Learn about small business tax prep documents you need to get ready for filing business taxes for your LLC for the first time.

Filing taxes for your small business that is structured as an LLC for the first time can be very confusing. Do you file a separate tax return for your LLC? Which important documents should be on your tax prep checklist?

When you are operating as an LLC, you are most often the only person working in your company, and the last thing you need is to take time away from your revenue generating activities to figure out tax filing requirements for your LLC.

I am going to cover 5 important documents you need to get ready for filing business taxes for your LLC.

1. EIN LETTER (CP575 NOTICE)

This is the letter you received from the IRS with your EIN Number. This number needs to be included in your tax return.

This letter also tells your tax professional if the IRS is expecting any additional returns based on the structure of your business.

2. PROFIT AND LOSS STATEMENT (P&L)

The P&L provides a summary of your income and expenses to be used in the preparation of your LLC tax return.

If you do not have an already prepared P&L, you will have to provide the following to your accountant to have a P&L generated for your business:

a. Bank Statements

b. Credit Card Statements

c. Transaction data from CashApp, Stripe etc.

d. Other income, and expenses that should be included in the P&L for your business.

3. SPECIAL REQUIREMENTS FOR CONTRACTORS

The IRS has special rules for businesses that have paid contractors.

Contractors need to receive a 1099 from any business that have paid them more than $600 to that contractor by January 31st of the following year.

You need to provide a list of such contractors when filing business taxes for your LLC so your tax professional can issue the 1099 returns. The following list is needed:

a. Name

b. Address

c. Tax Payer Identification Number (TIN) such as: Social Security, ITIN Etc.

d. Amount Paid

The contractors are awaiting receipt of their 1099 to file their taxes.

4. ASSETS AND OTHER CAPITALIZED EXPENSES

Not all expenses that you have paid during the business year can be tax deductions on your tax return.

Specifically, those expenses that qualify as an asset under IRS rules,, can not be fully duducted as an expense for the year, and must be capitalized on your balance sheet.

Examples of assets for your LLC are:

a. Computers

b. Office Equipment

c. Machinery etc.

The benchmark to test whether an expense is an asset is whether the item has a “useful life” to your business of more than year.

Capitalized expenses are amortized or depreciated over the “useful life” of the asset.

5. VEHICLE – DID YOU FINANCE OR LEASE?

Did you finance or lease your business vehicle? The answer to that question determines how you can deduct the monthly payment on your taxes.

If you finance your business vehicle then you will have to capitalize the vehicle as an asset, and depreciate the vehicle each year to capture the cost of using the vehicle in your business.

Whereas, if you leased your vehicle, you can deduct the lease payments in the year paid when filing your business taxes for your LLC.

BONUS: MILEAGE DEDUCTION

If you are planning on deducting mileage expenses under your business, you must maintain a Mileage Log. This Mileage Log must show the following:

a. Date of Trip

b. Start Odometer & End Odometer

c. Total Miles Per Trip

c. Place & Business Purpose

If you own five or more vehicles under your business, the IRS defines that as a fleet. A mileage deduction is not allowed for when you own a fleet. Instead, you will have to keep track of the actual expenses by vehicle.

This post covered 5 important documents you need to get ready for filing business taxes for your LLC for the first time.