Essential Tax Tips for First-Time Business Owners

Running a new business? Whether it’s a side hustle or your full-time focus, tax season can arrive unexpectedly. Don't worry, though; you're not alone. Here’s a friendly guide to help you prepare, navigate common myths, and get those taxes done like a pro.

Get Your Business Records in Order

Start by organizing all your economic records. This includes bank statements, issued and received invoices, receipts, payroll records, mileage logs, and 1099s for any contractors paid over $600. A common myth is, "I can just use my personal bank account and sort it out later." Mixing personal and business finances can create headaches come tax time. Separating them from the start is essential for clarity and accuracy.

Know Which Forms You’ll Need

Understanding the forms required for your specific business type is crucial. Sole proprietors need Schedule C, LLCs might require a Form 1065 or K-1, and S corps use Form 1120-S or K-1, while C corps file Form 1120. Some people believe "LLCs don’t pay taxes," but LLCs pay taxes in various ways depending on their classification by the IRS.

Organize Your Deductible Expenses

List out common deductions, such as office rent or home office expenses, software tools, marketing, business meals (50% deductible), travel, and professional services. Beware of the myth, "Everything I spend on my business is deductible." Not all expenses qualify, and incorrect deductions can lead to trouble. Knowing the rules can save you from costly errors.

Know Your Tax Deadlines

Familiarize yourself with the various tax deadlines: March 15 for S corps and partnerships, April 15 for C corps and sole proprietors, plus quarterly estimated taxes due in April, June, September, and January. Missing deadlines can mean penalties, so it’s wise to mark these dates on your calendar early.

Remember, tax preparation doesn't have to be overwhelming. With organized records and clear deadlines, you can confidently file your taxes and retain more of your earnings. Start organizing now, and consider consulting a tax professional for further guidance. Happy filing!