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The Ultimate Small Business Tax Preparation Checklist

Billie Anne Grigg

Billie Anne Grigg

Billie Anne Grigg has been a bookkeeper since before the turn of the century (yes, this one). She is a QuickBooks Online ProAdvisor, Xero Certified Advisor, LivePlan Expert Advisor, FreshBooks Certified Beancounter, and a Mastery Level Certified Profit First Professional. Billie Anne started Pocket Protector Bookkeeping in 2012 to provide an excellent virtual bookkeeping and managerial accounting solution for small businesses that cannot yet justify employing a full-time, in-house bookkeeping staff.
Billie Anne Grigg

Latest posts by Billie Anne Grigg (see all)

Do you find yourself scrambling to prepare for tax season? Have you ever wished there was a small business tax preparation checklist to help you prepare? Well, you’re in luck.

Below we’ve gathered everything you need to know to prepare for tax season as a small business owner.

The Ultimate Small Business Tax Preparation Checklist

small business tax preparation checklist

Preparing for tax season can be daunting, even if you have kept up with your bookkeeping and record keeping throughout the year. But it doesn’t have to be if you follow our ultimate small business tax preparation checklist.

1. Meet with your bookkeeper.

Whether you outsource your bookkeeping or keep it in-house, you bookkeeper is a valuable resource when it comes to small business tax preparation. That’s why meeting with your bookkeeper tops our small business tax preparation checklist.

Many bookkeepers do not prepare tax returns, but an experienced bookkeeper knows many of the answers to your tax preparer’s questions—before your tax preparer even asks them.

Schedule some time to review the previous year’s books with your bookkeeper. Make sure any questions they have for you have been resolved. Ensure all your accounts are fully reconciled. Review the balance sheet for the proper recognition of new asset purchases. Being comfortable with your books before your tax appointment will make the process go smoother for both you and your tax preparer.

2. Update your mileage log.

If you use your personal vehicle for business, deducting the standard mileage rate on your tax return is usually more beneficial than paying for actual vehicle expenses throughout the year. The trick, of course, is you have to actually track your mileage. Fortunately, the days of keeping a paper log are behind us, and there are a number of apps you can install on your smartphone to make tracking mileage painless.

Before scheduling your tax appointment, make sure your mileage log app has been updated and all trips have been properly classified as either business or personal. Print out the report and take it to your tax preparer, along with your vehicle mileage at the beginning and the end of the tax year.

Avoid the temptation to “estimate” your mileage deduction—the IRS requires you to keep a log, and failure to do so can lead to your deduction being disallowed in the event you are ever audited.

3. Gather your bank statements.

The third tip on our small business tax preparation checklist is to gather your bank statements.

Many tax preparers want to review their clients’ bank statements before preparing their tax returns. This helps them ensure the balance sheet balances match the bank balances, which in turn helps reassure the tax preparer all expenses and revenues have been recognized in the bookkeeping.

4. Capture all expenses you have paid for out of pocket.

Do you purchase things for your business using your personal Amazon account? Have you ever used your family PayPal account to easily subscribe for a business service? Even if you use your personal funds for business expenses, those expenses are legitimate tax deductions. However, if you aren’t careful you could overlook them since they are not included on your business bank and credit card statements. That’s why scanning your personal expenses for business purchases makes our small business tax preparation checklist.

How do you capture these expenses? Review your personal account activity for the previous year, and isolate any business expenses you find in them. If you act before the end of the tax year, you can write yourself a reimbursement check from your business bank account and capture the expenses that way.

Often, though, there are expenses you may not remember until after the beginning of the new year. In that case, enter the expenses into your bookkeeping by debiting the appropriate expense account and crediting an equity account.

5. Make sure all personal expenses paid for from your business accounts are properly recorded.

Just as you may purchase things for your business using your personal accounts, you might occasionally grab your business credit card instead of your personal credit card when you are in a rush at the grocery store checkout line. These personal expenses need to be recorded properly in your bookkeeping system, so they are not improperly deducted as business expenses.

Ideally, you would repay your business for these expenses, but it’s much more common to simply enter the transactions as a credit to your checking or credit card account and a debit to either a loan to business or equity account.

6. Gather any 1099s you have received, including 1099-Ks from credit card processors.

Forms known as 1099s serve as “tattletale” documents to help the IRS ensure taxpayers are reporting all their income. If your business is service-based, you will likely receive 1099s from a number of your customers.

Since 2012, credit card processors and payment processing companies like PayPal and Stripe have been required to issue a new kind of 1099. Form 1099-K is used to report payments in excess of $20,000. Form 1099-K is also issued when a payee receives payment for more than 200 transactions in a year, regardless of the annual dollar amount.

Most tax preparers don’t use Form 1099 or Form 1099-K to prepare a business’ tax return, but they review them to ensure their clients are reporting at least as much income as the total reported on the 1099s received. That’s why this tip makes our small business tax preparation checklist. 

7. Make sure you have issued 1099s as appropriate.

There are two questions on business tax return forms you must answer:

  1. 1Did you make any payments in 2016 that would require you to file Form(s) 1099?
  2. If “Yes,” did you or will you file required Forms 1099?

The IRS requires you to issue Form 1099 to any non-corporate service provider to whom you pay more than $600 in a given year (the corporation rule does not apply to attorneys, who must be issued a 1099 regardless of corporate status.) There is an exception, though: If you pay for these services using a credit or debit card, or if you use a payment service such as PayPal or Stripe, you must exclude those payments from your 1099 reporting. The payment processor is responsible for reporting those payments on Form 1099-K.

Other rules apply to 1099 reporting, so double-check with your bookkeeper to ensure you have issued all necessary 1099s. You want to make sure you can answer the two questions above honestly prior to scheduling your tax appointment.

8. Pull receipts for asset purchases.

Assets include furniture, computers, vehicles, and other large purchases. Generally speaking, an asset will cost at least $500 and is expected to be in use more than one year. Assets must be depreciated, meaning the full purchase price of the asset is not usually deducted as a business expense in the year the asset is purchased.

Your tax preparer will need to know when the asset was purchased and what was included in the purchase price—so pulling these receipts makes our small business tax preparation checklist. This will help her determine how much depreciation can be recorded in the tax year. Your tax preparer may also want to retain a copy of the receipt or other purchase documentation in their work papers.

9. Ensure your loan balances match what is on your balance sheet.

Many small business owners record the entire amount of their loan payments as a decrease in the liability owed. Not only does this cause the loan balance to be reflected inaccurately on the balance sheet, but it also doesn’t separate out the interest paid. Loan payments against the principal are not tax deductible, but the interest on the loan is.

Review your loan statements as of the end of the year with your bookkeeper, and make sure the loan balances on the balance sheet match the balances on these statements. As is the case with bank and credit card statements, many tax preparers will want to review your loan statements before preparing the tax return, so include them in the paperwork you take to your tax appointment.

10. Make sure your meals expenses are properly categorized.

Generally speaking, expenses for meals you have with your customers and clients are only 50% deductible. However, certain meals—such as those purchased while you are traveling—might be 100% deductible. Additionally, meals you provide for your employees for the business’ convenience—let’s say, pizza you order so your team can work through lunch to meet a deadline—are also 100% deductible.

If you classify all meals as “Meals and Entertainment” expenses, your tax preparer will only deduct 50% of the expenses as a business expense. Take a little extra time to subcategorize these expenses as Travel or Employee meal expenses to maximize your tax deduction.

11. Note any changes in ownership.

If a partner leaves the business, or if you offer a stock option to your employees, your tax preparer needs to know about it. Changes in ownership affect the equity in your business, and—while you bookkeeper may have recorded the changes to equity in your books at the time of the change—you will need to call the changes to your tax preparer’s attention. An important tip for our small business tax preparation checklist. 

Ownership changes can have some tricky tax ramifications, so before making a move like this in your business, consult with your tax preparer to ensure you are making the best decisions from a tax standpoint.

12. Schedule a pre-appointment call with your tax preparer.

Few things are worse than showing up for your tax appointment unprepared. Not only does this mean you have to make multiple trips to your preparer’s office, but it also delays the preparation of your return.

Your tax preparer knows what information they will need from you in order to file your tax return. In this article, I have highlighted the information you need for your business tax return, but additional information will be needed for your personal tax return.

Many tax preparers create client organizers to help ensure their clients are fully prepared for their tax appointments. Asking for a client organizer or other guidance from your tax preparer can prevent many headaches as you prepare for your tax appointment.


Nothing will completely eliminate the pain of tax season. Even with these 12 tips at hand, preparing for your tax appointment will take some time and effort. However, knowing what to expect, and taking the time to properly prepare using our small business tax preparation checklist,  will make tax season go much more smoothly for both you and your tax preparer. 

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.
Billie Anne Grigg

Billie Anne Grigg

Billie Anne Grigg has been a bookkeeper since before the turn of the century (yes, this one). She is a QuickBooks Online ProAdvisor, Xero Certified Advisor, LivePlan Expert Advisor, FreshBooks Certified Beancounter, and a Mastery Level Certified Profit First Professional. Billie Anne started Pocket Protector Bookkeeping in 2012 to provide an excellent virtual bookkeeping and managerial accounting solution for small businesses that cannot yet justify employing a full-time, in-house bookkeeping staff.
Billie Anne Grigg

Latest posts by Billie Anne Grigg (see all)

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