Tax Filing

Tax Filing Skill

Automates the entire tax preparation workflow for a small business (C-Corp, S-Corp, or LLC) and the owner's personal return. Built from real-world experience preparing a Delaware C-Corporation Form 1120 and MFJ Form 1040 with three children.

How This Skill Works

Tax preparation is a 7-phase pipeline. Each phase builds on the previous one. Run phases in order, but use parallel sub-agents within each phase to maximize speed.

Phase 1: Data Gathering

Launch these 5 research agents in parallel:

Agent 1: Accounting System Export

• If Xero: use the Xero API (OAuth2 custom connection) to export all data
  • Settings: organization, chart of accounts, tax rates, contacts
  • Per-year: bank transactions, journals, invoices, payments, reports (P&L, balance sheet, trial balance, bank summary)
  • Note: bank STATEMENT LINES (unreconciled items in Xero UI) are NOT accessible via API -- only matched transactions
• If no accounting system: skip to bank statement analysis

Agent 2: Obsidian Vault Search

• Auto-discover vault: check ~/Projects/Obsidian/*/ or common locations
• Search for: tax, filing, 1099, W-2, P&L, accountant name, company name, EIN, EFTPS
• Read all synthesis docs in wiki/synthesis/tax-*
• Extract: credentials (EFTPS, accountant portal), prior research, income flow maps, bank analyses
• Check for prior year preparation documents

Agent 3: Gmail Search

• Search for accountant correspondence (extension status, appointment details, portal links)
• Search for tax forms: W-2 notifications (ADP, Gusto), 1099 (Ascen, KForce, Robinhood, BofA), 1095-C
• Search for: Xero invoices, Hetzner/Cloudflare/hosting invoices, bank connection notifications
• Search for Delaware franchise tax correspondence
• Extract: meeting dates, deadlines, payment confirmations, document statuses

Agent 4: Google Drive / Filesystem Search

• Auto-discover Google Drive mount: ~/Library/CloudStorage/GoogleDrive-*/My Drive/
• Search for organized tax folder (e.g., Finance-&-Legal/Tax/{year}-Tax-Filing/)
• Inventory: W-2 PDFs, 1099 PDFs, bank statements, prior returns, invoices, contracts
• Also check ~/Downloads/ for recently downloaded tax files
• Read the prior year's filed corporate return (Form 1120) to understand how the accountant structured categories

Agent 5: Bank Statement Analysis

• Find bank statement PDFs (Chase, BofA, Mercury, etc.)
• If a categorized analysis already exists in Obsidian (chase-*-full-analysis.md), use it
• Otherwise, read each monthly statement and categorize every deposit and withdrawal
• Key classifications:
  • Revenue: C2C consulting deposits (KForce, Ascen, KPG99, etc.), platform fees
  • NOT revenue: owner Zelle transfers (capital contributions), card purchase returns, CC cash redemptions, family transfers
  • Business expenses: hosting, software, insurance, travel, meals, advertising
  • Personal expenses through business (constructive dividends): mortgage, HOA, utilities, personal subscriptions
  • Payroll: Gusto deposits may be client payments routed through Gusto (not self-payroll) -- check W-2 package to verify

Phase 2: Analysis & Classification

After all agents return, synthesize findings:

Revenue Classification

• Match bank deposits to contracts/1099s
• Verify: does the 1099 list the corporation's EIN or the owner's SSN? This determines which return it belongs to.
• C2C consulting through a corporation may NOT receive a 1099-NEC -- bank deposits + invoices are sufficient proof
• Soccer/personal Zelle payments in business account = NOT business revenue unless for services rendered

Expense Classification (Use Prior Year's Categories)

Read the prior year Form 1120 to match Sorsher's/accountant's category structure. Common mapping:

Line 26 detail categories: Computer & Internet, Travel, Business Meals (50%), Marketing & Promotion, Insurance, Legal & Professional Fees, Licenses & Permits, Office Expense, Automobile, Home Office Reimbursement, Miscellaneous.

Critical Reclassification Rules

• Owner Zelle to business: capital contribution (Director's Loan account 2700), not revenue
• Mortgage/HOA/utilities from business account: shareholder distributions, not deductible expenses
• Home office portion of housing costs: deductible ONLY through formal accountable plan (IRC 62(c))
• Gusto deposits: check the Gusto W-2 package. If no W-2 was issued to the owner, those deposits were likely client payments, not payroll wash
• Cash-basis accounting: expense is recognized when paid, regardless of when services were performed

Phase 3: P&L Generation

Read references/pnl-template.html for the exact HTML/CSS template.

Generate the Income Statement

• Use the template with Georgia serif font, double-ruled borders, professional formatting
• Include: Revenue by client, Total Revenue, Expenses by category, Total Expenses, Net Income, Tax computation box, YoY comparison table
• Convert to PDF: "/Applications/Google Chrome.app/Contents/MacOS/Google Chrome" --headless --disable-gpu --print-to-pdf="output.pdf" input.html
• If Chrome is not available, try pandoc with --pdf-engine=pdflatex or wkhtmltopdf

Generate Supporting Invoices (if needed)

Read references/invoice-template.html for the template. Generate quarterly invoices for:

• Foreign advertising/marketing providers (with their tax ID, address, service descriptions)
• Accelerator programs or one-time large expenses
• Mark payment method (bank transfer vs cash) on each invoice

Phase 4: IRS Compliance & Risk Assessment

Research current-year IRS thresholds. Read references/irs-knowledge.md for the embedded tax rules, then web-search for any updates.

Key Checks

1. Advertising ratio: compare to industry norm (10-20% for tech). YoY trend matters -- decreasing is good
2. Officer compensation: must be "reasonable" -- too low triggers IRS scrutiny for C-Corps
3. Constructive dividends: personal expenses through business account = highest audit risk
4. Accumulated earnings tax: $250K credit ($150K for PSC). Only matters above those thresholds
5. Personal holding company: sole owner + 60% personal service income = PHC risk. Check if contracts name the corp or the individual
6. Hobby loss (Section 183): does NOT apply to C-Corporations
7. Home office: calculate deduction opportunity (sq ft % of mortgage + HOA + utilities). Requires accountable plan resolution
8. Foreign payments: check W8-BEN status, 1042-S filing obligations, FBAR thresholds ($10K aggregate foreign accounts)

Expense Optimization Recommendations

• Spread expenses across categories (avoid concentration in one line)
• Reclassify AI/software from "subscriptions" to "Computer & Internet" or "R&D"
• Split travel into Travel + Meals (meals at 50%)
• Separate insurance from professional fees
• Add automobile mileage ($0.70/mile for 2025) if driving to business events
• Home office accountable plan: biggest legitimate savings opportunity

Phase 5: Tax Calculation

Corporate (Form 1120)

Revenue - Expenses = Taxable Income
Taxable Income x 21% = Federal Tax
Less: Estimated payments already made = Balance Due

Personal (Form 1040 MFJ)

W-2 Box 1 + Other Income = Total Income
Total Income - Standard Deduction ($30,000 MFJ 2025) = Taxable Income
Apply brackets: 10% / 12% / 22% / 24% / 32% / 35% / 37%
Less: Child Tax Credit ($2,000/child)
Less: W-2 Box 2 (federal withheld) = Refund or Balance Due

Key Knowledge

• Extension extends TIME TO FILE, not TIME TO PAY. Tax is due by original deadline (April 15 for 1120)
• 1095-C not required for filing (Paperwork Burden Reduction Act, signed Dec 23, 2024)
• Florida has no state income tax and no individual mandate
• Delaware does not tax out-of-state corporate income
• Standard deduction ($30,000 MFJ) beats itemized for most taxpayers under SALT cap ($10,000)

Phase 6: Document Preparation

Audit Evidence Map

For EVERY P&L line item, document:

• Dollar amount
• Supporting document (with file path)
• Audit risk level (LOW / MEDIUM / HIGH)
• Action needed (if any)

Stage Upload Folder

Create ~/Desktop/Sorsher-Upload-{year}/ (or accountant name) with subfolders matching the portal structure:

• Corporate folder: P&L PDF, W-2 packages, Good Standing cert, 940/941, bank statements, invoices, 1099s
• Personal folder: W-2, 1095-C (if available), mortgage 1098

Generate Templates

• Home office accountable plan resolution (read references/home-office-resolution.md)
• Fill in: company name, EIN, address, office square footage calculation, expense amounts

Identify Gaps

Flag missing documents by priority:

• CRITICAL: items that block filing
• MEDIUM: items that reduce accuracy
• LOW: nice-to-have for audit defense

Phase 7: Filing & Payment

Corporate Tax Payment

1. Check EFTPS first (eftps.gov). If enrolled "Through Financial Institution" = view-only, use IRS Direct Pay instead
2. IRS Direct Pay Business: irs.gov/payments > "Pay business tax"
   • Form: 1120 Corporation Income Tax
   • Reason: Extension
   • Tax Period: December of the tax year
   • Year: the tax year being filed
3. Record confirmation number in Obsidian and git repo

Update Records

• Update Obsidian tax preparation note with payment confirmation
• Update P&L PDF to show "Balance due: $0.00" with confirmation number
• Git commit and push all changes
• Update Claude memory with payment record

Reference Files

Anti-Patterns to Avoid

• Never count owner Zelle transfers as revenue
• Never count personal expenses (mortgage, HOA) as business deductions without an accountable plan
• Never assume Gusto deposits are self-payroll -- check the W-2 package first
• Never skip the prior year return analysis -- the accountant's category structure matters
• Never tell the user to "wait for 1095-C" -- it's not needed for filing
• Never use EFTPS if enrolled through a financial institution (it's view-only)
• Never forget that extension = more time to file, NOT more time to pay