Small Business Tax Preparation Checklist for 2024

Are you getting ready to file your small business taxes? If this is your first time, it can be a little daunting. But don’t worry, we’re here to help!

In this article, we’ll provide you with:

• a small business tax preparation checklist with details on what you need to gather and provide to your accountant
• what tax deductions and credits are available to small businesses

Let’s get started!

Small Business Tax Preparation Checklist

As a small business owner, you are responsible for ensuring that your taxes are filed correctly and on time. There are many documents you will need to provide if you want to make sure that you haven’t missed anything important. Knowing that this can be a daunting task, we’ve created a tax preparation checklist to help you:

What Do I Need to Give My Accountant for Small Business Taxes?

Read on to find out what types of documents you need.

Essential Documentation About Your Business

When you’re preparing to file your small business taxes, there are a few essential pieces of documentation that you’ll need:

• Federal Tax ID Number

First, you should provide your small business federal tax identification number (TIN), which is a set of unique numbers that identify your business. Anyone who files an annual tax return with the IRS must include their TIN. The IRS then uses this information to keep track of taxpayers and collect taxes.

• Social Security Number

A Social Security number (SSN) is a tax identification number provided by the Social Security Administration. To submit an income tax return, individuals working in the United States must have and submit their Social Security number.

• Previous Year’s Tax Return

Another essential document you need to include is your tax returns for the previous tax year, which is a twelve-month accounting period for keeping track of all your transactions and reporting income and expenses.

Income Documentation

When creating your checklist on small business federal tax documents, make sure to include all of your income sources. This may cover both day-to-day operations and any investments or secondary income. Here’s what you should include:

• Gross receipts from sales or services
• Sales records for accrual-based taxpayers (accounts receivable)
• Returns and allowances
• Business checking/savings account interest (1099-INT or statement)
• 1099-NEC (independent contractor or professional services work) or W-2 income
• Other revenue, such as rental income, federal and state gasoline or fuel tax credit, or refund, may also be significant

Business Expenses Documentation

Don’t miss including these expenses when filing small business taxes for the first time:

• Advertising
• Phones (fax, landline, or mobile phones related to business)
• Computer & internet expenses
• Transportation and travel expenses (cost for local transportation, as well as all costs related to business trips)
• Commissions and fees
• Contract labor expenses that you’ve paid to subcontractors or independent contractors
• Depreciation costs
• Professional fees (lawyers, accountants, advisors)
• Office supplies
• Wages paid to employees
• Employee benefit expenses
• Repairs, maintenance of office facilities, etc.
• Estimated tax payments (incl. any applicable property taxes and sales taxes)
• Other business-related expenses
• Health insurance

Employment Tax Documentation

Another thing to remember as it can help with small business taxes is to provide supporting documents to for yourself as self-employed as well as all the expenses you pay on behalf of others who work for your company:

Self-Employment Tax

As a small business owner, you are likely considered an employee of your own firm. If you made more than $400 from company activities and were self-employed, it should be recorded as income and included in your tax checklist.

Employment Taxes

If you have workers, you are subject to various employment taxes, also known as payroll costs. The following are examples of employment taxes your checklist should include:

• Social Security and Medicare taxes
• Federal and state income tax withholding
• Federal unemployment tax

In-House Office Documentation

These are all the in-house office documents your small business tax checklist should include:

• Square footage of office space
• Total square footage of home
• Hours of use (i.e. in-home daycare)
• Mortgage interest or rent paid
• Homeowner’s or renters’ insurance
• Utilities
• Cost of home, cost of separate improvements, and first date of business use

Other Items

Gather any additional information you may find, such as:

• The business’ financial statements, such as balance sheets, cash flow statements, or profit/loss statements
• Completed year-end books
• Information regarding any charitable contributions
• Information regarding NOLs

It is advisable that you make sure that you’ve finished any associated tax paperwork, and include it in your small business taxes checklist for beginners. This includes:

• Form 1099-NEC and Form 1096
• Form W-2 and Form W-3
• Federal and state payroll returns (Form 940, Form 941)

Small Business Tax Deductions Checklist

Deductions are a great way to save money on your business tax bill. This is possible since some expenditures, such as health insurance and investments, which are good examples of small business tax return expenses, may be deducted from your taxable income or final invoice, lowering the amount you owe.

Advertising

The cost of advertising and promotion is fully deductible. These include costs for media marketing campaigns, sponsoring events, logo designs, etc. However, you cannot deduct expenses paid to influence legislation (i.e., lobbying) or fund political campaigns or activities.

Legal Services

Legal and professional costs that are essential to operating your business are also deductible. Fees charged by lawyers, accountants, bookkeepers, tax preparers, and online bookkeeping services are all examples of deductible legal and professional expenses.

Mileage

Mileage expenses are among the common small business tax questions. For a trip to be considered business travel, it must be typical, necessary, and away from your tax home, which is the city or area where you conduct business. You must travel for more than a day away from your tax home in order for this to apply.

Keep records that include the amount of each expenditure, as well as the dates of return/departure, information about the trip (who you met with), a mileage log if you drove your own car, and the business reason for the trip.

Insurance

You may deduct the premiums you pay for business insurance, as well. Check the following small business tax return example list to see what applies:

• Property coverage (business furniture, buildings, and equipment)
• Liability coverage
• Group health, dental, and vision insurance for employees
• Professional liability or malpractice insurance
• Workers compensation coverage
• Auto insurance for business vehicles

Rent

When you rent a business location or equipment for your company, you can deduct the rental payments as a business cost.

Keep in mind that, even if you have a home office, rent paid on your house should not be subtracted as business expenditure.

Interest

If you borrow money or use a credit card to pay business costs, make sure you include the interest you paid in your small business tax return checklist. You can get an interest deduction as long as you fulfill the following conditions:

• You are legally responsible for the debt
• The lender and you both want the debt to be paid off
• You have a true debtor/creditor relationship with the lender

Internet and Phone Services

Your phone and internet costs may be business deductions if they are necessary to your operation. Keep in mind that the cost of your first line cannot be subtracted if you use a landline at home. If you have a second landline specifically for the business, you can deduct its cost.

Depreciation

When doing taxes for your small business, make sure you include the expenses for equipment, products, and other company assets. Although depreciation rules state that the cost deduction for these items is done over time, the IRS provides several strategies so you can deduct the full cost in a single year:

• De Minimis Safe Harbor Election

Small companies have the option of claiming assets that cost less than $2,500 per item in the year they are acquired.

• Section 179 Deduction

This section allows businesses to deduct up to $1,080,000 in property that is put into service during the tax year.

• Bonus Depreciation

It allows businesses to deduct 100% of the cost of machinery, equipment, computers, appliances, and furnishings.

Employee Salaries and Benefits

When you’re filing your small business taxes for the first time, make sure to include the salaries, benefits, and vacation time paid to workers, as these expenses are usually tax-deductible.

Training and Education

When you invest in courses that enhance your skills and help you grow your business, they’re entirely deductible. Just keep in mind that any education expenses that would qualify you for a new profession or expenditures for education outside of your company are not considered business deductions.

Meals and Entertainment for Business Dealings

The tax code allows you to deduct 50% of qualifying food and beverage expenses. Including these costs may help with receiving a deduction when filing your small business taxes.

To qualify for this deduction:

• The expense must be an ordinary and necessary component of your company’s operations
• The meal can’t be too lavish or expensive
• The meal must be attended by the business owner or a staff member

You can deduct 100% of the cost of providing meals to employees, such as paying for pizza when your staff is working late. Meals provided at office parties and picnics are also deductible to the extent of 100%.

Taxes and Licenses

You may be eligible for deducting taxes and licenses costs, so it’s worth including these on your small business tax deduction checklist:

• State income taxes
• Payroll taxes
• Personal property taxes
• Real estate taxes paid on business property
• Sales tax
• Excise taxes
• Fuel taxes
• Business licenses

Business Tax Credits You May Be Eligible For

You may be eligible for certain business tax credits, which can help offset the cost of tax preparation. Many small business owners seem to have small business tax and credit-related questions, so here is some basic information about the most common business tax credits:

Small Business Health Care Tax Credit

The Affordable Care Act (ACA) created a small business health care tax credit to help small businesses and tax-exempt organizations afford the cost of providing health care coverage to their employees. To be eligible, you must:

• have fewer than 25 full-time equivalent employees (FTEs)
• pay at least 50% of the cost of single coverage for each of your employees
• have a payroll that is below a certain threshold

Investment Credit

Other useful tax credit information for small businesses includes the fact that you may be able to claim a tax credit for certain investments in your small business, including equipment, facilities, and software. This is different from a deduction, which lowers the amount of income that’s subject to tax.
To claim the investment credit, you must file Form 3468 with your tax return. The form instructions will tell you what information you need to include.

Disabled Access Credit

The Disabled Access Credit is a non-refundable credit available to small companies that make special investments in order to enable persons with disabilities access. To claim the credit, use IRS Form 8826.

Work Opportunity Credit

Another helpful small business tax credit information is that you may be eligible for a Work Opportunity Credit. It is a tax credit available to employers who hire workers from certain target groups that have consistently faced significant barriers to employment.

Alternative Motor Vehicle Credit

The alternative motor vehicle credit is a tax credit given to individuals who buy cars that are powered by alternative energy sources. If you were the original buyer of a car after January 1, 2006, you may qualify for this type of non-refundable tax credit.

Key Takeaways

Conclusion

By now, you know all the necessary information you need about how to create your small business tax checklist. Just make sure to stick by it when gathering all the important documentation regarding your tax returns, tax deductions, or the tax credit you’re eligible for. A final piece of advice would be to respect the tax return deadline and prepare your documentation on time.