Get Your Business Records in Order
As a new business owner, it's vital to maintain a separate business bank account. Mixing personal and business finances can lead to complications with deductions and tax filing. Gather your bank statements, invoices, receipts, payroll records, mileage logs, and 1099s for any contractors you've paid $600 or more. The myth that “I can just use my personal bank account and sort it out later” can result in missed deductions and tax headaches. Keep these records organized from the start.
Organize Your Deductible Expenses
Understanding which expenses are deductible can significantly reduce your taxable income. Common deductions include office rent or a home office, essential software, marketing efforts, business meals (50% deductible), travel, and professional services. Be mindful of the myth: “Everything I spend for my business is deductible.” Not all expenses qualify—distinguish between personal, non-deductible costs, and those eligible for partial deductions.
Know Which Forms You’ll Need
Filing the correct tax forms depends on your business structure. A sole proprietor uses Schedule C, an LLC might file a Form 1065/K-1, partnerships require Form 1065/K-1, S corps need Form 1120-S/K-1, and C corps must file Form 1120. Address the myth: “LLCs don’t pay taxes.” LLCs are classified by the IRS based on how many members they have and can be taxed as sole proprietorships, partnerships, or corporations.
Know Your Tax Deadlines
Mark your calendars for crucial tax deadlines to avoid unnecessary penalties. S corps and partnerships generally file by March 15, while C corps and sole proprietors file by April 15. Quarterly estimated taxes are due in April, June, September, and January. Preparing ahead ensures you stay on top of obligations and minimize penalties.
Preparing for tax season need not be overwhelming. Taking these practical steps—along with careful organization and awareness of deadlines—ensures you file accurately and maximize your earnings. Begin organizing now or consult with a tax professional to navigate these waters smoothly and successfully.
