2022 Tax Preparation Checklist
Tax Preparation | 2022 Tax season can prove stressful for many taxpayers. In short, you need to prepare the tax returns while keeping in mind which types of documents you need.
Taxpayers need to fill the correct tax forms while keeping the supporting documents. For example, in the case of an IRS audit, you may need to present proof of certain deductions.
Moreover, tax preparations can get even complex for business owners. As a result, businesses need to pay different types of taxes. Fortunately, you can go through a tax preparation checklist that can make things easier for you.
Preparation Before Filing Taxes
It is a wise thing to prepare your documents and taxes before time. You should gather some basic information before the tax season begins.
Fortunately, there are certain decisions that you should make during the tax year.
Entity Type for Tax Preparation
In general, most small business owners form a sole proprietorship or a C Corporation entity type. Others may form another type.
Your entity structure will change the tax treatment of your business income. Therefore, consult a professional tax advisor for your Tax Preparation.
Types of Business Taxes
- Income tax on business income
- Estimated taxes
- Employment taxes – Social and medical care taxes
- Excise taxes
- Self-employment taxes
Particularly, for businesses paying estimated taxes quarterly. For example, if you expect to pay more than $ 1,000 as a business, you’ll need to make estimated tax payments along with your Tax Preparation.
- April 15
- June 15
- September 15
- January 15
In short, you’ll need to complete tax forms and provide identification documents. Hence, you should keep all of these documents and necessary tax forms with you.
- Federal Tax Identity Number or Employer Identification Number (EIN)
- Social Security Number
- Bank account details
- State and federal taxes paid – up to 3 years prior
Tax forms include:
- Schedule C: It is used with form 1040 for sole proprietors
- Schedule K1: For pass-through entities
- 1099-MISC: Independent contractors or self-employed income
- 1120 and 1120 S: Used to report income of C and S Corporations respectively.
- 3800: Used for general business credits
- 4562: Use this form when deduction depreciation and amortization of your business assets.
- 8829: Use this form to determine if you can deduct any expenses for home use of business.
- 1045: Use this form to apply for tax refunds for any unused tax credits or additional payments of estimated taxes.
Business Income-Expense Information
Next, consider gather your business income and expense records. For instance, gather important documents to avoid any penalties from the IRS ahead of your Tax Preparation. Similarly, you cannot deduct expenses and tax credits without proper documentation.
Moreover, keep a record of all of your business expenses.
- Cost of goods sold: inventory, materials, supplies, etc.
- Operational expenses: rent, utilities, office supplies, etc.
- Salaries and wages including employee benefits
- Marketing and advertisement costs
- Taxes paid, interest expenses, and financial services
- Insurance costs
Tax Deductions and Credits
Furthermore, you can deduct business expenses that are directly associated with your business activities. In addition, you should research tax credits and see which one you can apply for.
Thus, business deductions and credits include:
- Direct business expenses
- Legal fees
- Mileage and transportation costs
- Insurance costs
- Interest and taxes paid
- Internet and communication bills
- Employee benefits
- Depreciation and amortization
- Training and educational expenses of employees
- Licensing fees
- Employee opportunity tax credit
- Small business health care tax credit
- Alternative vehicle credit