The Complete Guide To Filing Small Business Taxes For The First Time

Filing small business taxes for the first time can feel overwhelming, but it doesn’t have to be. With the right preparation, filing your business taxes is much more manageable than most new business owners expect.

This guide explains how to file your small business taxes, the forms you’ll need, and the deductions and credits that can help lower your tax bill.

Need more tax help? Check out our complete small business tax guide for additional tips and resources.

Do I Have To File Small Business Taxes?

Most business owners are required to file a tax return, even if the business didn’t make a profit.

If you’re self-employed, you generally must file a federal tax return if your net earnings from self-employment are $400 or more. Filing may also be worthwhile if you qualify for refundable tax credits or expect a tax refund.

How To File Small Business Taxes For The First Time

Filing small business taxes for the first time is much easier when you’re prepared. These six tips will help you understand your filing requirements, gather the right documents, and avoid common tax mistakes.

Step 1: Understand Required Tax Forms & Filing Deadlines

The tax forms and filing deadlines that apply to your business depend on your legal business structure. Understanding which forms you’ll need before tax season can help you avoid missed deadlines, penalties, and unnecessary stress.

The table below compares the most common business structures.

Step 2: Choose An Accounting Method

Your business will generally use one of two accounting methods: cash-basis accounting or accrual accounting.

With cash-basis accounting, you record income when you receive payment and expenses when you pay them. For example, if you send two $500 invoices but only one customer pays, you record $500 in income until the second payment is received.

With accrual accounting, you record income and expenses when they’re earned or incurred, regardless of when money changes hands. Using the same example, you would record $1,000 in income when both invoices are issued, even if only one has been paid.

Cash-basis accounting is simpler and may delay taxes until you receive payment, making it a popular choice for many small businesses. Accrual accounting provides a more complete picture of your business’s financial health and is often preferred by growing businesses with more complex accounting needs.

Step 3: Use Accounting Software To Track Income & Expenses

Keeping accurate financial records throughout the year makes tax filing much easier. Accounting software helps you track income and expenses, organize financial records, and generate reports you’ll need when it’s time to file your tax return.

Many accounting platforms also include tax-related features, such as expense categorization, receipt capture, and tax reports. If you don’t already use accounting software, check out our picks for the best accounting software for small businesses.

Step 4: Gather Your Tax Documents

Before you file your tax return, gather the records you’ll need to report your income, claim deductions, and complete your tax forms. Keeping these documents organized throughout the year can save time and help reduce filing errors.

Common tax documents include:

• IRS tax forms (such as Forms 1099 or W-2s, if applicable)
• Employer Identification Number (EIN) or Social Security number
• Prior year’s tax return
• Income records
• Business expense records
• Payroll records (if applicable)
• Inventory records (if applicable)
• Financial statements and accounting reports
• Investment records (if applicable)

Step 5: Claim Eligible Tax Deductions & Credits

Business tax deductions and tax credits can help reduce what you owe, so don’t overlook them when preparing your tax return.

Tax deductions reduce your taxable income, while tax credits reduce your tax bill dollar for dollar. Depending on your business, you may qualify for both.

Common deductible business expenses include:

• Home office expenses
• Business vehicle expenses or mileage
• Advertising and marketing
• Phone and internet service
• Legal and professional fees

You may also qualify for business tax credits, such as the Work Opportunity Tax Credit, the Research and Development Tax Credit, or other federal and state incentives. If you’re unsure which deductions or credits apply to your business, consider working with a tax professional to help maximize your tax savings.

Step 6: Consider Working With A Tax Professional

Many small business owners file their own taxes using accounting software or tax preparation software. However, if your tax situation is complex or you’re filing for the first time, working with a tax professional may be worthwhile.

An accountant or tax preparer can help ensure your return is accurate, identify deductions and credits you might otherwise miss, and reduce the risk of costly filing errors or penalties.

If you decide to hire a tax professional, gather your financial records before your appointment. Staying organized can reduce preparation time — and potentially lower your tax prep costs.

Next Steps For First-Time Tax Filers

Filing small business taxes gets easier with preparation. Keep accurate records throughout the year, understand your filing requirements, and take advantage of eligible deductions and tax credits to help reduce your tax bill.

If you need extra guidance, use our small business tax checklist, explore our small business tax resources, or work with a qualified tax professional to help ensure your return is accurate.