Tax Advice

Make Tax Time Easy: A Must-Read U.S. Small Business Tax Checklist

As a small business owner, there is a lot to keep track of, especially when it comes to tax time. There are forms, receipts, deductions, and more. While it could be easy to let yourself ignore the small details, if you do that, you could be leaving money on the table—deductions can save you dollars. Not only that, making mistakes on your taxes can cause a delay. And no one wants a letter from the IRS.

This small business tax checklist will help make sure you don’t miss the details, so you can stay organized with your taxes and get back to running your business.

Your Small Business Tax Checklist

Ready for an organized start to small business taxes? Here are 12 action items to start checking off your list:

1. Find the Right Form

Each type of business comes with different due dates and forms. Knowing what you need to file come tax time is the first step for your small business tax checklist.

• If your business is a sole proprietorship, you’ll file Schedule C with your Form 1040 (personal income tax return)
• If your business is a partnership, you’ll file information return 1065, and use Schedule K-1 to report your share of business income and losses on your personal income tax return
• If your business is an S corporation, you’ll file form 1120S, and use Schedule K-1 to report your share of business income and losses on your personal income tax return
• If your business is a C corporation, you’ll file form 1120

2. Know Your Due Date

Along with knowing what form to file, you should also know your tax due date.

• Schedule C is due on April 15, along with your personal tax return
• Form 1065 and Schedule K-1 are due on March 15
• Form 1120S is due on the 15th day of the third month following the end of the business tax year (usually March 15)
• Form 1120 is due on the 15th day of the fourth month following the end of the business tax year (usually April 15)

If any of those dates fall on a weekend or holiday, the tax form is due on the next business day.

3. Schedule Time With Your Tax Preparer

If you work with a tax preparer, be sure to get on their schedule early. Don’t think that you can book a time to talk with them on the day before taxes are due. If you have questions about small business tax preparation (and you might!), it’s important to get those answered early on.

If you don’t have a tax preparer lined up yet, it’s a good idea to start interviewing some well before tax season begins. Great tax preparers get busy and booked with their clients. You can absolutely do taxes on your own, but as things get more complicated with your small business, a good professional can help advise you on tax-saving strategies and make sure your taxes are done correctly.

Even better if you can find a tax professional that specializes in your niche. For example, there are those who specialize in serving the needs of small business owners, or freelancers operating exclusively in the creative industry.

4. Pull Your Records

There’s a lot of information that you’ll need to have in order to file your taxes. Whether you’re working with a tax preparer or going the DIY route, you’ll want to have all your documents in order to make the tax filing process smoother.

Take some time to find or prepare:

• Prior year tax return
• Bank reconciliations
• Current year income statement and balance sheet (if you’re a FreshBooks customer you can download these directly from your account)
• Estimated tax payments made during the year

5. Track Down Any Missing Receipts and Expenses

In an ideal world, you’ll only use your small business checking account or credit card to make purchases for your business, and you’ll log any receipts immediately in your accounting software. But in the real world, sometimes things aren’t quite as clean. You may have accidentally used a personal credit card to make a business purchase, or made a purchase with your small business bank account but forgot to log the receipt.

It’s time to track down any expenses that haven’t been included in your financial statements yet. You’ll also want to take the time to make sure all of your receipts are in order. This gets more difficult to do the longer time goes on, so get organized now before you get too far into the new year. You don’t want to forget an expense and lose out on a valuable deduction on your taxes.

6. Send Any Required 1099-NECs

If you paid people this year who aren’t employees (e.g., contractors) you’ll need to send them a 1099-NEC. These forms detail the amount of money that you paid them since they’ll need to include that on their own personal tax return.

Since your non-employees need the information to file their taxes, these forms are due well before your business taxes are due. The due date for 1099-NECs to be filed is January 31. One copy needs to be filed with the IRS and one needs to be sent to the contractor.

If you work with clients who issue you a 1099-NEC, be sure to keep them together and handy for your tax return. You’ll want to have them double-check against your records when you file.

7. Update Your Mileage Log

If you ever drive for work, you should be keeping a mileage log. When tax time comes around, you can take a deduction for the miles driven. Ideally, you should input your mileage each time you drive. But if you’ve missed a few or are a little behind on your mileage tracking, now’s the time to update it before you get to work filing your taxes.

There is an option to claim expenses based on actual amounts paid, but you’ll need to split these expenses on your tax return based on how much you use the car for business and how much it’s used for personal reasons.

8. Decide on Your Home Office Deduction

If you run your small business out of your home, you can take a home office deduction. There are two ways to take the deduction and each comes with pros and cons. Before submitting your business taxes, you’ll want to have decided on your approach (a good tax preparer can help you here!).

The first option is the simplified method. Under this approach, you’ll get a standard deduction of $5 per square foot of your home office space, up to a maximum allowable space of 300 square feet. That means the maximum deduction you can take under this method is $1,500.

Under the regular method, you take deductions for actual expenses incurred. Expenses are usually allocated based on the percentage of your home used for business purposes. To use this method, you’ll need to do a little calculation to see how much of your home is a home office.

9. Deduct Health Insurance Premiums

If you are self-employed and pay for health insurance, you can likely take a deduction for the health insurance premiums that you paid. There are some limitations (like the health insurance premiums you paid can’t exceed your net self-employment income), but if you are paying for your own health insurance as a self-employed person, this deduction can really help you save. Keep track of your health insurance premiums paid monthly to take advantage of this valuable deduction.

10. Ensure All Other Expenses Are Properly Categorized

You always want to have all of your expenses properly categorized, but you specifically want to be sure that you have your meal expenses categorized correctly. That’s because meals are usually only 50% deductible.

However, there are some situations where meals are 100% deductible. For example, if you provide snacks for your employees in the office, that’s going to be 100% deductible on your tax return. If that’s incorrectly categorized as just meals, your tax preparer might just give you a 50% deduction for that.

11. Keep Track of Any Estimated Tax Payments

The U.S. tax system is a pay-as-you-go tax system, meaning you need to make tax payments throughout the year and not just at the end of the year. Many small businesses need to make estimated tax payments four times throughout the year to meet their tax obligations. If you make estimated payments, be sure to keep track of those and report them on your tax return, so you don’t end up overpaying your taxes.

12. File for an Extension, If Needed

There are times when no matter how organized you are, you still can’t get everything together for the tax filing due date. That’s OK! The IRS is fairly understanding and allows you to file for an automatic extension. You’ll need to file for the extension before your tax due date. And just know that this isn’t an extension to pay your taxes. You’ll still need to pay taxes by the original due date to avoid being charged interest and fees.

Make Updates for Next Year

It can be daunting to go through a checklist list of all the things you need to be aware of come tax time. But when you’re organized and have a good system in place, getting ready to file taxes shouldn’t be a challenge. If you weren’t as organized as you wanted to be this year, here are some resources to help you plan for next year:

• Use a good bookkeeping system: If you’re going to track income and expenses yourself, make sure you have a solid bookkeeping system. It’s easy to get behind on expenses (and make errors) if you don’t have a solid and easy-to-use system in place. FreshBooks offers accounting software to keep your business on track.
• Hire a bookkeeper: If you’re not one to go the DIY route in your business, hire a bookkeeper instead to help organize your records. Our partners at Bench offer professional bookkeeping services at affordable prices.
• Create a filing system: You will need to keep some documents (tax returns and receipts) for years, so devising a solid system for storing everything is a good idea. Whether you like to save paper copies or store everything in the cloud, get a system in place and have backup copies.
• Separate personal and business purchases: A common pitfall small business owners face is how complicated simple business books become when personal and business funds are combined. Try your best to keep everything separate by using separate business bank accounts and credit cards to receive your income and make your purchases.

Doing your business taxes doesn’t need to be stressful. The more prepared you are, the easier things will be. This checklist will help you get organized this year and stay that way next year.

This post was updated in November 2023.