3 Things to Remember When Filing Taxes for the First Time

It’s your first year outside Corporate America and, in addition to attending to your mile-long to-do list, your taxes need to be filed. Dread not. Tax time doesn’t need to be painful, especially if you remember to do the following.
Pay attention to deductions
Business owners love deductions and for good reason; even the smallest ones can make a world of difference to a company’s bottom line. Sit down and document every possible expense, recommends Deborah Sweeney, CEO of MyCorporation, a Calabasas, Calif.-based company that helps small businesses incorporate with the government.
Start with your physical location. If you work from home, calculate the percentage used for your business, then deduct that percentage from your mortgage and utilities. Added bonus: You can deduct 100 percent of any renovations done exclusively to your home office.
Next, look at your traveling expenses. “Do you travel anywhere in pursuit of your trade?” asks Sweeney. This includes mileage.
In addition, she says small-business owners can deduct a large portion of the actual expense of going into business. For 2011, that deduction is $5,000 (it was $10,000 in 2010 and there has been talk about increasing the limit, but it has yet to happen).
Business-related education is an added deduction available to small-business owners (i.e. conferences, certification renewals, etc.).
“Another one people don’t think of is bad debt,” Sweeney says. “If someone stiffs your business, you can deduct that cost. This usually applies to businesses with hard goods, not those that provide professional services.”
For more information on deductions, check out the IRS checklist.
Consider your audit risk
Audits will not spell the end of your business as long as you have proper documentation.
“Small business owners can get excited when they start up and deduct everything,” Sweeney says. “That is fine as long as the deductions are legitimate and they’ve been properly documented.”
Keep receipts and write down your mileage. You can now track your mileage using smartphone applications, like Trip Cubby and MileBug.
Know your deadlines
“Business taxes are due March 15, a month before personal taxes,” says Ian Aronovich, co-founder and CEO of GovermentAuctions.org in Great Neck, N.Y.
Don’t freak out yet. This law applies to corporations and S corporations, specifically, not to Limited Liability Partnerships (LLCs), Partnerships or Sole Proprietorships. If your company fits into the first two categories and you aren’t yet ready to file, consider asking for an extension.
“You can get a six-month extension, but you must file for the extension by March 15,” says Aronovich. Extensions can be electronically filed by using IRS Form 7004.
Beware: This form allows you to extend only the date of your filing, not the date of your payment. According to Aronovich, business owners are required to pay their estimated taxes by the original filing date. Failing to pay can result in IRS penalties.
For more information on filing deadlines, check out the IRS breakdown.
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Katie Morell is an independent business writer and editor, who over the past 10 years has covered topics ranging from business and politics to travel and social justice. Her work has appeared in a variety of regional and national publications, and she has served as an editor for Meetings Media.
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