Taxes
How to Prepare for Your First Tax Season as a Business Owner
3 min read
Your first tax season as a business owner can feel overwhelming. With a little preparation, it doesn't have to be. Here's what to expect and how to get ready.
Know which return you're filing
| Business type | Federal return | Typical due date |
|---|---|---|
| Sole proprietor / single-member LLC | Form 1040 with Schedule C and Schedule SE | April 15 |
| Multi-member LLC / partnership | Form 1065 (plus each owner's personal return) | March 15 |
| S corporation | Form 1120-S (plus each owner's personal return) | March 15 |
| C corporation | Form 1120 | April 15 |
Washington doesn't have a personal income tax return, but you'll have Department of Revenue excise tax returns on your assigned schedule.
Gather these documents
Income
- Profit and loss statement for the year
- Bank statements for all business accounts
- Forms 1099-NEC, 1099-MISC and 1099-K you received
- Records of cash and app payments
Expenses
- Categorized expenses from your bookkeeping
- Receipts for large purchases, meals and travel
- Mileage log
- Home office square footage and home expenses
- Health insurance premiums (if self-employed)
Assets and loans
- Invoices for equipment, vehicles and tools bought during the year
- Loan statements showing interest paid
Startup costs
- A list of expenses paid before your business opened
Payments already made
- Federal estimated tax payment dates and amounts
- Washington excise tax returns filed
Business information
- EIN, formation date, business address
- Ownership percentages (multi-owner businesses)
- Any IRS or state notices received
First-year surprises to plan for
Self-employment tax
Many first-year owners don't expect the roughly 15.3% self-employment tax on top of income tax.
Tax on profit you didn't take out
You owe tax on business profit even if you left the money in the business account.
Estimated tax penalties
If you didn't make quarterly payments, you may owe an underpayment penalty. Start making them for the current year now.
No refund from withholding
Unlike a paycheck, business income usually has no withholding, so many first-year owners owe money at filing.
Don't forget the deductions new owners often miss
- Startup costs (up to $5,000 in the first year, with limits)
- Business mileage
- Home office
- Phone and internet business percentage
- Software and subscriptions
- Half of self-employment tax and self-employed health insurance
File an extension if you need it
An extension gives you more time to file, generally six months, but not more time to pay. Estimate and pay what you owe by the original deadline to limit penalties.
Set yourself up for next year
- Start monthly bookkeeping now
- Make quarterly estimated payments
- Keep a tax savings account
- Ask whether an S-corp election might make sense as profit grows
The bottom line
Your first business tax season is a learning year. Organized books and a complete document list make it faster, cheaper and far less stressful, and every year after gets easier.
Need help getting this right? TRIG Bookkeeping & Tax Services helps new business owners in Washington with company registration, monthly and annual bookkeeping, and government compliance. Contact us to talk about your business.
This article is general information, not legal or tax advice for your situation. Tax rules and fees change, so confirm current details with the IRS, the Washington Department of Revenue, or a qualified professional.