What Documents and Forms Are Needed to File Small Business Taxes?
August 24th, 2022 | 5 min. read
In this day and age, it’s not unusual to file your own taxes. However, business taxes can be significantly more complicated than personal taxes. If you hear that a business owner is doing their own taxes, it’s safe to assume they’re only handling the personal end - especially if they own a corporation or partnership.
The situation is a bit different for sole proprietorships because the business taxes are included in the owner’s personal tax forms. Sole proprietors often feel that if they’re already planning to handle their personal taxes, they might as well take a stab at the business side too!
CSI Accounting & Payroll has been filing business and personal taxes for more than 50 years, so we know the things that sole proprietors commonly want to know about when filing their taxes:
- What documents are needed to file sole proprietor taxes
- What forms are used to file sole proprietor taxes
- The top missed items for sole proprietorship taxes
What Documents Are Needed to File Sole Proprietorship Taxes?
Even if you’re working with an accountant, you need to know which documents to bring to business tax filing appointments.
We know that nobody wants to hear “it depends,” but, well, it depends! There are no set forms that you need, although most sole proprietors work as contractors and are going to need Forms 1099 from the companies you’ve worked for this year. If your total revenue doesn’t match your Forms 1099, that’s a red flag.
You will also need your Income Statement and Balance Sheet to show what categories of expenses you had. When you work with a monthly accountant, you will already have these documents, but if not, here are some examples of things you need to help break things down:
- Credit card statements
- Bank statements
- Loan documents
- Payroll reports (if your accountant does not handle your payroll)
- Invoices for large vehicle or equipment purchases
- Sales and sales tax reports (typically for retail businesses)
- Inventory reports (for retail businesses)
- Accounts receivable and accounts payable (if applicable)
Having trouble distinguishing your personal finances from your business finances? A dedicated business bank account and a dedicated business credit card help you see which transactions are business-related.
What Forms Are Needed to File Sole Proprietorship Taxes?
Not many sole proprietors are concerned with this question. Typically, they just trust their software or their accountant. However, if you’re curious about the answer, it’s yet another “it depends.” There are thousands of tax forms that exist, and the ones you need depend on your unique situation, income, and expenses.
Just keep in mind that for sole proprietors, you will need to complete Schedule C as part of your personal tax return.
Tax software just asks questions on individual items and doesn’t elaborate on the forms it uses. It can guide you for the most part, although many people find it confusing, not very upfront with pricing, and not as beneficial as working with an accountant.
While accountants can experience human error just like everyone else, a great accountant will have enough education and experience to use the correct tax forms. Plus, if you’re a sole proprietor who’s having an accountant handle your personal taxes, you’re probably going to have them handle your business taxes as well.
Top Four Missed Sole Proprietor Tax Items
Since CSI Accounting & Payroll has been involved with sole proprietorship tax returns for more than 50 years, we’ve picked up on some trends. A trend that might be helpful for sole proprietors to know about is the top four missed sole proprietor tax items:
- Depreciation records the cost of an asset and the period of time it needs to be expensed over. This is done on a separate form.
- Automobile expenses, including business miles or actual expenses on the depreciation schedule. If you report an expense amount but don’t report details of the expense, it automatically triggers a letter from the IRS.
- Independent contractor dollar amounts to match Forms 1099. If they don’t match, it’s a red flag to the IRS to look deeper at your finances.
- Certain elections that the IRS allows that, if not taken on a tax return, can cause you to miss some deductions available to you.
Work With a Monthly Accountant For Business and Personal Taxes
If you own a corporation or partnership, you know how complicated business taxes are and probably already work with an accountant. However, if you’re a sole proprietor, you now know more about the documents and forms it may take to do your taxes, as well as the commonly missed items on your tax return.
While it’s certainly possible to do your own personal and business taxes as a sole proprietor, there are still many who work with accountants. Monthly accountants bear even more benefits, including categorizing all of your transactions and generating the financial statements needed to prepare the tax return. It takes a ton of time to do these things yourself!
At CSI Accounting & Payroll, we also analyze your current entity type each time you get a tax return to ensure it’s the best entity for you as you grow. While most of our clients are S-Corporations, we also accept other businesses that are the right fit to work with us.
Want to have a discussion about if we can be a good match? Click the button below for your free consultation!
Still looking to DIY? There’s help for that, too! Click the button below to download the free Small Business Accounting Kit, complete with a tax calendar, guides on reading financial statements, and more!
Bryan joined CSI Accounting in 2019. He joined the team after CSI purchased his accounting firm, AccountSource LLC, which he had owned since 2005. He graduated from St. Cloud State in 2001 with a Bachelor's Degree in Accounting and has been an Enrolled Agent since 2010. Before owning his own accounting practice, Bryan had worked at the State of MN handling financial reporting and had been in private industry as a Controller. His primary responsibilities include overseeing the accounting department and making sure clients are receiving quality service. Fun Fact: Bryan has played soccer since the age of 4. He still plays soccer year round through various adult leagues and is an avid supporter of the Minnesota United MLS soccer team. COYL!!! (Come on, you Loons!!!)