The Comprehensive Tax Preparation To-Do List

Tax season is often the most stressful time of year for businesses. I’ve seen it all at the company I co-founded to match growing companies to top freelance finance professionals: founders of $20 million-plus businesses in tears because they found out they hadn’t been making estimated tax payments over the course of the year and didn’t have enough cash to pay the full tax bill; $10 million businesses that haven’t filed their tax returns for five years; an owner of a middle-market company who realized $200,000 in savings by implementing a new sales tax strategy their tax accountant and golf buddy of 20 years had missed.

The anxiety is already palpable (and should be, given taxes are due on March 15 for S corps and partnerships and April 17 for C corps and individuals). I reached out to several of Paro’s tax experts to ask what businesses large and small need to focus on to make it through the season unscathed. Here’s what they said:

It’s time to change your bad tax season habits

Every year, the same thing happens the closer it comes to tax-filing time: Tax preparers get a bunch of last-minute, frantic clients freaking out about getting their taxes paid on time. Business owners throw tax experts every document they can find, get frustrated when the tax preparers ask follow-up questions and request additional information (which they often don’t have prepared) and end up filing late because they need a new bookkeeper and accountant to fix a multi-month (or sometimes multi-year) mess — not to mention paying out the wazoo for tight turnarounds.

It’s time to get ahead of this headache. How? Preparation is absolutely the key to tax success. So to help you prepare, we’ve compiled the 13 most critical pieces of information you need to provide your tax preparer with. If you know right now that you do not or will have some of these elements, talk to your finance team, understand why and come up with a plan in the coming few weeks to get these items together.

13 critical items your tax preparer needs from you

1. Trial balance that reflects balances in each of your company’s general ledger accounts.

2. Reconciled statements for the entire year, including bank, investment, credit card and loan accounts.

3. Documentation for transactions within the past year that are especially unique to prior years.

4. Fixed assets purchased in the given tax year, with information necessary for depreciation, including the year put into service, whether asset was new or used, cost and weight (if a vehicle).

5. Fixed assets disposed of in a given tax year, with the same details as needed for asset purchases.

6. Loan documentation that reflects principal versus interest payments.

7. Payroll tax returns for each quarter with form 941.

8. Sales tax returns from throughout the year.

9. Aging details for accounts receivable and accounts payable.

10. New rental, equipment lease or utility agreements and related prepaid expenses.

11. Distributions to partners or owners.

12. All 1099 contractor information. (1099s were due Jan. 31! Here’s what you need to know.)

13. And, finally, if you’re filing taxes on a cash basis but like to analyze your business on an accrual basis, be prepared to explain any adjustments that the tax accountant needs to back out to file on a cash basis.

If you’re looking at this list and feeling a sense of dread, chances are your bookkeeper and accountant have some work to do before they make the handoff to your tax preparer. Reach out and ask for the plan. If your bookkeeper or accountant doesn’t have one or takes a week to respond, it’s probably time to move on and find someone who gives your business the time and priority it deserves. Above all, know that you’re not alone in this. There’s always someone worse off from a tax standpoint than you. That I can promise.

(Article written by Michael Burdick)