Business Tax Preparation Checklist: Documents Your CPA Needs

Start with the books

The single most useful thing you can give your CPA is a year-end close: a trial balance or balance sheet and profit and loss statement where every bank, credit card, loan and payroll account has been reconciled through December 31. If the books are not closed, the tax preparation turns into bookkeeping, which takes longer and costs more. If they are months behind, ask for catch-up bookkeeping before tax season rather than during it.

• Year-end balance sheet and profit and loss statement
• Bank, credit card and loan statements for December, with reconciliations
• Accounts receivable and accounts payable aging reports at year end
• Inventory count and valuation at year end, if you carry inventory
• Access to your accounting file (for example QuickBooks Online) for review

Entity and ownership documents

Your CPA needs to know exactly who owns the business and how. Changes during the year, such as a new partner, a buyout or a transfer of shares, affect how income is allocated on Schedule K-1 and may need special elections.

• Prior-year federal and California returns, including all schedules and K-1s
• Articles, operating agreement or bylaws, and any amendments
• IRS acceptance letter for an S corporation election, if applicable
• Ownership changes during the year with dates and percentages
• Owner contributions, distributions and loans to or from the business
• Guaranteed payments to partners or officer compensation for S corporation owners

Fixed assets, loans and big transactions

Equipment, vehicles, buildouts and real estate drive depreciation, and California does not follow federal bonus depreciation, so the federal and state schedules differ. Send invoices for anything you bought or sold, and the closing documents for any loan or property.

• Invoices and placed-in-service dates for equipment, vehicles and improvements
• Sale or disposal records for assets you sold, traded or scrapped
• Loan documents, year-end loan statements and interest paid
• Leases signed during the year
• Purchase or sale agreements for a business, building or major contract

Payroll, contractors and information returns

Payroll reports and contractor payments are needed both for the return and for the information returns that are due in January.

• Year-end payroll summary, Forms 941 and 940, and California DE 9 filings
• Forms W-2 and W-3 as filed
• Contractor list with amounts paid and Forms W-9 on file, for Forms 1099-NEC
• Retirement plan contributions and health insurance paid for owners
• Forms 1099-K or 1099-MISC the business received

California-specific items

California has its own filing set for every entity type. An S corporation files Form 100S and pays 1.5 percent of net income with an $800 minimum. A partnership files Form 565, and an LLC files Form 568 and pays the $800 annual tax plus an LLC fee based on total income. Owners who live outside California may need nonresident withholding or a composite return. If the entity is considering the pass-through entity elective tax, your CPA needs to know before the return is filed, because the election is made on a timely original return.

• CDTFA sales and use tax returns, if you sell taxable goods
• City business license or business tax certificate renewals for each city you operate in
• Records of any PTE elective tax payments made during the year
• Estimated tax payments made to the IRS and the FTB, with dates
• Any notices received from the IRS, FTB, EDD or CDTFA

Deadlines that set the timeline

For calendar-year businesses, S corporation and partnership returns (federal Forms 1120-S and 1065) are due March 15, and C corporation returns (Form 1120) are due April 15. California's Forms 100S, 565 and 568 follow the same March 15 date for pass-through entities. Extensions give more time to file, but not more time to pay, and partners and shareholders cannot finish their personal returns until the K-1s are ready. A practical goal is to have the books closed by the end of January so returns can be prepared in February.

This is general information, not tax or legal advice. Tax rules change and the right answer depends on your facts, so talk with a CPA before acting on it.