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DIY Small Business Tax Filing Checklist

Filing your taxes as an Independent business owner doesn’t have to be a struggle! Use our DIY tax filing checklist to stay organized for this year’s tax season.

DIY small business tax filing checklist

It’s tax time! If you’ve always wondered if you could handle it by yourself, this post is for you.

If you’re an LLC with a single owner or sole proprietor, doing your own taxes is actually much simpler than you might expect. You don’t have to worry about a corporate tax return or any W-2’s for employees (assuming that any assistants or freelancers that you use are paid as independent contractors).

Not only will you save a couple of bucks on an accountant, but more importantly, doing your own bookkeeping and filing your own taxes makes you feel more in control of your business. It will give you a much better understanding of how income taxes work and how your business is doing on a micro & macro level.

The exception: If your business reaches a level where you no longer have time for administrative work, there’s nothing wrong with outsourcing tasks like bookkeeping or tax filing. If you do decide to hire an accountant or bookkeeper, make sure they specialize in your field, are easy to communicate with, and will be able to send you information and reports you need at a moment’s notice.

Find a professional easily by browsing the HoneyBook Pros. Our accountants are vetted and experienced in supporting small business owners with their finances. If taxes feel too daunting, you can work with a HoneyBook Pro who specializes in tax filing.

Why business structure matters for taxes

Before we dive into your tax steps, let’s talk about why your business structure matters a lot when it comes to taxes. If you’ve been in business for a while, feel free to skip this step. 

For someone just getting started with an Independent business you may not realize the impact business structure will have in the long run. 

Most Independent business owners end up running a sole proprietorship since it’s the easiest to establish. You don’t need to file any documents or paperwork for your business, so it’s the structure that individual business owners default to. 

However, with a sole proprietorship you file taxes as yourself, meaning you only file personal taxes. As a sole proprietor, your tax liability may be higher even if you don’t generate a lot of income through your business– it all depends on your personal household tax bracket. 

On the other hand, a single-member LLC lets you separate your personal and business taxes. You can protect your personal assets from liability, and you’ll be taxed at a corporate tax rate rather than your personal tax bracket. With sole proprietorships and single-member LLCs, you’re still entitled to the same tax deductibility, including travel, meals, equipment, and more.

How to prepare for your small business taxes

I recommend using a bookkeeping program or accounting software to track & categorize your income & expenses. For instance, with HoneyBook you can sync your account seamlessly with Quickbooks and track all your revenue information, including profit & loss and expenses.  

Once your HoneyBook account is synced, the software will automatically log all your business transactions. Be sure to periodically check that your transactions are categorized correctly. These categories will be important when you’re filling out the “Business Expenses” section on the Schedule C portion of your tax return.

Pro Tip: Remember to start tracking expenses at the beginning of the year! The most common categories your business expenses will fall under include Cost of Goods Sold, Marketing & Advertising, Dues & Subscriptions, and Salaries & Wages. Learn more about tracking expenses.

Make sure you mark tax day in your yearly calendar and begin preparing as soon as possible. Every year, your taxes are due on or soon after April 15, depending on if April 15 falls on a weekend. Tax season typically begins in late January or February, during which you can file at any time until the due date. 

Gathering tax forms and important numbers

Before you can file your taxes, you’ll need to get organized with all the tax forms and numbers that you’ll need. As soon as you can start in the new year (preparing for the tax year prior), use the following checklist to gather your documents and financial reports. Depending on your business structure and work, you may not need all these documents and forms, but it’s a good rule of thumb to have the full list on hand. 

Business tax forms and numbers

☐  Your personal SSN & business EIN

☐  All 1099-MISCs you’ve received– These will come from any non-salary/non-employee freelance work you did that exceeded $600. The employers will ask for your EIN/SSN & mailing address.

  • You’ll be receiving these throughout the month of January—collect them in a folder until you’re ready to file your taxes.  (If they don’t send you one, that’s their mistake, not yours! Just enter the dollar amount as part of “General Income”.)

☐  General Income—This refers to all other income that you did not report in the 1099-MISC section. (They only require a sum of all of this income, but I like to make sub-categories of different services for my own purposes.)

☐  Transportation Expenses:

  • Total miles driven in the tax year (both business and personal)
  • Miles driven for business (you can use an app like MileIQ!)
  • Tolls paid during business driving
  • Public transportation expenses (train tickets, subway, PATH, etc.)
  • Parking fees (parking meters, parking garages, etc.)

Pro Tip: I recommend not tracking gas and vehicle expenses and instead taking the IRS’s standard mileage rate of $.585/mile (as of February 2022).

☐  All 1099-MISC forms that you’ve issued– These are for any non-salary/non-employee freelancers who you paid at least $600 during the year. 

If you haven’t sent these yet, you’ll need to know their full company name (if applicable), EIN/SSN, and mailing address. (You can collect all of this by sending them a W9 to fill out.) You’ll need to fill out a 1099-MISC form for each worker and mail a copy to the IRS and the recipient by January 31st.

☐  The cost of any (non-medical) insurance for your business—this includes liability insurance, equipment insurance, etc.

☐  Advertising expenses—these include Facebook/Instagram ads, brochures, business cards, web hosting/blog expenses, logo design, etc.

☐  Office expenses—such as equipment, stamps, flash drives, software subscriptions, etc.

☐  Supplies—such as boxes, packaging, printer paper, ink, pens, post-its, planner, etc.

☐  Other expenses—these could include PayPal/bank/ATM fees, courses, workshops, client gifts, etc.

☐  Home Office Expenses:

You can only deduct these if you use part of your home solely for business, such as an office, desk, or studio. Common areas like your kitchen, bathroom, hallways, etc. do not count.

  • Square footage of the whole home
  • Square footage of the business only area of the home
  • Percentage of time you conduct business inside vs. out of the home
  • Expenses relevant to the whole home—mortgage interest, property taxes, condo insurance, utilities, etc.

☐  If you have a SEP IRA set up for your business, it’ll let you know the maximum amount you can contribute to the account. The more you contribute, the more your taxes will go down (by roughly 15%).

Personal tax forms and numbers

☐  Any 1099-INT’s you’ve received—these come from banks, brokerages, etc.

☐  Any 1099-DIV’s you’ve received—these come from investments, retirement accounts, etc.

Banks may mail or email these to you, or post them on your account under “Documents”, Tax Documents”, “E-Documents”, etc.

☐  Any additional (personal, not under your business) 1099-MISCs you’ve received for miscellaneous freelance/subcontractor work. (These will be associated with your personal SSN, not your business EIN.)

☐  1099-K—if you’ve received one for third-party network transactions

☐  1099-G—if you’ve received unemployment or local income tax refunds, etc.

☐  Property tax information – If you entered this info under the “Home Office” section, it’ll carry over the info and give you the proper deduction for the non-business portion of your home.

☐  Any charitable donations – You’ll need the name of the 501(c)(3) organization and the dollar value of the donation.

☐  Any 1098-E or 1098-Ts—if you’ve paid any money towards tuition, student loans, etc.

☐  Any medical expenses

☐  Estimated Taxes—Each quarter, you should’ve been filing a Form 1040-ES and submitting your estimated taxes. To do this, just take last year’s federal tax due and divide by 4, then pay these equal amounts by the quarterly due dates throughout the year. You can file online at sites like pay1040.com, etc.

Enter the quantities you paid and the dates submitted. (Don’t include any online credit card fees you might have paid for filing/submitting.

☐  Retirement/Investments—such as a ROTH-IRA. (If you’re financially able to, you should consider contributing the maximum—it isn’t taxed when you take out the funds when you retire!)

☐  Any moving expenses, accountant fees (or the price of the TurboTax software!), etc.

That’s it! Not so hard, right?

Once you’ve gone through the entire checklist and have everything you need, you just need to file and make any tax payments necessary. You can file your taxes through online software like TurboTax and H&R Block. You may also be able to use the IRS’s Free File resource if your adjusted gross income was $73,000 or less (this is the maximum as of February 2022).

 

Disclaimer: The advice featured in this blog post was sourced from our community members for sharing general information and knowledge. For specific legal, financial, tax, and professional advice, please consult an authorized professional.

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