You have to be good at many things to run a small business. Anyone can do it—from chief executive officer to social media manager. A tax expert may be worth the investment if you lack the knowledge to handle running a small business’s financial and tax aspects.
Think about teaming up with an accountant who can handle tax preparation so you can concentrate on growing your business.
Additionally, scheduling an audit for your company can ensure your financial records are accurate and help identify potential areas for improvement. This proactive approach not only ensures compliance with tax regulations but also offers valuable insights into your company’s financial health.
Regarding small business taxes, you may ask, “What information should I provide to my accountant?”
Keep reading to find out what information your accountant will require from you when they prepare your small business tax return.
1. Identification information
Your accountant will require access to certain personal information to submit your small business’s tax return. You will provide them with the following forms of identification:
- Give out your Social Security numbers as well as those of your spouse and any children you may have. Make sure to get everyone’s full legal names as well.
- Identity Number for Employers: Tell your accountant if your company has an EIN. Previous tax returns will have your EIN.
- ID card or driver’s license: While it’s not always required, providing copies of your identification and your personal and business permanent addresses is a good idea.
Gathering accountant supplies for tax professionals may be necessary if your small business employs additional staff.
2. Return on taxes
Submitting your accountant your business’s tax returns from previous years will assist them in better comprehending your company’s structure. If you’re starting a new tax preparation relationship, it’s a good idea to get the return from the prior year.
Your certified public accountant will review your previous year’s tax returns, including your taxable income, tax liabilities, and tax credits. If anything has changed with your company since last year’s return, you must inform your accountant.
3. Invoice
Talk to your small business tax preparer about your financial accounts. These papers show how your company is doing financially.
Some key financial statements to share are as follows:
- Reviewing your company’s cash flow statement can reveal a lot about its financial management and ability to meet its financial obligations and cover its expenses.
- The balance sheet details a business’s assets, liabilities, and owner’s equity as a whole.
- An income statement is a financial document that summarizes a company’s earnings and expenditures for a specific time frame.
- Your company’s annual income, profits, and losses are detailed in the profit and loss statement.
To ensure your taxes are accurate, you need your company’s financial statement and a documented record of all financial activity.
4. Capital-asset operations
Capital assets are one kind of the many tangible and intangible assets that a company typically has. Any tangible item that a company holds with the hope that it will generate income in the future is considered a capital asset. These investments usually provide income for a long time to come.
You must include in your tax return any purchases, sales, or exchanges of capital assets that your company made throughout the year.
To illustrate the types of capital assets you should discuss with your accountant, consider the following:
- Property your company has owned for more than one year is considered land.
- Tools: Tools for research and development are part of this category.
- Anything your company has owned for over a year is considered a building.
- Autos: Any vehicle(s) that your company has owned for more than one year
- You must keep track of copyrights, an intangible asset.
- Include all of your active or dormant patents on your tax return.
- You are liable for the dissemination of trademarks, which are intangible assets.
Gains or losses in capital are the outcomes of selling a capital asset. Print out any capital-asset activity if you use small business tax accounting software. This will ensure your accountant has all the facts to make an appropriate tax return.
5. Details about business loans
Feel free to provide any documents that detail your business’s funding strategy. Distribute the following to your accountant in the form of grants and small business loans:
- Include any documentation that attests to the receipt of a business loan.
- Provide any documentation that attests to the receipt of grant funds.
- Any interest statement must be shown in the accrued interest section.
- Proof of receiving a PPP loan under the CARES Act should be shared.
You can help your accountant prepare an accurate tax return by providing as much documentation as possible on payments, reimbursements, and receipts of funds.
6. Data about earnings
If you own a small business and must file your taxes, you must include any relevant financial records detailing your company’s revenue for the previous year.
Here are several examples:
- Submit your most current bank statement.
- Original deposit slips from the prior year were used to purchase shares.
- Sales Invoices: Provide any invoices generated in the past year.
Automated company reporting services can help small businesses save time when completing their taxes by allowing them to digitally save financial records such as income records.
7. A record of expenses
Your business tax accountant will also need records of your annual expenditures and your income. Your online banking account is a good place to find expense data, such as credit card statements. Another option is to use software that can keep tabs on your company’s spending for you.
Recordings of expenses may contain:
- All receipts should be shared, whether for office supplies or new machinery.
- Provide copies of all bills paid in the previous year.
- Submit your most current credit card statements.
While some accountants may request a complete set of receipts covering all of your spending (direct and indirect), others may be content with a summary. Before setting up a meeting, gather all your paperwork and ask your accountant which one they prefer.
8. Possible subtractions
Finding additional tax deductions for which your small business is eligible is one of the greatest benefits of working with a tax accountant.
The following details are required for accountants to locate these deductions:
- If you work from home, you can claim a portion of your living expenses as home office expenses.
- Keep track of the miles you put on your business vehicle to claim them as a tax deduction.
- If you travel for business purposes, you can deduct your flights.
- You can claim your charitable contributions as a tax deduction.
- Expenditures on health insurance are tax deductible.
- Monthly utility costs for your business can be claimed as a tax deduction.
- Expenditures on marketing materials are tax deductible.
- Spending on legal services: Take that amount out.
If you want the best possible outcome, disclose all documents eligible for a deduction. To find out whether costs qualify, see your tax accountant.
Conclusion
Tax preparation need not be one of the many difficult aspects of running a business. If you own a small business, a tax preparation checklist can spare you the headache of dealing with complicated employment, sales, and state tax matters, allowing you to devote more time to running your company.
