The first year after you start a business is crucial, both in terms of getting it off the ground and fulfilling legal requirements. Filing tax returns is one such legality that needs to be fulfilled in a timely manner, or else, your business might get fined by the IRS.

If this is the first time you’re filing business taxes, here’s a guide for you:

Review your business tax returns

The first step when filing returns is to thoroughly review business tax returns in case the IRS has any questions. First-time filers may be asked what the nature of their business is, how many years it’s been operating for, and its location.

Double check your chart of accounts so that the correct categories of income and expenses have been mentioned. This helps with business operations and for your tax returns to be filed easily.

Determine your accounting basis

As a business owner, one of the most vital financial decisions you need to make is choosing an accounting basis. Tax returns can be filed on a cash or accrual basis. The cash basis recognizes income when it is collected and expenses are recorded when paid. The accrual basis requires income and expenses to be recorded as they’re earned and incurred. Lenders often prefer the accrual basis, but taxes can easily be prepared on a cash basis even if the financial statements are not.

As a new business, it’s likely that you’ll have more unpaid expenses than revenue at the end of the year. You could consider taking net expenses as a deduction if you’ve chosen the accrual basis. However, you should be aware that going down this route will result in your business paying more taxes when it’s profitable.

Depreciation method

Another important decision to make when running a business is choosing a depreciation model to follow. The IRS permits new businesses to deduct up to $100,000 for furniture and equipment, instead of depreciating it over 5–7 years. Choosing this option is more beneficial for businesses.

Startups without any profits cannot deduct this amount; in fact, they carry it forward to profitable years. Businesses often opt for slower depreciation in their initial years to take advantage of deductions.

Stay on top of automobile expenses

Business vehicles can be a major expense for a new business, their cost and maintenance is significant. Always maintain an auto log that’s meant to record where the vehicle has travelled and the purpose it was used for. This auto log should also include expenditure done on the vehicle which is handy for deducting transportation and medical expense.

Get many more tips by signing up for our tax services online in Palm Beach County. We also provide payroll services for small business and other accounting solutions. Contact us at 1(954) 596-9966