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Tax Preparation & Deductions Checklist

1. Gather Essential Documents

  • Income Records:
  • 1099s (from clients/platforms like PayPal)
  • Sales invoices/receipts
  • Bank/credit card statements
  • Expense Receipts: Save digital or physical copies (IRS requires proof for deductions).
  • Previous Year’s Tax Return: For reference.

2. Track Deductible Business Expenses

  • Common Deductions:
  • Home office (simplified or detailed method)
  • Mileage (business travel) or car expenses
  • Office supplies/equipment (computers, software)
  • Marketing (ads, website hosting)
  • Professional fees (accountant, lawyer)
  • Rent/utilities (if not home-based)
  • Meals (50% deductible for business-related meetings)
  • Health insurance premiums (if self-employed)
  • Retirement contributions (SEP-IRA, Solo 401(k))
  • Industry-Specific Deductions:
  • Inventory costs (retail)
  • Contractor payments (freelancers)
  • Depreciation (equipment/machinery)

3. Organize Payroll & Employee Taxes (If Applicable)

  • W-2s (for employees) and 1099-NEC (for contractors).
  • Filed quarterly payroll taxes (Forms 941, state withholding).
  • Recorded unemployment/workers’ comp payments.

4. Quarterly Estimated Taxes (For Self-Employed)

  • Calculate estimated taxes (IRS Form 1040-ES).
  • Mark deadlines (April 15, June 15, Sept 15, Jan 15).

5. Choose the Right Tax Forms

  • Sole Proprietor/LLC: Schedule C (Form 1040).
  • Partnership: Form 1065 + K-1s.
  • Corporation: Form 1120 (C-Corp) or 1120-S (S-Corp).
  • Freelancers: May need Schedule SE (self-employment tax).

6. Maximize Tax Credits

  • Research & Development (R&D) Credit: For innovation-driven businesses.
  • Work Opportunity Credit: Hiring from certain groups (veterans, ex-felons).
  • Energy-Efficient Upgrades: Credits for green business improvements.

7. Last-Minute Checks

  • Reconcile books (ensure income/expenses match bank records).
  • Confirm receipt of all 1099s/K-1s before filing.
  • Double-check deadlines:
  • March 15: S-Corp/Partnership deadlines.
  • April 15: Sole props/C-Corps/individual returns.
  • Extensions: File Form 4868 if needed (but pay estimated taxes to avoid penalties).

8. File & Save Records

  • E-file (via IRS Free File, TurboTax, or accountant) or mail paper forms.
  • Save copies of returns + supporting documents for 3–7 years (IRS audit window).

Pro Tips to Reduce Liability

  • Use accounting software: QuickBooks, Xero, or FreshBooks to auto-track expenses.
  • Hire a CPA: Worth it for complex deductions or if you’re audited.
  • Don’t miss state taxes: Some states have unique deductions (e.g., CA R&D credit).

Common Red Flags to Avoid

  • Mixing personal/business expenses.
  • Overclaiming home office or mileage without logs.
  • Missing deadlines (penalties = 5–25% of unpaid taxes).
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