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TAX TIPS – Preparing to File Your 2021 Tax Return (Part 2 Self-Employed)

H&R Block PresentsPreparing to File Your 2021 Tax Return (Part 2 Self-Employed)

Taxpayers who have self-employment income (businesses or farms) or rental income can take some steps now to prepare to file their 2021 tax return. Beginning to get your records together now will help you file an accurate return and avoid processing delays that can slow your tax refund. Here are steps you can take now to make sure your tax filing experience goes smoothly in 2022.

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Make sure your income journal is complete. Your income journal should be an accounting of the income received by your business throughout the year. Preferably, the journal should be by month. If you are required to file sales tax returns, have a copy of the returns you filed during 2021. If you have a business bank account, have a copy of your bank statements and match your income journal to your deposits to verify accuracy. If you sold any assets you have used in your business you should list them separately from other income and show the description of the asset, date sold and amount.

Have an expense journal that is detailed showing the date, payee, description, and amount for all business expenses. The expenses should be categorized into common types of expenses dependent on your type of business. A monthly or yearly summary of the expense categories is needed when filing your tax return. List assets purchased for your business or farm (such as equipment, vehicles, livestock) separate from other expenses showing the date purchased, description, and cost. If you have employees, have your payroll returns for 2021 available to reconcile the entries on your tax return.

Other items needed for small businesses include: If you use your personal vehicle in your business, make sure your mileage log is complete and detailed. Your log should contain the date, destination, business purpose, and number of miles for each business-related trip. If your business keeps inventory of saleable goods, you must account for your inventory at the end of the year. As soon as possible after December 31, you should determine the value of your remaining inventory using the cost of the product. If you have a qualified home office or home based business, gather your home related expenses such as mortgage interest or rent, utilities, insurance, and repairs.

If you have questions about recordkeeping for your business or documents needed to file your 2021 tax return, please call H&R Block at 931-728-9462. H&R Block Has Your Back!

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