Filing taxes for a small business is something most people would wish to avoid, but eventually, everyone has to do it. Avoiding the tax preparation requirements can make you a criminal and puts your business in danger. Eventually, the taxes may pile threatening business financial leading to bankruptcy or business shutdown. The best advice is to hire an accounting firm to help you with the process.

Regardless if you do or do not need an accounting firm in Carmel, you need a tax preparation checklist to accomplish the tax obligations on your own. The tax preparation checklist helps your business in different ways, such as improving financial strategy. If you are a small business, you need this.

Income records

Income refers to the capital you gain from the business. It is the money the business receives from trading or the amount generated by business assets. You need to record all those incomes the business obtains. Here are some of the incomes to include:

  • Receipts from sales and services
  • Allowances and returns
  • Accounts receivables
  • Business checking/savings account interest (1099-INT or statement)
  • Other incomes such as tax refunds, rental incomes, and tax credits.

The cost of the goods sold

This applies to small businesses that manufacture and produce products then sell to customers. You are required to file for the inventory at the beginning and the edn of the year. Here is what to include in this category:

  • Materials and supplies
  • Beginning and ending inventory
  • Purchases
  • Items removed for personal use.


Expenses refer to the amount the business spends for various activities such as lobbying, marketing, salaries, and others. These are costs going out of the business. Remember the amount you take from the business for your home or personal uses as a part of the business agenda is not an expense. The expenses accounted for here must be those that relate to the business operations.

The tax preparation checklist divides business expenses into various categories.

Rent expenses

These are the costs directed towards items the business needs, but you do not own them. They include:

  • Office space rent
  • Car lease
  • Others such as leasing production machines.

Professional fees

These are the costs of consultancy offered by lawyers, accounting firms, consultants, and other professionals.

Office supplies

These are costs related to purchasing or acquiring items you need to run other business operations apart from the main services or manufacturing process you engage in. They are the costs related to office items such as staples, office glue, paper clip, dustbins, computers, papers, and the rest.

Interest expenses

Most businesses require loans to achieve certain production goals. If not, they require loans to purchase assets such as office space or machinery. The interest paid on these loans is the interest expenses, and they include:

  • Business loan interest and other financial fees
  • Investment interest and expense
  • Include the costs of acquiring the loan and any other capital injected into the business.
  • Mortgage interest on the building owned by the business

Business insurance

The costs you pay for insuring business assets such as cars, machines, buildings, and employees. Under this category, include the following expenses:

  • Errors and omission
  • Casualty loss insurance
  • Asset insurance premiums
  • Employee health insurance

Depreciation expenses

Most assets depreciate due to wear and tear. Some assets prone to depreciation include machines and buildings. You need to ensure you adjust the value of your assets, and the decline in value from the original price is the depreciation expenses. Machine and building depreciation must be included by accounting for the change in the value between the beginning and the end of the financial year.

Utility expenses

These are items need in production, such as:

  • Electricity
  • Water
  • Heating and cooling
  • Internet
  • Phone bills

Travel expenses

  • Meal tips
  • Taxi tips
  • Hotel
  • Train/car/plane tickets


If you use part of your home as an office, you can claim the office expenses. To succeed in this, your home must be the principal place for business and the part of the home you wish to include as an expense must strictly be used for business purposes. A good example is the home office. Other home spaces do not qualify as a deduction.

  • Square footage of office space
  • Total square footage of home
  • Hours of use, if operating in-home daycare
  • Mortgage interest or rent paid
  • Homeowner’s or renters’ insurance
  • Cost of home, separate improvements, and first date of business use

Other expenses

  • Commission you pay to agents and sales representatives.
  • Meals and entertainment
  • Taxes and licenses
  • Wages, salaries, and employee benefits

There are certain expenses not included in this tax preparation checklist, yet you know them as an expense; If you are not sure where to include them, you need the help of an accounting firm to help you file your taxes correctly.

Where to get the information to include in the tax preparation checklist

For Carmel small business, records are critical to ensure accurate tax preparation. You must not lose any document, and you must create a backup copy for all the documents. These copies will help you in tax filing and as evidence. Suppose you hire tax preparers Carmel CA; you need to provide them with the following documents to help you in tax preparations.

  • All financial statements (Income, balance sheets etc.)
  • Receipts of payment
  • Invoices
  • Banks statements
  • Other cash transfers such as online money transfers (VISA, Mastercard, PayPal payments)
  • Income from sources such as digital currencies, online payments and bank transfers.

About us

Savage Accountancy, APC is one of the top and leading accounting firms in Carmel, CA. Our expertise is wide, and we help Carmel small businesses in dire need of accounting and tax consultancy. We have been in operations since 1983, meaning we have the exact experience and expertise to help your business.

We also offer other services such as litigation, business valuation and tax analysis for businesses. Our main concern is to help businesses obtain the highest value for their costs. We ensure you accurately file your documents to avoid any losses or lawsuits.

Hire our services today by contacting us through our website, office email, or visit our accounting offices in Carmel, CA.