inventory values if applicable
• Review fixed asset records and depreciation

Maximize Your Deductions

Common Business Deductions:

• Home Office: If you use part of your home exclusively for business
• Vehicle Expenses: Business mileage or actual expenses
• Equipment and Supplies: Computers, furniture, office supplies
• Professional Services: Accounting, legal, consulting fees
• Marketing: Advertising, website costs, business cards
• Insurance: Business liability, property, health insurance (for self-employed)
• Business Meals: 50% of meals with clients or while traveling
• Education: Courses and workshops that improve business skills

Understand Your Business Structure

Your tax obligations vary based on your business structure:

• Sole Proprietorship: Report income on Schedule C of your personal return (Form 1040)
• Partnership: File Form 1065, issue K-1s to partners
• LLC: Can be taxed as sole proprietorship, partnership, S-corp, or C-corp
• S Corporation: File Form 1120-S, issue K-1s to shareholders
• C Corporation: File Form 1120, separate from personal taxes

Don't Forget Quarterly Estimated Taxes

If you're self-employed or your business doesn't withhold taxes, you must pay quarterly estimated taxes. Missing these payments can result in penalties. Due dates are typically April 15, June 15, September 15, and January 15.

Consider Tax-Advantaged Retirement Contributions

Contributing to a SEP IRA, SIMPLE IRA, or Solo 401(k) before the tax deadline can reduce your taxable income while building retirement savings. For many self-employed individuals, this is one of the most significant tax-saving opportunities.

Prepare for Form 1099 Filing

If you paid any contractor or vendor $600 or more during the year, you must file Form 1099-NEC by January 31. Gather all contractor information early, including:

• Legal business name
• EIN or Social Security Number
• Business address
• Total payments made

Review Your Filing Status and Entity Type

Tax season is a good time to evaluate whether your current business structure is still optimal. As your business grows, switching from sole proprietorship to S-corp or LLC might provide tax advantages. Consult with your CPA to determine if a change makes sense.

Digitize Your Records

Scan and save digital copies of all important documents. The IRS accepts digital records, and having backups protects you in case of loss or damage. Use cloud storage or accounting software to keep everything organized and accessible.

Know Your Deadlines

• March 15: S-corp and partnership returns due (Form 1120-S, Form 1065)
• April 15: Individual returns (including sole proprietorships) and C-corp returns due
• Extensions: File Form 7004 (business) or Form 4868 (individual) if you need more time, but estimated taxes are still due by the original deadline

Work with a Tax Professional

Tax laws change frequently, and missing deductions or making errors can be costly. A qualified Brooklyn CPA can help you maximize deductions, ensure compliance, handle complex situations, plan for next year, and represent you if audited.

At Accounting Standards Inc, we specialize in small business tax preparation for Brooklyn and NYC businesses. We handle everything from bookkeeping review to tax filing, giving you peace of mind and more time to focus on your business.

Ready to tackle tax season with confidence? Schedule your tax preparation appointment today.