Complete guide to navigating 2024 tax season

The following guide has been contributed by our partners at Bench Accounting.

Whether you’re facing an overstuffed envelope of faded receipts or you need a refresher on what’s new for the 2024 tax season, you’re in good company. We know your time as a startup founder is valuable, so consider this your one-stop guide to not just surviving but thriving this tax season.

Grab a notepad, turn down the music (or turn it up, if that’s how you focus best), pour a fresh cup of whatever it is that brings you joy, and let’s spend 15 focused minutes together, making lists and talking taxes.

What to know in 2024

Before we get into the meat of conquering your taxes, here’s an overview of upcoming tax filing forms, key deadlines, and changes.

2024 tax deadlines to remember

New during the 2024 tax season

Heading into the 2024 tax season, there are significant updates for businesses. The introduction of reforms like the Business Organizational Improvement (BOI) and Paycheck Protection Program (PPP) loan forgiveness are key highlights. The Small Business Administration (SBA) has set a March 3, 2024, deadline for PPP and Economic Injury Disaster Loan (EIDL) forgiveness for loans under $100,000, aimed at supporting small businesses in recovery.

This 60-day exception window is a critical chance for PPP borrowers to seek forgiveness and for COVID EIDL borrowers to explore more manageable repayment plans, with options to reduce monthly payments to as low as $25. → Get the application

Meanwhile, the Financial Crimes Enforcement Network (FinCEN) has introduced new reporting requirements to tackle financial crimes, affecting entities from January 1, 2024. This effort to boost transparency will impact most small business owners, especially those with complex ownership structures.

These updates underscore the IRS's drive to adapt to changing economic conditions, emphasizing the importance for businesses to stay updated. With the tax landscape continuously evolving, keeping informed for the 2024 season is crucial. → Learn more

With these dates and tax updates in mind, let's dive into the key steps to getting tax-ready. At a high level, your tax season checklist and workflow will look something like this:

• Determine your tax forms and make note of deadlines
• Gather business records
• Identify tax deductions and credits
• Deduct your estimated tax payments
• Request an extension if needed
• Plan for your federal tax obligation
• Review your tax forms
• File your taxes

Step one: Determine the tax forms and deadlines that apply to you

Not all businesses are created equal. Everyone has to pay taxes, but how and when you need to file is determined by your business type. Sole proprietor? You’re filing Schedule C by April 15. S Corporation? You’re filing IRS Form 1120-S by March 15.

If filing as a sole proprietorship:

Note that you’re automatically treated as a sole proprietor if you don’t elect another status.

How to file: Report all business income on Schedule C of your personal tax return (IRS Form 1040) using your Social Security number.

Before you fill out form 1040 you’ll need:

• The IRS's instructions for Schedule C
• Your SSN (Social Security Number)
• Your EIN (Employer Identification Number)—if you have one
• An income statement for the tax year
• Your balance sheet for the year
• Receipts or statements for any business purchases—including smaller items, like food expenses, and big-ticket items like equipment, cars, or buildings
• An inventory count and valuation (if you sell products)
• Mileage records

If filing as a C-corporation:

File IRS Form 8832 to confirm your tax status.

How to file: Report all business income on IRS Form 1120. That income will be taxed at the corporate rate.

Keep in mind — any dividends or salary you earn from your SMLLC will also be taxed as personal income on IRS Form 1040. For this reason, single member LLCs rarely elect to file as C corporations.

If filing as an S-corporation:

An S corporation is a pass-through entity, so you’ll pay your personal tax rate on all business income and you don’t need to file self-employment tax like you normally would when filing as a sole prop.

If you are filing as an S corporation, file IRS Form 2553 to confirm your tax status, then report all business income on IRS Form 1120S.

Before you fill out form 1120S you’ll need:

• General information about your business, including your date of incorporation and the date you elected S corp status
• Your business activity code and your Employer Identification Number (EIN)
• A profit and loss statement and a balance sheet for your business
• Information about any payments you made to independent contractors totaling at least $600 for the year (each of whom you should have sent a 1099 form)

If filing as a single-member LLC:

By default, your single member LLC is taxed as a sole proprietorship. In that case, the IRS treats your LLC as a disregarded entity. That means that, even though it’s legally a separate entity from your person, you and your small business are one and the same for income tax purposes and file the same income tax return.

However, you can also elect to file using the rules for a C corporation or S corporation. Then you would need to complete a separate corporate income tax return. Simply put, you have a say in how your LLC is taxed.

Need an extension? Tax preparation can be time-consuming, but it’s essential you get it right. If the tax deadline is approaching and you’re not confident in your ability to file on time, you can request an extension. To request an extension, complete and file IRS Form 7004 before the tax filing deadline. You can e-file Form 7004 or send in a paper copy. Filing an extension does not allow you to delay payment. You must still make estimated quarterly tax payments as discussed below.

Step two: Review your general ledger

Review your general ledger and confirm all information is accurate and consistent. For example, if you’re paying a developer to build an app for your ecommerce company, don’t record it as an “investment” one month and a “marketing expense” the other. Be consistent.

Step three: Focus on accuracy

Balance your books

If you use double-entry accounting, make sure that your books are balanced — or that the sum of all the credits is equal to the sum of all debits. If you’re using a program like QuickBooks, don’t worry about this part — it should be done automatically. If you’re doing your bookkeeping on paper or in Excel, check out our guide to double-entry bookkeeping.

Reconcile your bank accounts

Your bookkeeping isn’t really done until you’ve checked it against what the bank says. Make sure your books match your bank records.

Separate personal and business expenses

Not separating personal and business expenses can become a huge headache around tax time. Ideally, this will be something you’ve already taken care of well before tax time by opening a dedicated business bank account or checking account to handle your startup’s finances and expenses. It generally takes more time to sort through expenses when they’re mixed up in one account, and you might miss some deductions.

Step four: Prepare to submit your taxes

Once you have all the appropriate documents for your business type (which you’ll have identified in step one) and gone through the subsequent steps, it’s time to double-check your work. Consider using a tax software to help you go through each section of the tax form.

Here are a few items in particular to pay extra attention to — making sure to get the numbers exactly right and ensure you have the documentation to support them.

• Business mileage: If you drive for business reasons, you can deduct that mileage. Be sure you’re tallying mileage that directly relates to your business tasks, not mixed or personal ones.
• Home office deduction: If you have a space in your home entirely (not partially) devoted to business, you can deduct the costs associated with that space. Be careful in how you determine this space — it is a common IRS trigger and can draw a tax audit.
• Travel and entertainment deductions: If you travel for business or entertain clients or employees as part of your business, those entertainment expenses can be deducted from your business taxes. Be sure to separate any business or personal costs if your travels include both work and pleasure.
• Small employer health insurance tax credit: If you pay for employee health insurance, you may be qualified for the health insurance tax credit.
• Disabled access credit: If you have created access for employees with disabilities, you may be qualified for a disabled access tax credit.
• Charitable contribution deduction: If your business has made charitable contributions for the year, these can be deducted. Again, be careful to check your records on these as charitable contributions can be an IRS audit trigger.
• R&D credit payroll offset: If you are a qualified company with gross receipts under $5M, you may be eligible to offset up to $250K each of the employer portion of social security tax and Medicare tax.

Be sure to deduct the money you’ve already sent to the IRS for tax payments. There’s no need to pay more in business taxes than you owe.

Step five: Review your tax forms

If you’ve outsourced your tax preparation to an accountant, yours will be the second set of eyes on the numbers. When you file, your signature will go alongside theirs, along with their PTIN, or preparer tax identification number.

If you have completed your own tax forms — kudos to you, it’s no easy feat — it may be worth it to hire a CPA, accountant, or tax professional to review them on your behalf.

Step six: File your taxes

The final step may be the easiest. Once you have prepared, checked, and double-checked your tax forms, it’s time to submit. If you have been working with an enrolled agent, they may also file your completed taxes on your behalf. You can also file your taxes by mail — just be sure they’re postmarked on or before the filing date.

In general, you can expect to get your tax refund 3-4 weeks after filing your return. You can check your IRS refund status in five minutes by using the IRS Where’s My Refund tool.

Tax season FAQs

What tax deductions are available for startups like mine?

Making the most of all your available tax deductions can save your company a pretty chunk of change come tax season. As a founder, it can be difficult to know what deductions are relevant to you. To help, Bench has compiled a list of 17 deductions that businesses can keep in mind, many of which may apply to your startup.

How much does it cost to file business taxes?

Tax professionals may structure their service pricing differently. Many charge a flat fee per return, while others charge an hourly rate for the same task. Hiring a CPA or accountant to file your taxes costs between $220 and $800, depending on the size, complexity, and type of business. You’ll pay more for tax prep if your business records are messy or your bookkeeping isn’t accurate and tax-ready.

You can save considerably by buying tax accounting software. The cost is much less than hiring a tax expert, and the expense is tax-deductible, but you should be honest with yourself in your confidence to file your own taxes.

Do I have to make estimated tax payments?

If you intend to file as a sole proprietor, a partnership, S corporation shareholder, and/or a self-employed individual, you’ll generally need to make estimated quarterly tax payments if you will owe taxes of $1,000 or more. Businesses that file as a corporation generally need to make estimated tax payments if they expect to owe $500 or more in tax for the year. If you meet these IRS minimums, then you’ll likely have to file estimated quarterly taxes.

To find out how to calculate and pay your estimated quarterly taxes, Bench has created a free estimated quarterly tax calculator you can use.

Do I have to pay self-employment tax?

Every self-employed person has to pay self-employment taxes on their self-employment earnings of $400 or more. This applies to anyone who is defined as self-employed, even if you’re a senior currently receiving Social Security benefits. The IRS considers you to be self-employed if you are a freelancer, independent contractor, or if you have your own business (sole proprietorship or partnership).