Tax Checklist for Business Owners

Tax season is no reason to panic if you plan in advance. Owners of small business should take steps, whether they do their own tax preparation or use a CPA. Here’s a checklist of important preparatory actions:

Bookkeeper:

If you use a bookkeeper, set up a meeting, even if she doesn’t prepare tax returns. She probably knows the answers to most of your questions and can ensure all your accounts from the previous year are fully reconciled. Your balance sheet should reflect any addition or disposal of assets.

Mileage log:

If you use a vehicle for business, make sure your mileage log is complete and up to date. If you don’t have a smartphone app that automatically logs mileage, get one and use it. Failure to keep a log can cost you an important deduction.

Bank statements:

Gather all your bank statements for the tax year, and use them to ensure your balance sheet balances match bank balances.

Out-of pocket-expenses:

You need to recognize business expenses you paid with personal accounts and credit cards. These are deductible even if you didn’t use a business account. Scan your personal credit card and bank statements to identify business expenses to file on your Schedule C or corporate tax return. Then, before the end of the year, write reimbursement checks from your business bank account to your personal account to capture the deductions. If you miss the end-of-year deadline, debit your expense account and credit an equity account.

Personal expenses:

You need to make sure you don’t deduct personal expenses paid for by a business account. This can sometimes happen if you grab the wrong credit card. Either repay the business for these expenses of enter a transaction to debit an equity account and credit to your checking or credit card account.

Received 1099s:

Gather all your 1099s, including the credit-card-related 1099-Ks. The IRS doesn’t look kindly upon taxpayers who don’t declare all their income, which is what 1099s report. PayPal, Stripe and all other payment processors prepare 1099-Ks for payments of $20,000 or more, or if you receive more than 200 payment transactions per year. Never declare less gross income than the sum of your 1099 receipts.

Issued 1099s:

If you made payments to contractors, consultants and other non-employees, you need to issue them 1099s for amounts greater than $600. But don’t issue 1099s if you paid via a credit card or payment processor, because they will issue 1099-Ks. Check with your bookkeeper to ensure you have issued all required 1099s.

Asset purchases:

Pull the receipts for your purchases of business assets such as cars, furniture, computers and any other items that you expect to last at least one year and cost more than $500. You might have to depreciate assets worth more than $2,500 instead of expensing them, and you also might qualify for Section 179 deductions and bonus depreciation.

Interest:

Remember to deduct your interest expenses. Even though IOU Financial charges low interest rates, every penny of interest is deductible, so take advantage of this gift from Washington. Tax-deductible interest lowers the after-tax cost of borrowing, so keep that in mind when you need cash from IOU Financial, your source for business loans.

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