If you are a new business owner, you might not know yet how to file taxes. Filing taxes can be complicated if you do not know how to get started. Find out how to file taxes for your small business and minimize your tax burden.
It is important to organize your accounting records when you are filing small business taxes for the first time. You must track your business transactions from the very beginning of your business so you do not have a headache from figuring out how to calculate your income and expenses when it is time to file your taxes.
By having all the accounting records organized you will save time and money if you use an accountant to help you file your tax return.
Here is a list of the documents to have ready when filing your taxes for the first time:
- Gross receipts
- Checking and saving account interest
- Records of sales
- Employee wages
- Insurance premiums
- Transportation and travel expenses
- Advertising costs
- Office supplies and equipment
Understand Your Tax Obligations
Make sure that you know your tax obligations and what IRS forms you need to file. It all depends on the business entity you have. Each business structure has a different IRS form required.
- Sole proprietor: income and self-employment taxes need forms Schedule C and 1040.
- Partnerships: Form 1065 is required.
- Corporations: Form 1120, the corporate tax return.
- Limited Liability Corporation: you need to file as a corporation or partnership or as part of an individual tax return.
They kind of business structure you have also determines your tax filing deadline. It is important that you establish tax planning strategies when you start your business to avoid making changes in the future that could be inconvenient and costly.
Small Business Tax Deductions
In order to reduce your income tax bill is to ensure that you are claiming all the tax deductions available. Below are examples of deductions you should get familiar with and take advantage of.
- Home-office deduction: you might be eligible to deduct some of your home-related expenses including utilities, mortgage interest, property taxes and more.
- Startup costs: advertisements, salaries and wages, and other expenses.
- Interest payments: if you have a loan or making payments on a line of credit, the interest you are paying is tax deductible.
- Other deductible business expenses: mileage deduction, health insurance, self-employment tax, licenses, permits, training employees, equipment purchase or rental.
Consider Hiring a Professional
Consider seeking help from a professional if you are still feeling overwhelmed or lost about filing your taxes for your small business for the first time. First and foremost, you need to be organized and prepared. A professional could help navigate the process so you can get the best business tax refund possible.