The day to day responsibilities of entrepreneurship can leave you guessing when it comes to what you need for tax season. Tax time is never that much fun so, this year, make sure you don’t leave out any crucial information.
You can start now with a simple checklist:
1. File the correct tax form
Sole proprietors and single-member LLCs report business income and expenses on Schedule C that is attached to your Form 1040 Individual Tax Return.
If your business is a partnership or multi-member LLC, you’ll be required to report business income and expenses on Form 1065. S corporations report business activity on Form 1120-S. Then the partnership, LLC or S corporation issues a Schedule K-1 to its shareholders, reporting their share of the entity’s income, deductions, and credits.
2. Provide business information
When preparing to file your annual tax return, you will need to provide some basic information, including your business legal name, social security number, and address. If you have filed for an Employer Identification Number (EIN) with the IRS for your business, you will need it as well.
If addition, make sure the name on your tax return matches the name on file with the Social Security Administration – otherwise, it can cause a delay with your refund.
3. Get your receipts out of the box
Keeping your accounting records in order throughout the year can make it a lot easier to prepare your annual tax return.
If you have a professional tax preparer or accountant, one of the first things they will ask you for is your bookkeeping records, such as your journal entries, list of revenue and expenses, bank and or credit card statement, profit and loss statement and balance sheet.
4. Understand the Home Office deduction
One very common business deduction for small business owners involves the home office deduction. You may be eligible if you use your home regularly and exclusively for business. You can find the full instructions for Form 8829, Expenses for Business Use of Your Home, for more details on whether you qualify.
5. Be clear on deductions for your business vehicle
Another common deduction associated with small business owners is car expenses. It is important that if you drive your own car, you need to keep an accurate log of your mileage for business use. The IRS will not allow a deduction for business use of a vehicle without a record of miles driven for business. Your log may be kept manually or electronically.
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