Getting started during that first year as a new business is scary and crucial to your success. The first time filing for taxes as a business is a very stressful, new experience, and getting prepared during the year leading up to tax season helps really take all of that pressure off. Small business taxes work much differently than personal or corporation taxes.
Here are the top 5 things you need to know about taxes during that first year as a small business.
1. Put A Tax Advisor On The Payroll
When you first make a business and see things start to take off, many people start to get a control freak syndrome where they want to be in charge of everything. Taxes included. However, it’s often a better idea to leave it up to an advisor or expert agency to handle your tax concerns to free up your hands for other things… like business management.
2. Provide All of the Documentation
The amount of paperwork that a first year business needs is about the size of a medium mountain. It can feel ridiculous at times, because you’re going to need so many different little articles of paperwork from the birth of your business up until the day of tax season. A few of these endless forms you’ll need include:
- Employee forms like W2 and I9s
- Business entity forms
- Documentation of your income & employment taxes
- Proof of payment history with the IRS
3. Track & Organize Every Business Expense
Ordinary and necessary business expenses are allowed by the IRS to be taken off your total income amount. However, to do so, you need adequate proof of these expenses, and it can’t just be anything. A company car can only be used for work, for example, just as a company phone or computer would be. Documenting all of the costs related to your business and it’s start-up can help you get a bigger return.
4. Keep Up With Your IRS Payments
Unless you work with a specific payroll company that handles the tax portion of your small business bookkeeping, it’s up to you to figure out how much is deducted for taxes, even from your own paychecks. Some business owners make quarterly installments to the IRS to count towards their taxes so they aren’t slammed at the end of the year with hundreds of dollars to repay.
5. Obey the Deadline
Every year, a company has deadlines for the actions they must take. This includes sending out the W2 to employees you have hired, getting in your own payments on time, and then, of course, the process of filing your taxes. Sticking to the deadlines and leaving plenty of wiggle room to amend mistakes can help you stay on track and not fall into trouble with the IRS. If the worst case scenario does happen, make sure you file for an extension quickly.