How to Prepare a Self-Employed Year-End Tax Packet

Introduction

Preparing a complete year-end tax packet is one of the highest-impact habits a self-employed person can build. A well-organized packet saves you time, reduces errors, preserves deductions, and makes tax season far less stressful for you and any tax professional you hire. In my 15+ years advising freelancers and small-business owners, I’ve seen good recordkeeping cut clients’ tax prep time in half and prevent costly missed deductions.

Why this packet matters

• Substantiation: The IRS requires written evidence to back deductions. A packet makes that evidence easy to find (IRS Recordkeeping guidance: https://www.irs.gov/businesses/small-businesses-self-employed/recordkeeping).
• Accuracy: Consolidating income and expenses reduces math errors and omitted items.
• Efficiency: A clear packet speeds up meetings with accountants and reduces billable hours.

Core components: what to include (checklist)

1. Income documentation

• 1099-NEC, 1099-MISC, and other payer statements. Collect every 1099 you received and note any missing forms.
• Bank and payment-processor summaries (PayPal, Stripe, Venmo Business, Square). These show total gross receipts when a 1099 is missing.
• Invoices and a year-to-date income summary from your accounting software or ledger.

1. Expense documentation (organized by category)

• Receipts and invoices grouped into categories: office supplies, software subscriptions, subcontractors, advertising, travel and meals (see rules for deductibility), rent, utilities, phone/internet allocation, insurance, and professional fees.
• Mileage log or mileage app export that shows business miles driven, date, purpose, and odometer readings (if you use the standard mileage deduction).
• Asset purchases: invoices and the date placed in service for equipment or furniture you’ll depreciate or expense under Section 179.

1. Payroll and contractor records

• 1099-NEC issued to contractors you paid $600+ (and records for amounts paid to subcontractors even when you didn’t issue a 1099).
• Payroll summaries if you ran payroll and W-2s issued to employees.

1. Tax forms and schedules

• A completed draft of Form 1040 with Schedule C (Profit or Loss from Business) and Schedule SE (Self-Employment Tax). See our guide to Schedule C for line-by-line help: https://finhelp.io/glossary/schedule-c-profit-or-loss-from-business/.
• Copies of any business-related state returns, sales tax returns, and local filings.

1. Estimated tax payments and withholding

• Dates, amounts, and confirmation numbers for quarterly estimated tax payments (Form 1040-ES vouchers or payment confirmations). Keep receipts or bank records showing the payments. For guidance on calculating and avoiding penalties, review our estimated tax article: https://finhelp.io/glossary/estimated-tax-payments-calculating-and-avoiding-penalties/.

1. Prior year tax return

• A copy of last year’s federal return and any business returns. This helps identify carryovers, depreciation schedules, basis calculations, and the previous year’s estimated payments.

1. Supporting schedules and reconciliations

• Bank reconciliations, profit-and-loss (P&L) summary, and a balance sheet if you maintain one.
• Receipts or logs for home office deduction allocation (square footage and home measurements), if applicable.

1. Other documents

• Contracts, client statements of work, cancelled checks for large payments, invoices for business meals and entertainment, and documentation for any loans or lines of credit.

How to assemble the packet (practical steps)

Step 1 — Run core reports

• Generate a year-end P&L and an income report from your accounting software (QuickBooks, FreshBooks, Wave, etc.). I recommend reconciling bank accounts and credit cards before finalizing these reports.

Step 2 — Reconcile income vs. 1099s

• Match total gross receipts on your P&L to 1099s and processor reports. Note any discrepancies and collect supporting records for the difference.

Step 3 — Organize receipts by category

• Use folders (digital and/or physical) for each major expense category. Label and index digital receipts by date and vendor.

Step 4 — Prepare draft tax forms and notes

• Complete a draft Schedule C and Schedule SE. Add margin notes for any unusual items (one-time legal fees, insurance settlements, etc.).

Step 5 — Summarize estimated taxes

• Create a one-page summary of all estimated tax payments made during the year with dates and confirmation numbers. This avoids searching multiple bank statements later.

Step 6 — Create an executive summary

• Put a 1–2 page cover sheet that includes: business name/DBA, EIN or SSN used for filings, brief description of business activity, total gross receipts, net profit/loss, and a list of included documents. This helps your tax preparer get up to speed quickly.

Digital tools and storage

• Accounting software: QuickBooks, FreshBooks, and Wave can generate the main reports you need. Many clients switch from spreadsheets to software and see immediate reduction in errors.
• Receipt scanning: Use apps like Expensify, Receipt Bank (Dext), or even the mobile camera + cloud storage to keep receipts searchable.
• Backup: Store the packet in read-only PDF form in a secure cloud folder (Dropbox, Google Drive, or an encrypted provider). Keep physical copies for the most-important records if you prefer.

What to give your tax preparer vs. keep for your records

Give your preparer:

• Executive summary, P&L, bank reconciliations, copies of 1099s and major receipts, mileage summary, estimated tax payment summary, and draft Schedule C/SE.

Keep for your files:

• Originals of receipts supporting deductions, contracts, canceled checks for major purchases, and depreciation schedules. The IRS recommends keeping most tax records for at least three years; keep some items longer when they affect basis or involve omitted income (IRS record retention: https://www.irs.gov/taxtopics/tc201).

Common mistakes and how to avoid them

• Missing receipts: Back up paper receipts with photos and store them digitally.
• Mixing personal and business expenses: Keep a separate bank account and credit card for business use.
• Failing to track mileage: Use an app or a simple spreadsheet and log trips contemporaneously.
• Overlooked 1099s: Reconcile all payment-processor totals with bank deposits to capture income not reported on a 1099.

Special situations to watch

• Home office deduction: Requires exclusive and regular business use of space; measure the area and document the business percentage.
• Depreciation and Section 179: Asset purchases have different tax treatments — include purchase date, invoice, and placed-in-service information.
• Multistate income: If you performed work in other states, list the states and collect any state-specific income records.

Timeline and deadlines

• Quarterly estimated tax deadlines are usually April, June, September, and January (of the following year). If you miss them, document why and be prepared for an underpayment calculation.
• Start assembling your packet in November or December. Run final reconciliations in January so you have complete year data.

Sample packet checklist (one-page)

• Executive summary (1 page)
• P&L and balance sheet (1–2 pages)
• Bank and credit card reconciliations
• 1099s and payer statements
• Invoices and income summary
• Receipts by category and mileage log
• Draft Form 1040 with Schedule C and Schedule SE
• Prior year tax return
• Proof of estimated tax payments
• Contracts and major invoices

Resources and references

• IRS Self-Employed Individuals Tax Center: https://www.irs.gov/businesses/small-businesses-self-employed
• IRS Self-Employment Tax overview and Schedule SE instructions: https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax
• IRS Recordkeeping guidance: https://www.irs.gov/businesses/small-businesses-self-employed/recordkeeping

Internal links

• For help estimating and avoiding penalties when you pay quarterly, see our guide on estimated tax payments: Estimated Tax Payments: Calculating and Avoiding Penalties (https://finhelp.io/glossary/estimated-tax-payments-calculating-and-avoiding-penalties/).
• If you need a line-by-line refresher on Schedule C, read Schedule C (Profit or Loss from Business): https://finhelp.io/glossary/schedule-c-profit-or-loss-from-business/.

Final tips from my practice

Start today. The single best improvement I recommend is a monthly closing: reconcile accounts, file receipts, and run a P&L. Clients who do this reduce last-minute surprises and spend less on preparer fees. When in doubt, document the business purpose—clear contemporaneous notes are the strongest evidence if questions arise later.

Professional disclaimer

This article is educational and does not replace personalized tax advice. Tax laws change; consult a qualified tax professional for guidance tailored to your situation. For official IRS information, visit IRS.gov.