Small business tax services: A guide on preparing for tax season

As a small business owner, you’ve got more than enough on your plate. You may run the day-to-day operations of your business, manage both customers and employees and funnel efforts toward growing your business and its services. With all of these responsibilities, you may not have time for accounting and tax preparation.

Hiring an expert who offers small business tax services can help prepare and file tax forms, look for potential tax deductions, and ensure your records are up-to-date. If you plan on using an accountant or tax expert, this guide covers everything you need to prepare.

Do you need a small business tax service?

You might wonder if outsourcing small business taxes is the right choice for you and your business needs. While it depends on your particular situation, there are a few questions you can ask yourself to help guide your decision:

• Are you worried that you may not have time to complete your business tax return by the correct tax date? 
• Does your business have special circumstances or arrangements that can complicate tax filing?
• Do you have an outstanding debt with the IRS?
• Have you sought tax settlement services or filed for bankruptcy in the past?
• Do you run an LLC or S Corporation, or are you self-employed?

If you answered yes to one or more of these questions, tax preparation services could be a responsible choice for you and your small business. Tax preparation services can help you remain in good standing with the IRS and ensure your tax return is completed according to federal and state tax laws. 

What to look for in a small business tax service

Determining that you want the assistance of a tax professional is a great way to start this journey, but you may not know where to go next. There are a few factors to consider when choosing a tax preparer: 

Budget

When choosing a tax service for your small business, your budget might be a top priority. Of course, how much your preparation services will cost depends on your specific needs. It’s also important to consider the option to e-file with tax software and how that plays a part in your budget. 

The average cost of hiring an accountant to assist with tax preparation will vary depending on the services. The charges can range from $100 to well over $200 per hour. While this might sound like a large expense, using small business tax services can save you time and avoid penalties. 

To help you get the most out of your money and time when preparing your small business taxes, consider using QuickBooks Live as a yearlong bookkeeping solution to keep your books up to date. This can help you achieve peace of mind, especially for tax season, and might make your overall tax pricing more sustainable. 

Workload

There are different professionals who can help you prepare your taxes depending on the complexity of your situation. Naturally, the more difficult the situation, the more experience is needed, and therefore the higher the cost. For example, an enrolled agent (EA) is a tax advisor who can assist with tax-related consultations. EAs can be a viable, inexpensive option for a simple filing process. 

Certified public accountants (CPAs) are licensed professionals who can perform accounting procedures and prepare tax returns, among other things. Typically, a smaller CPA firm is the more cost-effective route—perfect for a small business. 

Small businesses with larger tax-related needs, such as requiring legal representation in court or fighting tax disputes, may require a tax attorney. While tax attorneys can also help file taxes, it can be quite expensive due to the complexity of the circumstances they handle, and they are often considered a last resort. 

Common tax questions

Naturally, you may have questions about the tax preparation process before you meet with your tax professional. Keep reading for answers to some common small business tax planning questions.

Do I have to pay small business taxes?

You might wonder if it’s even necessary to pay taxes as a small business. Generally, most businesses will need to pay taxes no matter how much they’ve made over the year. If you’re filing self-employment taxes you need to file taxes if you made over $400. Remember that the income you report must match the amount reported in the 1099 Forms you receive. 

What kind of taxes do I need to file?

As a small business owner, you might not know everything you are responsible for. 

Beyond federal and state taxes, small business owners may need to file:

• Employment tax: If you have employees, this tax is deducted for things like Medicare, unemployment, and Social Security. 
• Income tax: This is what you pay on the income your business earned over the fiscal year. 
• Property tax: This is paid on any land, property, or real estate that your small business owns. 
• Self-employment tax: This covers taxes for Medicare and Social Security.
• Excise tax: This is for goods and services related to fuel, tractors, and air transportation. 
• Sales tax: Most states have a sales tax requirement, meaning that if you sell a good or service, you are required to collect and report sales tax. 

While this can seem overwhelming, remember that your tax pro will be able to walk you through exactly how to ensure proper tax compliance. 

What is a small business tax deduction?

A tax deduction is an expense that you can deduct (or write off) from your taxable income. This helps with a potential tax refund, which can benefit you as a small business owner. 

While there are several types of small business tax deductions, these are the most common:

• Insurance benefits: This includes premiums such as health insurance and business owner’s policy. 
• Vehicle expenses: If you use a vehicle specifically for business purposes, you can deduct the cost of vehicle operation (either car expenses or standard mileage). 
• Rent expenses: This applies to a space you rent for business operation, including if you operate out of and rent your home. Besides physical location, this can also include equipment. 
• Telephone/internet expenses: If you use a phone or internet for your small business, you can deduct up to 100% of your expenses in your tax return. This expense requires diligent recordkeeping to deduct but can help your tax refund. 
• Professional services: These relate to the direct needs of the business, including lawyers, accountants, tax preparers, and bookkeeping services. 

Some deductions only apply if they are exclusive to your small business, so if you use them for personal use, you may not qualify to deduct them. 

What to gather for your small business tax accountant

If you decide to work with an expert for your small business tax preparation, there are several considerations to keep in mind before work begins.

If you’re working with a tax preparer for the first time, keep in mind that the process is not completely hands-off. You will need to provide the preparer with the information they’ll need to complete your small business tax return. 

Here’s what to give your accountant for small business taxes:

Personal information

This includes information you would normally provide on an income tax return, such as your legal name, address, and Social Security number, among other things. If you completed a small business tax return last year, simply bring the old tax forms along with you, as they should include all of the above information. Your previous small business tax returns will also give your tax preparer a high-level view of your business needs and the previous tax year’s deductions.

Small business information

In addition to your personal information, you’ll need to provide information about your small business. That includes your Employer Identification Number (EIN), if you have one, as well as your legal business name. This, too, will be listed on last year’s income tax return if you have it.

If you lost or misplaced your EIN, the IRS advises you to look for the computer-generated notice sent when you applied for it, find a previous tax return, or contact them.

Financial statements

The bulk of the information you’ll need to give to your tax preparer you can find in your financial statements. This includes things like: 

• Profit and loss statements
• Income statements
• Balance sheets
• Cash flow statements
• Cost of goods sold
• Any other bookkeeping and accounting records

These documents will provide your tax professional with information about the financial standing of your company. This financial information includes business income, business expenses, and the origins and recipients of those payments.

Relevant tax forms

It’s important to bring your tax forms with you to your appointment. Do you have employees or contractors? If so, you’ll need to provide your tax preparer with payroll information. You’ll also need to provide a W-2 for each employee. Finally, you’ll need to file a 1099-MISC for each contractor to whom you paid $600 or more over the year.

And if you provide health insurance to your employees, gather that information as well—it can be used as a tax deduction for your business.

Business expenses

Gather all information about any business-related expenses to be considered for tax deductions. This is also a great time to gather your full business records. The list of relevant expenses is lengthy but includes things such as:

Expenses relating to your office, including:

• Rent
• Utilities
• Office supplies
• Wi-Fi and phone

Travel expenses, including:

• Motor vehicle expenses
• Flights
• Meals
• Hotels

Legal and professional fees, including:

• Bookkeeping services
• Legal consult
• Accounting services

If you have any questions on the information you need, it’s best to consult your tax advisor prior to your appointment to file your small business taxes. 

How to stay prepared throughout the year

Finding small business tax help might seem like a large project, but there are a few steps you can take throughout the year to make this process an easy part of your business plan.

Invest in bookkeeping software

In the age of, “There’s an app for that,” why should you keep your books by hand? Your accounting software can save you a significant amount of time throughout the year. It will also be a huge help when it comes to prepping for tax preparation services.

Bookkeeping and accounting software can track and tally all of your financials, as well as your business expenses, payroll information, and more. Plus, you can give your tax expert direct access to your bookkeeping software so they can easily pull the information they need.

QuickBooks offers small business owners the tools they need to record and organize important business finances. With streamlined reports, you can help your tax preparer navigate any tax situations they may find when preparing your small business tax returns. If you need help with your books, you can work with a QuickBooks-certified bookkeeper on QuickBooks Live to ensure you have clean books and accurate reports.

Start early

Don’t wait until April to start your tax preparation. Not only will your tax professional be crunched for time, but they’ll likely be booked by then. 

Find a tax professional now, whether it’s January or August. Get on their books sooner rather than later. With an expert on hand, you’ll be able to ask tax-related questions as they come up. That can save you time, stress, and confusion come tax season. 

Keep your receipts

When conducting business, no matter what you’re buying, keep your receipts. Whether it’s a bill for a lunch meeting, a tank of gas on a work trip, or a new pack of pencils, it may be deductible come tax season, so be sure to keep it!

Organize your receipts by type. Travel expenses, office expenses, and miscellaneous expenses are a few good categories to start with. Save your accountant the tedious work of categorizing your costs—it will save you money on your accounting bill.

Find peace of mind come tax time

No matter how simple or complex your business is, seeking the assistance of small business tax services saves you time, money, and the headache of having to deal directly with the IRS.

Working with a tax expert will help ensure you complete your state and federal tax returns correctly, providing important peace of mind. It also may give you advantages you weren’t previously aware of, such as tax deductions or tax credits. Understanding and correctly filing your small business tax payments will only help set you up for further success.

Disclaimers

*QuickBooks Live Tax, powered by TurboTax, is an integrated service available with a QuickBooks Online subscription. Additional terms, conditions and limitations apply. Pay when you file.

**QuickBooks Live Bookkeeping Guided Setup is a one-time virtual session with a Live Bookkeeper. Available to new QuickBooks Online Simple Start, Essentials, Plus, or Advanced subscribers who are within their first 30 days of their subscription. The QuickBooks Live Setup service includes instructions on how to set up your chart of accounts, customize invoices, set up reminders, and connect bank accounts and credit cards. QuickBooks Live Setup does not include Payroll setup or services. Your bookkeeper will only guide you through the setup of your QuickBooks Online account, and cannot set it up on your behalf.

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