6 Easy Ways to Sail Through Filing Taxes for the First Time

6 Easy Ways to Sail Through Filing Taxes for the First Time

Every time you make a significant life change, you feel like you're filing taxes for the first time - all over again. It changes when you get married or divorced, has kids, sends kids to college, become self-employed, and start a business. If something in your life changed, your tax returns would reflect it. Small business taxes, in particular, differ drastically from your regular W-4 employment funds. There's new taxes, new deductions, and a whole host of other changes including an entirely different form. Filing taxes will never be fun, but there are seven things everyone can do to make preparing a small business tax return more straightforward.

1. Keep Your Files in One Place

It doesn't matter whether you are an employee, self-employed, or an employer, everything is easier when you know where to find your tax documents. Start by getting in the habit of keeping all your tax documentation in one place. In today's world, that means having two copies of everything: one digital and one hard copy. Keep all those papers in a single drawer or folder. You don't need to alphabetize them or sort them by date, but putting them all in the same place will ensure you can find everything you need when it comes time to file. Remember: minutes, hours, or days spent looking for a tax document is the time not spent growing your business. Make every second count!

2. Choose the Right Preparation Method

Are you filing taxes for the first time? You may not realize you have options. People file taxes using one of three methods:
  • Filing on their own (with a pen and paper or on software)
  • Paying for software or an accountant
  • Using company tax services
If you declare yourself as an employee, you may find that you can submit for free. The government runs programs to ensure those who make middle-to-low incomes don't need to spend their hard-earned cash on accountants. Their accounts are often simple, and money spent would be a waste. Those filing as self-employed or as a small business, however, usually have to pay. You can do the books on your own, but you need to weigh how much time it will take you to learn the tax code (remember, we had a significant tax overhaul in 2017), collect the documents, and file your taxes. Weigh your options. Will the money spent on an accountant or bookkeeping service earn you money in the long run?

3. Use Apps to Keep Records

Current and accurate records are a small business owner's best friend. Thankfully, you now have plenty of apps that will keep track of those expenses and deductions for you. Use some of these apps to help manage your finance and accounting procedures and make tax season simpler.

4. Use Business Accounts with Banks and Apps

Have you separated your personal and professional lives? If not, get started now. You should have a business account for every service you use that could be an expense. Do you use Uber for business? Only take work-related rides from your business account. Do you book travel expenses for work? Only do it on your business credit or debit card. Any expense you pay should not only come from a business customer account but also paid from your business banking accounts. Separating the two not only makes it clear to the IRS that your business and your personal life are two different things. It also prevents you from trawling through a year's worth of bills and expenses to dig out the business ones. By keeping two accounts, you can pull the records without worrying whether that latte was for your or a client.

5. Get an Extension

Are you scrambling to get all your ducks in a row? Make life easier by asking for an extension. The IRS grants extensions fairly - you just need to ask. These extensions give you more time to ensure your final filing is correct and prevents you from overpaying or missing out on essential deductions or credits. But - and this is a big but - you must still estimate the amount you owe and pay it by the April deadline. In other words, extensions help you file more accurate returns, but they don't eliminate the need to pay in April. If you file for an extension and don't April, two things can (and likely will) happen. First, the IRS adds on late fees and also charges interest on the amount you owe. If you continue to fail to pay, the IRS can even come for your bank accounts - and they don't need a court order to do so. Second, the IRS can invalidate your extension, leaving you with no additional time to put your return together. Do you worry about coming up with the payment? The next tip will make them more manageable.

6. Pay Quarterly

If you file as a small business, the IRS may either request or require quarterly filings. Even if it doesn't, paying quarterly may better suit your finances. In what universe are four bills better than one? Well, paying quarterly means you pay in much smaller amounts, which may be more amenable to your cash flow than one lump sum. Quarterly payments also help out those filing taxes for the first time. If you haven't filed before, you may not know what to expect from an annual payment. You may also not know how to save and manage your cash flow to cover it. Paying quarterly simplifies the process and prevents you from falling behind, which comes with fees, interest, and more stress than you need.

Filing Taxes for the First Time Doesn't Need to Be So Hard

Like so many other things in life, filing taxes for the first time as a small business is as complicated as you make it. By staying organized, using the tools at your disposal, and hiring a great accountant, you'll take much of the sting out of tax season. Are you getting to grips with the world of small business finance? Check out our other resources here.

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