Filing taxes is an important responsibility for every small business owner. Whether you operate as a sole proprietor, LLC, partnership, or corporation, understanding your tax filing requirements can help you stay organized and avoid unnecessary problems.
For Chicago business owners, tax filing may involve federal, Illinois, and potentially local tax requirements. The exact obligations depend on your business structure, income, employees, and business activities.
This small business tax filing checklist can help you prepare before tax season.
1. Confirm Your Business Structure
Before preparing your return, determine how your business is structured for tax purposes.
Common structures include:
- Sole proprietorship
- Partnership
- LLC
- S corporation
- C corporation
Your structure affects which tax forms you may need to file and how business income is reported.
If your business structure has changed during the year, speak with a CPA before filing to make sure the correct tax treatment is used.
2. Gather Your Business Income Records
Start by collecting records showing all business income for the tax year.
Depending on your business, this may include:
- Sales records
- Invoices
- Bank statements
- Payment processor statements
- 1099 forms
- Client payments
- Other business income
Do not rely solely on 1099 forms. Your tax return generally needs to reflect your complete business income, so maintaining your own records is important.
3. Organize Your Business Expenses
Review your business expenses and gather supporting documentation such as receipts, invoices, and bank or credit-card statements.
Potential business expenses may include:
- Advertising and marketing
- Office expenses
- Software
- Professional services
- Insurance
- Business travel
- Equipment and supplies
- Employee expenses
- Qualifying vehicle expenses
- Certain home-office expenses
Not every expense qualifies for a deduction. Expenses should be reviewed based on applicable tax rules and their business purpose.
4. Review Your 1099s and Contractor Payments
If you work with independent contractors, review your payment records and applicable information-reporting requirements.
Business owners who receive 1099 income should also make sure all income has been properly recorded.
Keeping accurate contractor and payment records can make tax preparation easier and help identify missing information before filing.
5. Check Your Estimated Tax Payments
Many small business owners make estimated tax payments throughout the year.
Before filing, compare your estimated payments with your actual tax liability. If your income changed significantly during the year, your tax liability may also be different from what you originally expected.
Planning for estimated taxes throughout the year can help reduce the risk of an unexpected tax balance.
6. Review Your Business Bank and Credit-Card Accounts
Reconcile your business bank and credit card accounts before preparing your return.
Look for:
- Missing transactions
- Duplicate transactions
- Unrecorded income
- Uncategorized expenses
- Personal purchases accidentally charged to business accounts
Keeping business and personal finances separate can make bookkeeping and small business tax filing much easier.
7. Review Payroll and Employee Records
If you have employees, make sure your payroll records are complete and accurate.
Review wages, payroll taxes, benefits, and other employee-related expenses before filing.
Businesses with employees may also have separate payroll tax filing and reporting responsibilities.
8. Review Major Equipment and Business Purchases
Did your business purchase computers, machinery, furniture, vehicles, or other significant equipment?
These purchases may have different tax treatment from ordinary operating expenses. Keep purchase invoices and related records and discuss the appropriate treatment with your tax professional.
9. Check Illinois Tax Requirements
Federal taxes are only part of the process for many Chicago businesses.
Depending on your business activities, you may have Illinois state tax, sales tax, payroll tax or other state and local filing responsibilities.
Because requirements vary by business, reviewing your Illinois obligations before filing can help prevent missed filings or payments.
10. Keep Your Tax Records Organized
After filing, do not throw away your supporting documentation.
Maintain copies of tax returns and records supporting income, expenses, deductions, payments, and other tax-related information for the applicable retention period.
Organized records can make future tax filings, financial planning, and potential IRS or state inquiries easier to manage.
Common Small Business Tax Filing Mistakes
Business owners often run into problems by:
- Waiting until the last minute to organize records
- Mixing personal and business expenses
- Forgetting income from a client or payment platform
- Missing estimated tax payments
- Claiming expenses without adequate documentation
- Overlooking state or local tax requirements
- Failing to update their tax strategy as the business grows
A year-round approach to bookkeeping and tax planning can help reduce these issues.
When Should You Work With a Small Business CPA?
You may benefit from professional tax assistance if your business has multiple income sources, employees, contractors, significant deductions, complex transactions, or changing tax requirements.
A Chicago small business CPA can help you organize financial records, prepare tax filings, review potential deductions and plan for future tax obligations.
Working with a CPA throughout the year can also help you avoid treating tax preparation as a once-a-year task.
Need Help Filing Your Small Business Taxes?
Don’t wait until the tax deadline to discover missing records, overlooked deductions, or unexpected tax obligations.
We help your business owners with small business tax preparation, tax planning, bookkeeping, and accounting. Whether you’re filing your first business return or managing an established company, our team can help you organize your records, understand your tax responsibilities, and prepare for the year ahead.
Contact us today to discuss your small business tax filing needs and schedule a consultation with a Chicago CPA.
Frequently Asked Questions
1. What documents do I need to file small business taxes?
Common records include income statements, 1099s, bank and credit card statements, receipts, invoices, payroll records, contractor payments, and documentation for business expenses and major purchases.
2. What expenses can a small business deduct?
Potentially deductible expenses can include advertising, professional services, software, insurance, office expenses, qualifying travel and other ordinary and necessary business costs. Specific eligibility depends on your circumstances.
3. Do small businesses have to file taxes every year?
Generally, businesses have recurring federal and potentially state or local filing responsibilities. The specific returns and deadlines depend on the business structure and activities.
4. What happens if I cannot pay my small business tax bill?
Filing requirements and payment obligations are separate considerations. If you cannot pay the full amount when due, it is important to address the balance promptly and discuss available options with a tax professional or the appropriate tax authority.
5. Can a CPA file my small business taxes for me?
Yes. A CPA can assist with tax preparation and filing, review financial records and deductions, and help with year-round tax planning based on your business circumstances.