As a small business owner, filing business taxes for the first time can be seamless. Even if you’ve been in business for several years, changes in federal tax laws, state tax laws, and small business tax deductions.
This is especially true if you kept paying taxes until the last minute and are now crying out for you to collect all your receipts, calculate what you need to do to file taxes, summarize on profit and loss figures and business income, remember all your activities financial over the past year. So in this article let’s talk about what do I need to give my accountant for small business taxes.
What do I Need to give my Accountant for Small Business Taxes?
Let’s go over the top five documents you and your accountant need to complete your tax return.
A financial statement represents the financial health of a business and generally includes a cash flow statement, a balance sheet, and an income statement. For tax purposes, the income statement, or profit and loss statement, is extremely important to your accountant, but it will likely also ask you for a summary of your company’s assets and expenses.
The cash flow statement summarizes how well your business manages its cash position and how well it generates cash to meet its obligations or finance its expenses. The balance sheet shows the assets and liabilities of a company, as well as the owner’s equity in a given period of time. The income statement focuses on the income and expenses of your company over a period of time. Capital asset activity.
Capital asset activity
A capital asset is an asset that benefits your business for more than one year. A company usually has many assets.
When an asset or assets are sold, they should be classified as a capital asset, a depreciating property, a business-used property, or an item for sale to customers, such as inventory. The sale of a capital asset results in a capital gain or loss. During the year, if you traded, bought, or sold any tangible or intangible capital assets owned by your business, you will need to account for those transactions on your tax return. Known types of tangible capital assets include land, equipment, buildings, or vehicles. While intangible assets can include copyrights, patents, and trademarks.
If you use accounting software, be sure to print out any capital asset activity so your accountant has the details necessary to file an accurate tax return.
There may be times when you need to use your personal vehicle for business purposes. When you do, you can claim some of your vehicle’s operating costs as a tax deduction.
The IRS allows you to calculate the deductible portion of your car costs in two ways:
- When you use the actual vehicle expense method, you start by adding up all of your vehicle’s operating costs, such as interest on your loan (or the cost of leasing a vehicle), gas, repairs and maintenance, insurance, etc. Then divide any miles you drive at a business by the total miles driven. Then apply that percentage to your operating expenses. Here is your allowable deduction.
- The simplified method allows you to apply the current IRS required mileage rate to the total miles your business travels in a year. For tax year 2019, the standard mileage deduction is 58 cents per mile for business use.
Summary of home office costs
If you use part of your home exclusively for business or meet regularly with clients or clients in your home office, you can usually claim your home office expenses. These costs cover a percentage of your homeowners insurance, mortgage interest (or rent), utilities, repairs, and maintenance. However, there are two requirements for your home to qualify as a deduction: it must be the main place of business and you must use the part of your home that you intend to deduct exclusively for that business.
The most accurate way to calculate your home office deduction is to divide the square footage of your office space by the usable square footage of your home. Using this calculation, multiply your total household expenses by the home office percentage.
Form 1098 for mortgage interest and property taxes
If you are claiming part of your main or second home for business, you must decide which part is used for business and who is used as personal living space. Think of it this way, if your home office space is 15 percent of your home, you can claim normal deductions on 85 percent of your home’s mortgage interest and the remaining 15 percent as a business expense. In this case, you probably received a 1098 form from the IRS from your mortgage company at the end of the year that summarizes your mortgage interest and property tax payments for the year.
Before you go, I hope this above article what do I need to give my accountant for small business taxes is helpful and beneficial for you.