Getting ready to file your first tax return for your new business? Regardless of what type of business you started last year, there are some important things that you should be doing to get ready to file your first return.
Check your checkbook
The biggest part of your tax return—whether it’s a Form 1120 for a corporation, a 1065 for a partnership or a Schedule C on your Form 1040 for a sole proprietorship—is the income statement. Not only will you report your income earned, but you will also record your expenses. Expenses are deducted from your income and will lower your overall tax liability, so it is important to make sure that you have reconciled your checkbook to include all relevant expenses. Make sure that you have receipts for all of your expenses, though, as you can be audited for up to three years from the time you file your return.
Categorize your expenses
Remember, you can only deduct 50% of your meals and entertainment expenses, so be honest with yourself as you go through your checkbook and categorize your expenses to fit into the tax return’s expense lines. Look at the IRS’s website to find instructions regarding the various tax forms. Here you can also find details about what exactly a fully deductible expense is, what you can deduct 50% on and what purchases are considered assets rather than expenses. With assets you have the ability to spread out your expense deductions through depreciation instead of taking all of them during the year that you spent the money.
File your extension
If you have not yet received crucial tax forms (like a Form 1099 Misc for a sole proprietor) or are still working to figure out what your total revenue was for 2010, then you can file for an extension. You should be squared away with the government as long as you remember to file the request for an extension on time and have made an estimated tax payment. Do not skimp on the estimated payment though, as underpaying when you file for the extended due date can leave you with an underpayment penalty. An extension is only in regard to filing your taxes, not paying them.
This guest post was provided by SuretyBonds.com, an agency that works to help new business owners keep on track with legal regulations. The agency issues surety bonds and insurance policies to business owners and other professionals who need them to maintain active business licenses.