Does hearing the phrase ‘business taxes’ make your knees shake in fear?

It did for me my first year in business. I was really terrified that I’d mess something up or end up owing a ton of money at the end of the year.

But guess what? I made it through. And so will you.

To help you get on the right track, here’s a quick guide for your first year of business taxes.

Define Your Business

If you’re a small business owner, you’ll first have to determine which kind of business category you want to fall into.

Sole proprietor: Single operator, reports business and income on a Schedule C, pays self-employment taxes (like Social Security and Medicare)

Partnership or Corporation: Have a business partner, files information return but doesn’t pay income tax

S Corporation: Like a partnership, but income flows through personal tax return

Defining your business is important, so consult a resource like the SBA for further details before you make a decision.

Note: I recommend consulting a professional accountant if you feel uneasy about your options. They can help answer your questions and get these documentation processes going if you need a little help.

Sales Tax: Both Online and Brick & Mortar Sellers

Some online business owners think they don’t have to pay sales tax — but in reality, they do. Sales tax rates vary by state, so be sure that you’re adding a sales tax onto all online and offline sales you make.

You’ll start out making sales tax payments quarterly, and if the government determines your  collection is low enough, you may eventually be transitioned to annual sales tax payments.

Bottom line: Keep track of your sales tax charges for each and every product you sell.

Set Aside a Portion of Your Earnings

Depending on how much it costs to run your business, you’re going to have a variable amount of tax-deductible expenses. But as a rule of thumb, you should plan on setting aside a full third of your total earnings to pay business taxes.

When you pay your taxes depends, too. You can pay quarterly estimated business taxes to both federal and state government, or you can fork over a big chunk at the end of the year. If you owed more than $1,000 on April 15th, you should opt for the quarterly route — just to be safe.

Know Your Deductions

As a business owner, you’ll need to keep receipts from all business related expenses (and document them), such as:

But this is just the tip of the iceberg. Check out the IRS’s full list of business-related tax deductions — which includes office equipment.

One of the other big deductions is mileage. If you’re traveling to/from business-related events, keep a mileage log in your car and note your total miles traveled. Be sure to note your odometer reading at the beginning of the year, too.

Get an Extension (If You Need It)

If you’re really scrambling around April 15th and need a little more time, you can file for an extension on your business taxes.

These give you more time to file documents (but payment is still expected on time.) Late payments incur interest and penalties — so be aware of that when filing the request.

Get Organized With Helpful Tools

My final piece of advice is to start using an accounting tool to make expense and income tracking more efficient, organized, and a lot less stressful during tax time.

You can use online options like Wave, Less Accounting, or Freshbooks, or a software solution like QuickBooks, too. See which best fits your needs — and then optimize your bookkeeping process.

Still feeling stressed? Reach out to a professional accountant who can walk you through your first year of business taxes. It’s worth the fee you’ll pay, and you’ll get more sleep at night.

Just remember: Business taxes don't have to be a big deal. You can do this, and don’t be afraid to ask for help!