Guide

How to get your books IRS-ready in February (step-by-step small business checklist)

Stay IRS-ready this February with a step-by-step small business tax checklist for accurate, on-time filing.

Written by Kari Brummond—Content Writer, Accountant, IRS Enrolled Agent. Read Kari's full bio

Published Thursday 2 July 2026

Key takeaways

A small business tax checklist keeps you organized by listing the forms, documents, deductions, and deadlines you need to file accurately and on time.
Your filing requirements depend on your business structure, and you may also owe estimated quarterly taxes if you're self-employed or don't have taxes withheld from your income.
Tracking deductions throughout the year, including Section 179 expensing and home office costs, helps reduce your tax bill and avoids last-minute scrambling.
Setting up a tax calendar with key deadlines for returns, extensions, and estimated payments keeps you on pace and helps you avoid penalties.

What is a small business tax checklist?

A small business tax checklist is a step-by-step list of forms, documents, deductions, and deadlines you need to file your federal and state tax returns accurately and on time. It helps you stay organized, avoid missed deductions, and reduce the risk of IRS penalties. The IRS charges a failure-to-file penalty of 5% per month on unpaid taxes, up to 25%, so staying on top of deadlines matters.

Depending on the purpose of the list, it may outline which tax returns you need to file, information needed to file your return, small business tax deductions, or other tax-related essentials.

The IRS provides a detailed guide to self-employed and small business taxes.

Taxes and forms that apply to small businesses

Tax time can be a lot for small business owners. According to the U.S. Small Business Administration, small businesses must meet federal, state, and local tax obligations. You must file an annual income tax return with the IRS, provide wage and income documents to employees and contractors, and meet state filing requirements.

The exact forms you need to file vary, but here's a tax form checklist to help you out.

Annual business tax returns

The annual tax form you should file depends on your structure:

Sole proprietors: Schedule C with Form 1040 individual income tax return
Partnerships: Form 1065
LLCs and C-corporations taxed as S-corporations: Form 1120-S
C-corporations: Form 1120

Note that by default, single-member LLCs should file as sole proprietors, while multi-member LLCs should file as partnerships. Your LLC should only file as an S-corp if you've filed Form 2553 to elect to be taxed as an S-corp.

State filing requirements vary. Even if you're only required to file a Schedule C with your individual income tax return, you may have to file a standalone business return with your state. Ask an accountant or check with your state's department of revenue.

The IRS has more details on the tax implications of different business structures.

Tax document checklist for employees and contractors

You also must file informational returns to report payments made to employees and contractors:

W-2: Wage and income information must be provided to employees and sent to the Social Security Administration (SSA).
W-3: Total of all W-2 details must be sent to the SSA.
1099-NEC: Non-employee compensation form must be provided to contractors and sent to the IRS.

Common business tax forms

Your small business may receive several forms during tax time, which you'll use when preparing your return.

1099-K: credit card payments or payments received through payment processing apps like PayPal or Venmo
1099-NEC: payments received from customers who paid you as an independent contractor
1099-MISC: payments received for rents, royalties, or other income not related to your services
1098-INT: interest you paid, like interest paid on mortgages or other business loans
1099-INT or 1099-DIV: interest or dividends your business received through the year, which generally must be reported as other revenue
K-1: your share of partner or shareholder income reported on Form 1065 or 1120-S, used to report business income on your individual tax return

Estimated quarterly taxes

Estimated taxes are quarterly payments self-employed individuals and small business owners make to the IRS to cover income tax and self-employment tax on earnings not subject to withholding. If you expect to owe $1,000 or more in federal taxes for the year, you're generally required to make these payments.

You'll use Form 1040-ES to calculate and submit your estimated payments. Payments are due four times a year: April 15, June 15, September 15, and January 15 of the following year. Missing a payment or underpaying can result in an estimated tax penalty, so it's worth setting calendar reminders for each due date.

Small business tax preparation checklist

To prepare to file your taxes, you need the right documents. Use this tax preparation checklist to get ready:

Prior year tax return: your previous year's filed return, which serves as a reference for carryforward amounts, prior depreciation schedules, and consistency checks
EIN confirmation letter: the letter from the IRS confirming your Employer Identification Number (EIN), which you'll need when filing business tax forms
Revenue records: sales reports from your point of sale software, 1099s for payments made to your business, and records of any other revenue
Receipts and invoices: payments for inventory, utility bills, and receipts for business expenses
Interest statements: interest and fees paid on business loans during the year
Bank statements: used to reconcile income and expenses, helping to make sure you don't forget to claim any business expenses
Notes on expenses paid from personal accounts: dates, amounts, and types of business expenses paid with your personal bank account or credit card
Mileage logs: dates, business purpose, and miles driven for your business
Personal vs business breakdown of mixed-use assets: breakdown of how mixed-use assets were used for personal vs business purposes
Home office records: square footage of home office, size of office relative to the rest of your home, and lists of deductible expenses (rent, mortgage interest, insurance, utilities, and so on)
Payroll tax returns: shows wages paid to employees, taxes withheld from wages, employer payroll taxes, and unemployment taxes
List of capital assets: a description of each asset, its purchase price, date of purchase, and date placed into service for your business

Ask your tax preparer for a tax preparation worksheet if you're not sure what you need.

Keep in mind that you don't necessarily need all of these documents to prepare your tax return directly. You need these documents for bookkeeping, and then you can prepare your tax return with the profit and loss report from your bookkeeping records.

The IRS has detailed tips on recordkeeping for small businesses.

How to get your books IRS-ready in February

To get your books ready for tax season, follow these steps:

Reconcile any outstanding bank account or credit card statements.
Make journal entries for any income or expenses that weren't deposited into or paid through your business accounts.
Check that the revenue in your books lines up with the revenue in your sales records or 1099 documents.
Look over your balance sheet for errors. If you see expenses miscategorized as assets or liabilities, change their classification to expense in your chart of accounts.
Adjust liability accounts to reflect interest expenses.
Enter depreciation for capital assets.

Ask your accountant for help if you're unsure of how to handle any of these tasks. Tax preparers routinely clean up the books for small business owners at tax time.

What small business tax deductions and credits to track

Throughout the year, you should track all of your expenses in your small business accounting software. To make sure you don't miss anything, ask your accountant for a small business tax deductions checklist. The IRS allows businesses to claim deductions for all necessary and ordinary business expenses.

The list varies, but often includes:

advertising
business vehicle expenses
commissions and fees
contractor labor
depreciation
employee benefit programs
insurance: liability, workers' comp, property insurance, and so on
interest expenses
legal and professional services
office expenses
pension and profit-sharing plans
rent or leases for equipment or business property
repairs and maintenance
supplies
taxes and licenses
travel and meals
utilities
wages

This isn't an exhaustive business tax write-off checklist; deductions vary based on your industry and your activities.

Section 179 and bonus depreciation

Section 179 lets you deduct the full purchase price of qualifying equipment and software in the year you buy it, rather than spreading the cost over several years through standard depreciation. For the 2025 tax year, the deduction limit is $2,500,000 with a phase-out threshold of $4,000,000 in total equipment purchases. Bonus depreciation works similarly, allowing you to deduct a percentage of the cost of eligible assets in the first year.

Home office deduction

If you use part of your home regularly and exclusively for business, you may qualify for the home office deduction. The IRS offers two methods:

Simplified method: Deduct $5 per square foot of your home office, up to 300 square feet, for a maximum deduction of $1,500.
Actual expense method: Calculate the percentage of your home used for business, then apply that percentage to actual expenses like rent, mortgage interest, utilities, and insurance.

The simplified method is easier, while the actual expense method may yield a larger deduction if your costs are high.

You should also track any expenses that entitle you to business tax credits, such as research and development (R&D) credits, energy-efficient credits, small business healthcare credits, and employer credits such as the credit for employer taxes on tipped income or the Work Opportunity Tax Credit.

The IRS has a comprehensive guide to small business deductions and credits.

How to set a tax calendar and handle extensions

To stay on pace, create a calendar to guide tax prep and make sure you file on time. Here are the key milestones for the 2025 tax year (filing in 2026):

October to December 2025: Meet with your accountant to talk about optimizing deductions during the last three months of the year.
January 2026: Generate 1099 forms for contractors and W-2 forms for employees. Send all forms to payees and the government by January 31.
February 2026: Get books ready to file your annual tax return.
March or April 2026: File S-corp and partnership returns by March 16. File corporate and individual tax returns by April 15.

The IRS will give you a six-month extension on your annual return, but only if you request it on or before your filing deadline.

Estimated tax payment due dates

If you're required to pay estimated quarterly taxes, mark these due dates on your calendar for the 2026 tax year:

April 15, 2026
June 15, 2026
September 15, 2026
January 15, 2027

Missing these deadlines can trigger an underpayment penalty from the IRS, so it's worth building them into your calendar early.

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Tax season is easy when you're ready. Use Xero to stay on top of bookkeeping all year long. Automate bank account reconciliation so you never miss a deduction, sync with payroll apps to track wage and tax expenses, and easily generate all the financial reports you need to file your tax returns.

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FAQs on small business tax checklists

Here are answers to common questions about preparing your small business taxes.

What documents should I send my accountant first?

Start with your profit and loss statement and balance sheet, as these give your accountant the clearest picture of your finances. Your accountant may also request records like sales statements or W-3 forms if you paid employees.

What if my accounts aren't reconciled yet?

Set aside time to reconcile your bookkeeping records with your bank and credit card statements, sales reports, and loan statements before filing. If you don't have time, consider hiring a bookkeeping service or ask your tax preparer for help.

How do I handle personal expenses in business accounts?

Mark personal expenses as owner or shareholder draws when reconciling bank statements in your accounting software. Don't claim personal expenses as business deductions on your tax return.

When are estimated quarterly taxes due?

Estimated tax payments are due April 15, June 15, September 15, and January 15 of the following year. Use Form 1040-ES to calculate your payments and avoid underpayment penalties.