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December 9, 2024
As the end of the year approaches, it’s time for startups and small businesses to start thinking about tax season preparation. It might seem like a lot to handle, especially if you’re a new business, but getting organized now can save you headaches down the road. Proper tax prep isn’t just about crunching numbers. It’s about ensuring you’re compliant, minimizing your tax burden, and setting your business up for success in the new year. Here’s a tax planning checklist to help you get ready for tax season.
Your financial statements are the starting point for tax prep. This includes your Profit & Loss Statement (P&L), balance sheets, and any other key financial data. These documents provide a snapshot of your business’s financial health and will help your tax advisor prepare your business tax return.
If you haven’t kept track of these, now is the time to start. For true startups, this is especially important. The way you handle your startup expenses can significantly impact your tax strategy.
If you’ve recently opened your doors, make sure you’ve tracked all your business expenses. Startups often incur a mix of deductible and amortizable expenses, so you need to categorize them correctly to maximize tax savings. You can write off some startup expenses right away, while you must spread others (amortize) over time—sometimes 15 years or more.
Be specific about when the expenses were incurred. This timeline matters for tax purposes.
If your startup has purchased fixed assets—like machinery, equipment, or computers—you must review how you are depreciating those assets. Tax rules allow businesses to deduct a portion of the cost of fixed assets each year, but the method and timing of depreciation can vary.
You’ll need to ensure that your depreciation calculations are accurate and consistent with the tax code. If you’ve used a different provider for depreciation reports, make sure those numbers are included and aligned with your overall tax filings.
Next on the tax planning checklist – make sure you have all your organizational documents on hand. This includes your Articles of Incorporation (if applicable) and any partnership agreements.
These documents tell your tax advisor important details about your business’s structure: Is it a C Corp, S Corp, or LLC? Who owns the company? How is ownership divided?
If you’re a partnership, review your partnership agreement to confirm how profits and expenses are split among the partners. This ensures that everything is in order for the tax filing.
Your EIN is like a social security number for your business. Make sure it’s in order, as the IRS uses it to track your tax filings and payments. Double-check the number against your SS-4 form (the form you used to apply for the EIN) to avoid any potential issues with misidentification or delayed refunds. Your advisor will need your SS-4 as well.
This might sound minor, but getting your EIN wrong can cause big headaches down the line, especially when it comes to processing tax payments or refunds.
If you’ve raised capital or have multiple owners, investors, or partners, you’ll need to prepare a capitalization table. This table outlines who owns what percentage of the company and tracks the value of those shares.
For LLCs, the cap table may look a little different, but the same principles apply: who owns what, and at what cost. Having this information available can help avoid confusion when it comes time to file taxes and allocate deductions properly.
Proper recordkeeping year-round is a great way to prepare for tax season. With everything organized and managed in advance, handing over documents to your tax professional becomes a simple process. There’s no more last-minute scrambling to locate missing information.
Keeping accurate financial records also helps ensure compliance, reduces the risk of errors that could trigger penalties or audits, and can uncover opportunities for deductions and credits.
A tax planning checklist can help you start preparing for the upcoming filing season. However, navigating the tax code can be overwhelming—especially for startups and small businesses. Working with a tax professional not only ensures you stay compliant but also helps you:
Tax professionals like the experts at Escalon specialize in managing the complexities of the tax system, from federal to state to international laws. Trying to handle it all yourself can be risky, especially when penalties or delays are involved.
Escalon’s tax professionals also offer strategic tax planning services. The team can help you prioritize what’s important for your business in the upcoming year, so you’re prepared for whatever comes next.
The year-end tax prep process doesn’t have to be stressful. By following this tax planning checklist and working with a knowledgeable tax advisor, you’ll ensure that your startup is properly prepared for tax season. Plus, you’ll be set up for success in the year ahead.
Ready to simplify your tax filings so you can focus on growing your business? Contact an Escalon tax professional today.
Hugh Alexander is an accomplished tax executive and licensed attorney with over 27 years of experience in delivering comprehensive business tax services, specializing in technology-based SMBs. Known for his strategic insight and client-focused approach, Hugh expertly navigates complex tax regulations and compliance challenges. He is an active member of the Tax Sections for both the State Bar of Texas and the State Bar of Arizona, demonstrating his commitment to staying at the forefront of the industry.
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