How to Prep for a Business Pre-Season Tax Meeting

What to Bring and What to Discuss

What to Bring to a Pre-Tax Season Planning Meeting
What to Bring to a Pre Tax Season Planning Meeting. skynesher/Getty Images

Smart business owners are proactive about taxes. If you got caught unaware last tax season, start early this year and meet with your tax professional to discuss how you can minimize your business tax bill. 

Learn the major subjects that should be covered in a pre-season tax preparation meeting. Also, explore topics in depth to give you a head start on subjects relevant to your business.

What to Bring to a Pre-Season Tax Meeting

1. A profit and loss statement. The most important discussion in your preseason business tax discussion will be the profit and loss statement (P&L) for your business.

This form is used to complete Schedule C for a small business. The income tax and self-employment tax your business pays is based on the net earnings from your P&L. This number is the starting point for looking at how much income tax you will need to pay.

2. A balance sheet. You should also prepare a balance sheet. This statement shows the assets of the business, the liabilities, and the owner's equity or retained earnings. Your tax professional will probably look at it for information about your business assets in particular. More: Filing your small business taxes on Schedule C.

3. Information about your home office. The IRS allows businesses to take a tax deduction for the cost of using a home for business purposes, including a home office. The You can take a deduction for your home office space, and there is a simplified deduction. You might want to read up on this. I’ve included some information below.

More: Using the simplified home business deduction. Taxes and deductions for your home-based business

4. Information about business assets. You will need records of all business assets, including computers and office equipment. Effective with the 2016 tax year, business assets costing less than $2500 can be expensed directly on your business tax return, eliminating the need to calculate depreciation.

 More: Business assets and taxes

5. Information about other income and deductible personal expenses. For most small business owners, the business tax return is only one part of your overall tax situation. 

Your tax professional will want to review your other income (and income of your spouse) and expenses that can be deducted. You will need to bring year-to-date information from paychecks and any other income sources. 

If you own a home or have other major tax-deductible personal expenses, you may be able to deduct these expenses on the personal tax return side. 

An important piece of your overall tax strategy is self-employment tax. If your business makes a profit for the year, you must also pay this tax (for Social Security and Medicare), based on your business net income. The amount of the tax is included with your income tax on your tax return. More: Making Itemized Deductions from Form 1040 Schedule A.

What to Discuss at a Business Tax Pre-Season Meeting

1. Your Business Legal Structure. Your tax professional might want to talk about your business' legal entity and whether you should change to get a better tax situation.

For example, a business organized as a sole proprietorship, LLC, or partnership must pay taxes on the income of the business, even if you didn't receive that income in payments. Owners of a corporation or S corporation, on the other hand, only pay personal income taxes on dividends received. (The corporation, of course, still has to pay corporate taxes.)   More: How business types pay taxes, and how business owners are paid from their businesses.

2. Tax Shelters for Business Owners. Your tax professional may want to discuss getting a business tax shelter, as in an IRA or 401-k. The two most common types of tax shelters for businesses are a SIMPLE Plan and a SEP-IRA.  More: What Is a SIMPLE IRA? and What Is a SEP-IRA?

The Business Tax Planning Meeting and Estimated Taxes

A good tax professional needs to see the big picture of all your income and deductions to be able to discuss tax strategies. This picture includes business income and expenses and possible taxes, personal income and expenses, and tax payments already made for the year.

The earlier you do this planning, the more time you have to make estimated tax payments if these are necessary. It's no fun being caught with a big tax bill on April 15. 

Don't forget to bring your questions and take good notes at your meeting!

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