Business Guides

IRS Checklist for Startups

Last updated on April 22, 2021

Jacques Famy Jr

Taxes are not something to mess around with, especially if you’re a startup company that’s making a new path in the business world. You’ll want to know exactly what you need to complete your taxes correctly. There are deadlines to consider, financial records that need to be gathered, and receipts necessary for filing. If you are audited by the IRS but have correctly filed your taxes, you’ll have nothing to worry about. Small business owners and startup companies who have never filed for taxes before should be informed about everything they need to know so they can prepare year-round for tax season. Here are the items in the IRS checklist for startups that will be discussed below:

  • File the correct tax form according to your business structure.
  • Know your tax filing deadline.
  • Provide your personal and financial records.
  • Keep all of your receipts on hand.
  • Look for tax deductions and credit options.

IRS Checklist

This IRS checklist for startups will help small businesses avoid certain IRS audit flags and make filing taxes much more manageable. It can be intimidating to file taxes for the first time as a startup, but when you’re prepared with the proper records and aware of all the deadlines, it’s not hard. Whether your startup or small business has been around for a few years or is just getting started, knowing how to file taxes properly will help your overall operations go smoothly. Listed below are the tips and checklist items for startups when preparing for tax season.

File the Correct Tax Form

It’s essential to know your business structure so that you are aware of how to file taxes correctly. The tax form you have to file will depend on your business structure because different tax forms are used for various business structures. If you were to file the incorrect form, you would likely have to send in revised tax forms later. So, it’s best to avoid that extra work and file the correct form the first time.

Know Your Filing Deadline

You must know what your tax filing deadline is so that you can avoid filing late or making any payments late. There are penalties for filing your tax return late, which typically involve paying a certain percentage of the taxes you owe. If you forget to file or end up filing 60 days past the due date, then the minimum penalty is $210 or 100% of the taxes you owe. These costs can add up, which is why it’s essential to know what your tax filing deadline is, especially as a startup. Listed below are the different deadlines depending on what your business structure is:

  • Partnerships, S corporations, and multi-member LLCs: March 15
  • Single-member LLCs and sole proprietorships: April 15
  • Corporations that officially end their business year on December 31 and multi-member LLCs that are currently taxed as corporations: April 15

Provide Personal and Financial Records

Providing your personal and financial records for tax purposes might seem straightforward, but if you’re filing for the first time as a small business owner or a startup, you may not be aware of all the records you’ll need. If your business is audited for the first time, having detailed personal information becomes very important. When items are incorrect, even an address or a digit on your social security number, it can create a delay. In addition to these personal records, you will be required to have the proper financial records for your startup. Knowing what these documents and records are will make tax season a lot easier on you as a small business owner.

Necessary Personal Information:

  • Full legal name
  • Social security number
  • Any addresses of your business
  • The percent ownership that you have
  • The ownership acquisition date
  • Distribution details for you, your spouse, any of your dependents, and any other business owners

Necessary Financial Information:

  • Income statement
  • Balance sheet
  • Bank and credit card statements
  • Accounting documents
  • Asset purchase details
  • Depreciation schedules
  • Payroll documents
  • Previous year’s business tax return
  • Partnership agreements

Keep All Expense Receipts

Though you might not end up needing them, you must keep all of your receipts related to business expenses on hand in case you do need them when preparing your taxes. Many of these expenses can be deducted from your taxes, making them even more critical if you’re looking to save some money. The IRS also requires that businesses keep this documentation and recommend holding onto them for at least six years following the tax return date. If you ever were to get audited, these receipts would be an essential part of that process.

Look For Deductions and Credits

Small businesses and startups may not be aware of the tax deductions and credits they can take advantage of, which is why this is an integral part of our IRS checklist. These deductions and credits can lessen the amount of money you owe or increase your tax refund, meaning they can save you money or decrease the taxed business income. Most of them are simple, too. Standard tax deductions for small businesses and startups include work opportunities, small employer health insurance, and disabled access. You can also claim deductions for certain expenses, like charitable contributions, travel expenses, home office expenses, and business use of a car.

Filing Taxes as a Startup

Of course, beyond this checklist, there are accountants and bookkeepers you can talk to that will help you ensure you have everything for filing taxes as a small business owner. Being prepared is just the start, and it will help you run your business correctly and look out for any ways to save through deductions. Keeping accurate records and staying up to date on the latest tax information will help you know when tax rates increase and ensure that everything will check out if you get audited. Being a small business or startup owner can be intimidating, but it’s easier to find success with the correct information and helpful people around you.

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