It is the first year of your business and that time of year has come for you to file your business tax return. It is of utmost importance that any business owner for that matter should prepare such files not only accurately but in a timely manner. Achieving favorable results for the business is very much essential as well.
The form should be reviewed completely. Take a look at the items on the business return that the government expects you to fill out accurately most especially the amounts and figures required. You should have the answers to the questions being asked on the return. These may include but are not limited to the nature of business, the business' location, on whether it is the first year of operation, etc. It is important to ensure that your chart of accounts have the right categories of income and expenses.
The business owner should make a decision as to whether to use the cash basis or the accrual basis in preparing tax returns. The decision you make will basically stay all throughout the life of your business although changes are typically allowed. Certain businesses especially those with huge inventories and large revenues should use the accrual basis of accounting.
Another important consideration would be the method of depreciation to use. The IRS actually allows a deduction of up to $100,000 for furniture and equipment as an option from writing it off over a number of years and most businesses would elect to do such. However, if the business does not generate any profits for the first year, you cannot deduct your first year depreciation although you could carry it over the next profitable years. A business should consider taking on the slower depreciation route in order that depreciation deductions will still be available in the next business years when the income will be in a higher tax bracket.
Sole proprietors whose business is home based can also consider that a portion of their residence can be used as a business deduction. Another important thing as well for year end tax returns would be the non-employee compensation of independent contractors for which you should inform the government of. Keep track as well of automobile expenses. The business tax return would want to know information on when the vehicle was placed and used for service for the business, the business amount as well as the personal and commuting miles for each vehicle for that particular year.
Self-employment tax can be overlooked as well. Such taxes should be calculated as a part of your total estimated taxes when paying estimates quarterly.
Aside from the ones mentioned, there are still others that need to be considered by the business owner in preparing business tax returns. For those who work with tax professionals, consult with them in the preparation of your returns.
