When you start a new business, taxes can be one of the last things on your mind. Between registering your business, hiring employees, and getting all of your shop policies in order, it can feel overwhelming to even think about tax season.

However, filing taxes is an important part of owning a small business because it helps you figure out how much money you made, how much money you spent, and what you can claim as tax deductions.

Today we’re sharing seven essential tips for filing taxes as a new business owner:

1. Hire a Tax Professional

Hiring someone else to file your taxes might seem expensive, but the cost will be well worth it if you get audited by the IRS. The government tends to take a particular interest in small business owners because they want to make sure no one is trying to get away with cheating on their taxes.

If you hire a tax professional, the biggest benefit will be peace of mind in knowing that your taxes are correct. You also have the option whether to hire a tax specialist or work with a CPA firm. The advantage of choosing the latter is that accountants can take care of other financial aspects of your business that may have tax implications.

2. Do Your Taxes Year-Round

Many small business owners wait until tax season before starting to do their taxes. However, this is a huge mistake.

If you start doing your taxes now, you will have more time to plan out deductions and file as soon as you can. You should also be keeping track of expenses throughout the year, so everything is ready when it comes time to file. You’ll be surprised how much you spend in a year.

3. Maximize Your Tax Deductions

Tax deductions are a vital part of filing because they lower your taxable income. Your taxable income is what the IRS uses to calculate whether or not you owe them money or if you are getting a refund.

You can write off business related expenses such as car mileage, business equipment and any other supplies you need to run your shop. The IRS has compiled a comprehensive list of expenses you can deduct and not.

4. Keep Track of Your Business Expenses

Since you’ll be filing taxes on your business expenses, it’s important to keep track of everything you spend money on throughout the year. You can do this by using an Excel spreadsheet or an app. Tracking your expenses will help you calculate deductions later on.

Another way to monitor your expenses is to hire a bookkeeper, who can not only keep track of your expenses but also reconcile bank statements.

Regardless of how you want to track your business spending, keep your receipts for at least a year. You can also create copies by scanning them and storing them in a cloud.

5. Know Which Tax Form You Need

When you start your business, the IRS will give you a tax ID number so that they know who you are and how to contact you. It’s important to keep this number in case you get audited or questioned about your taxes, so make sure to save it somewhere safe.

You will also be given a tax document called the SS-4, which you can use to apply for an Employer Identification Number (EIN) if your business is based in the United States.

6. File on Time

Strive to file by the deadline. If you don’t do this, you could be subject to fines and penalties that can really add up. The current filing deadline for most individuals is April 15th, so make sure to get your taxes in on time and explore tax deductions that can give you a bigger refund.

7. File for an Extension

If you aren’t able to finish doing your taxes by the deadline, don’t panic. You can easily file for an extension and get extra time. However, this doesn’t mean that you will pay your tax liability later. It is still due on the deadline.

Further, if you owe the IRS money, you will have to make a payment by the original deadline or two things will happen. First, interest and penalties will accrue on top of your unpaid taxes. Second, a failure-to-pay penalty may be applied to any balance due if it is not paid in full by the filing extension due date.

Tax season can be really daunting if you’re a new business owner because there is so much information to take in. With this article, we hope that we’ve given you a great start to your tax filing journey and have kept it simple enough for anyone to understand.

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