It’s important as a small business owner that you know how to file your first tax return. If you want to make sure that your small business tax return is done properly, consider the following essential checklist for filing your first tax return as a small business owner.
Review a copy of the return
You should examine what type of items you’ll be expected to fill in with the proper amounts and see what questions if any, you’ll be expected to answer on the return. Common questions on first returns are the years the business has been in operation, the business location, as well as the overall nature of the business.
As a business owner, you will be able to file your returns on either a cash or accrual basis. With a cash basis, your business income is recognized when it is collected and business expenses are recognized when they are paid. Conversely, with an accrual basis, income is recognized when it is earned and expenses are recognized when they are incurred.
There are several different depreciation methods available to small business owners, including the availability of up to $100,000 in deductions for most business expense furniture and equipment; this is the most common depreciation deduction for small business owners.
If you have a home-based business, you can deduct a portion of your home under a business deduction. However, the home office space must be used exclusively for business; you will also have to measure the square footage being used for business and compare it against the total square footage in the home.
If you paid for any independent contractors over the past year, you will need to consider whether or not they will need to receive a 1099-MISC from you based on how much they were paid.
Automobile expenses can vary for small business, but you should be keeping careful track of auto expenses that are business related so that you can use this as a business deduction. For instance, keep a log of when the automobile was used as part of a business trip.
Self-employment taxes are often overlooked, which is why you need to make sure that they have been carefully considered for your first tax return.
With the above checklist in mind, you will know how to file your first tax return and make sure that your small business tax return is done properly. To learn more about our small business tax services, please contact us today.