While the thought of hiring a professional to handle your taxes sounds ideal, many freelancers and small business owners opt for doing their own business taxes. While we don’t know precisely how many entrepreneurs are DIYing their taxes, a recent study by Clutch revealed that small business owners are overwhelmingly (93%) confident in their ability to correctly file their taxes.

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Because their business structures are fairly simple and easily connected to their personal tax return, it may be easiest for sole proprietors and owners of single-owner limited liability companies (LLCs) to do their own taxes. If your small business is incorporated or is a partnership or multi-member LLC, though, your tax rules are more complicated. You may benefit from a little professional tax help along the way.

Whichever way you go — DIY or pro — many of the preparation steps are the same. Here’s what you need to do to get started on your own business taxes, or to do a thorough job of handing over your information to a tax professional:

Getting Started

  • Pull out last year’s business tax return: Even if your company has grown or changed, reviewing your previous year’s return — particularly your federal Schedule C, which is where you’ll enter most of the required information about your company business — can give you a jump start on the information you’ll need to gather. Last year’s return may remind you of the business expenses you typically report, and whether or not you claimed expenses related to a home office.
  • Get familiar with filing dates: April 15 is the tax deadline that most people have marked on their calendars since it’s the deadline for filing personal tax returns, too. Sole proprietors, LLCs and corporations with a Dec. 31 fiscal year-end will use that April deadline. However, if you:
    • Run a partnership or multiple-member LLC taxed as a partnership: Your business tax due date is March 15, 2019.
    • Own a corporation with a fiscal year-end other than December 31: Your business return is due on the 15th day of the fourth month after your fiscal year-end.
    • Need more time: You can file for an extension of up to six months for your business tax return. The extended return due date is Oct. 15, 2019, for companies with a Dec. 31, 2018, fiscal year-end. Note: You still need to send to the IRS and your state — by April 15, 2019 — your best estimate of any owed taxes.

Collecting Key Information

Now you’re getting into the nitty-gritty. Consider working on your company’s taxes for a short time each workday. You may also want to create a special electronic folder or paper-based holding place for tax-related documents.

  • Gather or review 2018 business expenses: This step is much easier if you have been using a digital business accounting program such as FreshBooks or Quickbooks. Having a business credit card can also be quite helpful. You can review your 2018 credit card statements for business expenses. Download them from your online account if you didn’t keep paper copies. Expenses could include:
    • Office supplies
    • Business equipment
    • Payroll expenses, if you have employees
    • Proof of retirement plan contributions
  • Review taxes you’ve already paid: Both tax software programs and paper tax forms will ask you to report any state/federal estimated or other taxes you’ve already paid. Have those figures ready. Again, using a dedicated business accounting program or spreadsheet can make this task much easier.
  • Did you buy or sell/donate any business equipment? You’ll want to report this info on your business taxes, as you may earn some deductions for doing so.
  • Collect client 1099-MISC forms: These forms typically come in the mail to you after January 31. Compare 1099s to client payments (accounts receivables) you’ve logged in your accounting program or spreadsheet. See any mistakes on the 1099s? Request a corrected form from the issuer. You can also use 1099s to make sure you haven’t forgotten to record any client payments in your business files.
  • Gather bank/credit union information: You’ll need to include on your taxes any interest or dividends you earned on business financial accounts. Many financial institutions now post interest statements, known as either 1099-INT or 1099-DIV forms, online. Access them through your online baking account.
  • Pull out your auto records: If you use your car for business, you’ll need to keep a log that details your business driving (if you use the mileage reporting method) and possibly a list of repairs and gas costs (if you use the actual-cost method).

If You Have a Home Office

Many entrepreneurs now work from their homes, and claiming a deduction for a home office is getting easier than ever. If you have a dedicated home office, you can decide each year whether the simplified or regular deduction method works for you. The simplified method allows you to multiply your office square footage by a set tax rate. The regular method allows you to deduct portions of your overall home-related expenses as business costs.

  • Measure your home office: If you’re entitled to deduct expenses related to a home office, you’ll need to double check the size of your office. What percentage of your home’s square footage does your office occupy?
  • Collect home-office related expenses: This step can take a little time but could result in a hefty tax deduction. If you’re eligible for a home-office deduction, you can also deduct a portion of the tax year’s overall home expenses. These expenses could include a percentage of your utilities (electricity, water/sewer, oil or gas), home repairs, homeowners’ insurance premiums and more. IRS Publication 587, “Business Use of Your Home,” includes all the details. If you work with a tax professional, they can help you determine these costs.

Finish Up

If you work with a tax pro, they’ll take your information from all the previous steps and finish your return on your behalf. Typically, all you’ll need to do is review and sign your tax forms. However, if you’re doing your own taxes:

  • Set aside some uninterrupted time: Even if you’ve done your business taxes before, answering all the questions on a software program or filling out the paper forms always takes time and you may do a more thorough and accurate job if you don’t try to squeeze tax work in between other work tasks.
  • Choose your tax prep and filing method: Of course, you can still fill out paper forms if you’re a fan of analog methods. Most local libraries provide free copies of the most common tax forms. However, if you prefer to file your returns digitally, the IRS offers e-filing options on its website. You may also want to look into programs such as TurboTax, TaxSlayer, TaxAct or H&R Block.
  • Mail it or hit “send”: Congrats! Your taxes are done for this year.

Before the Next Tax Year

Once you finish your business taxes, it’s tempting to avoid thinking about taxes again until next year. However, a better option might be a quick review: Did you learn anything from doing this year’s taxes that could help you be better prepared for next year’s tax season?

For instance, would you like to start using a business accounting software program? Early in the new year may be the best time to research programs and get started. Would it be easier to track your business mileage with a smartphone app? Install one now.

And if you decide you’d rather hire a pro next year, don’t start calling around until at least the end of May. Many tax-weary practitioners will be on vacation until then!

Legal Disclaimer: This site is for educational purposes and is not a substitute for professional advice. The material on this site is not intended to provide legal, investment, or financial advice and does not indicate the availability of any Discover product or service. It does not guarantee that Discover offers or endorses a product or service. For specific advice about your unique circumstances, you may wish to consult a qualified professional.