How to File Business Taxes for the First Time: Step-by-Step Guide for New Entrepreneurs

Your first year in business comes with a series of “firsts.”

First sale. First customer complaint. 

First time realizing you’ve worked a full day and haven’t eaten a thing.

And then, there’s your first time filing business taxes!

One founder posted this request on Reddit:

“So I opened my S Corp 3 months ago and I’ve been making some money, yesterday I realized that I need to file Estimated Taxes quarterly. I’m reading but it is so confusing.

For context, I’m the only owner and only employee of the S corp. I understand that I have to pay myself a salary (reasonable contribution), but do I have to pay quarterly taxes for myself, for the company, or for both??

I pay through the IRS portal, correct? I couldn’t quite find the section to pay estimated taxes for my S Corp. Can someone explain this to me like I’m a kid?”

That post drew over 50 replies, most from other small business owners saying the same thing:

“Taxes are so hard to understand.”

And they’re right.

Tax rules aren’t taught in school. They don’t show up neatly printed in your incorporation welcome kit. They’re not even clearly explained on most government sites.

But failing to file taxes can cost you, sometimes in ways that feel wildly disproportionate. 

Every year, millions of taxpayers under-report their income or taxes owed, which adds up to billions in back taxes, interest, and penalties. 

Not all of it is fraud. 

Many are first-timers making innocent mistakes, like filing late, mixing up forms, or not realizing a payment deadline existed. 

Other cases and reasons are more nefarious, deliberate underreporting, which can result in jail time in addition to monetary penalties. 

And nobody wants that. 

So, in the spirit of that Reddit user’s plea to “explain it like I’m a kid,” let’s answer the question “How to File Business Taxes for the First Time” in a way you can actually follow, even if your head is already spinning.

Here’s what we’ll cover in this blog:

• The steps to take when filing your business taxes for the first time

• How to avoid rookie mistakes that cost thousands in penalties or overpayments

• What to do if you’ve already missed something, before it snowballs

And if, at any point, your brain fogs over like that Reddit founder’s did? You can hand off your tax queries to our tax team at doola, and get things sorted.

Let’s get started.

How to File Business Taxes for the First Time

Filing your business taxes for the first time can feel like learning a new language while someone’s running a stopwatch. 

But once you break it into clear steps, it’s far less intimidating. 

Here’s exactly what you need to do to get it right from day one:

Step 1: Get Your Financial House in Order

Before you even think about forms, you need clean, accurate, and complete financial records for the prior year.

For most first-time filers, this is where reality bites: you might have been tracking sales in Stripe, expenses in Google Sheets, and receipts in a shoebox. 

That’s not going to cut it.

The IRS is blunt about this: without accurate records, you’re likely to miss deductions, which directly increases your taxable income.

In FY 2024 alone, $20.9 billion in civil penalties were assessed against businesses,  much of it from poor record-keeping and inaccurate reporting.

For a first-time filer:

• Build a profit and loss statement and balance sheet that reconcile perfectly with your bank accounts.

• Categorize expenses consistently. Misclassified costs are a top cause of audit adjustments.

• Centralize everything in one accounting platform. Multiple disconnected systems = higher penalty risk.

🔍 doola’s lens: Treat this as your first internal audit. If your books aren’t investor-ready, they’re not IRS-ready. The discipline you set now will serve you every quarter going forward.

Step 2: Choose the Right Tax Return for Your Entity

Choosing the correct tax form is more than a formality; it directly impacts your entity’s legal standing and financial strategy. Selecting the wrong form can lead to penalties, rejection, and missed deductions.

Common Business Structures and Their Corresponding Tax Forms:

• Sole Proprietor / Single-Member LLC: File Schedule C (attached to Form 1040) by April 15.

• Partnership / Multi-Member LLC: File Form 1065 by March 15.

• S Corporation: File Form 1120-S by March 15.

• C Corporation: File Form 1120 by March 15.

Key Tax Strategies for First-Time Filers:

• 20% Qualified Business Income (QBI) Deduction (Section 199A): Pass-through entities may qualify for significant tax savings, though this deduction is currently set to expire after 2025.

• Section 179 Expensing: Recent changes have increased the expensing limit to $2.5 million, offering a substantial benefit for businesses investing in equipment or technology.

🔍 doola’s lens: Don’t just “pick the form you think you need. Your tax form choice should align with your long-term business goals (3-5 years), especially if you anticipate outside investment, mergers and acquisitions (M&A), or structural changes.

Step 3: Complete Your Business Tax Forms

All business returns require basic information: business name, address, and Employer Identification Number (EIN). 

You’ll also need your profit and loss statement to report income and deductible expenses such as advertising, office expenses, wages, and contractor costs.

Be especially mindful of the “Other Expenses” line, where you can deduct all ordinary and necessary business expenses not listed elsewhere. 

Missing items here could cost you deductions and increase your tax bill. On the other hand, claiming non-deductible expenses could trigger IRS issues.

Other Key Tax Return Areas to Check:

• Qualified Business Income (QBI) Deduction: Up to 20% of qualifying income (Form 8995).

• Accounting Method: Cash basis (report income when received) vs. accrual basis (report when earned). This choice can significantly affect your taxes.

• Material Participation: Determines whether your income is passive or active,  important because they’re taxed differently.

Remember: tax avoidance (legal) is different from tax evasion (illegal). Strategic tax planning can change your facts and reduce your tax bill legally. 

Have your CFO treat the tax return as a management report,  a condensed operational map that signals performance patterns to both investors and regulators.

Step 4: File an Extension If Needed,  But Understand the Limits

An extension buys six more months to file, not to pay.

• Failure-to-File Penalty: 5% per month (max 25%).

• Failure-to-Pay Penalty: 0.5% per month (max 25%) 

Source: IRS Penalties

Extensions are tactical in scenarios like delayed K-1 arrivals or pending tax law changes.

In FY 2024, the IRS still collected $120.2 billion in unpaid assessments,  a reminder that filing late without paying is a costly mistake. 

🔍 doola’s lens: Use extensions to improve accuracy, not as a cash management tactic. Build estimated tax payments into your working capital plan so an extension is a timing shift, not a liquidity scramble.

Step 5: Pay Taxes on Time and in Full

The IRS issued 46 million penalty assessments in FY 2023, totaling $66 billion. 

For a first-time filer, that number is a clear warning: missing your tax payment deadline is not a small mistake. Late payments trigger interest and penalties that compound month after month, eroding profit margins.

And the financial cost is only part of the story. Chronic late payment signals operational weakness to lenders, investors, and potential partners. In a first-year business, those perceptions can close doors before you even knock.

Here’s what you should do:

• Plan for taxes in advance. Build tax payments into your quarterly cash flow forecasts, just like payroll or debt servicing. This ensures funds are earmarked and available when due.

• Run a mock return early. If you haven’t been making estimated tax payments during the year, run a mock return immediately after year-end close to calculate your likely liability.

• Pay before the deadline. Submit payment for the expected amount before the filing date to stop interest from accruing and avoid the failure-to-pay penalty.

🔍 doola’s lens: In your first year, this isn’t just about staying on the right side of the IRS. Timely tax payment is a credibility signal. It tells capital providers, partners, and regulators that your business is disciplined, financially sound, and run with foresight.

If you’d rather not manage quarterly forecasts, mock returns, and IRS payment scheduling in-house, doola’s tax and bookkeeping teams can handle the end-to-end process for you.

Book a demo to know more!

Step 6: Decide How You’ll File, and Set the Standard for Every Year After

Okay, so you’ve done all the hard work to get ready for tax season. 

Now, you just need to figure out how you’re going to actually send in your taxes, and whatever you decide now will be important for every year after.

You have a few choices:

• Hire a professional accountant/CPA?

• Use a special service that handles tax filing for businesses?

For a new business owner, this isn’t just about how much it costs. This is your first big test of how well you handle your money matters in public. How you file your taxes this first year will affect:

• How much tax you pay this year (and if you miss out on any ways to pay less tax).

• How ready your financial records will be for an audit (when the tax authorities check your books) in the future.

• How much trust banks, investors, and even people who might want to buy your business will have in your operations.

Your 3 Options for Filing

To help you decide, ask yourself these 3 questions:

• Do I have enough time and feel confident enough to handle all the complicated tax filing myself? If you answer yes, doing it yourself might work. But think about how much your time is worth compared to how much money you might lose by missing out on tax deductions.

• Is my business setup or how much money I make complicated enough to need a specialist? If yes, hiring a CPA or a good tax filing service will definitely be worth the money.

• Do I want a process I can repeat every year without one person being the only one who knows how to do it? If you answer yes, a service that combines your bookkeeping (keeping track of your money) and tax filing, like doola, will give you consistency and good financial habits.

Why Many New Business Owners Choose doola

For most first-year business founders, the real problems aren’t the tax authorities, but rather wasting time and making avoidable mistakes.

doola can help you in these ways:

• Preparing your federal and state business tax returns.

• Reviewing and tidying up your financial records before filing.

• Finding all the tax deductions you’re allowed (which can often save you 10 to 20 times more than the service fee).

• Submitting your taxes to the IRS and relevant state agencies.

• Sending you reminders all year long about important compliance deadlines, so they don’t surprise you.

Step 7: File & Pay Taxes

This step covers the actual submission of your completed federal and state tax returns and the payment of any taxes you owe. 

It includes how to file electronically, how and when to make your payments, what to do if you can’t pay in full, and what to expect after filing.

1. File Federal Taxes

File electronically through your CPA, doola, or approved IRS software. Enter your EIN, legal business name (exact match to IRS records), business address, return data, and supporting schedules like depreciation tables, partner K-1s, or your “other expenses” breakdown.

Once submitted, the IRS will send an acceptance code within 24–48 hours,  keep this as proof of timely filing.

2. File State Taxes

Requirements vary: some states have no income tax; others require a separate filing.

Log into your state tax portal, enter your business ID, confirm your federal income figures, and apply any state-specific adjustments. Electronic filing is strongly recommended to avoid processing delays and errors.

If You Can’t Pay in Full

For shortfalls under 120 days, request a short-term plan via IRS.gov,  no setup fee.

For longer-term needs, apply for an installment agreement (up to 72 months). Interest and penalties still accrue, so pay as much upfront as possible.

After Filing

You’ll receive confirmation from the IRS or your state tax agency once your return is accepted. Refunds typically arrive within 21 days from the IRS; state timelines range from 2–6 weeks.

If you still owe, expect a notice (such as IRS CP14) detailing your balance, interest, and penalties,  pay promptly to avoid further charges.

🔍 doola’s Lens: This is the final checkpoint in your first-year tax process. File early to avoid system delays, pay on time to protect your credibility, and keep all confirmations in one secure place so you’re always audit-ready.

Avoid (and Fix) Common First-Time Filing Mistakes

For first-time business tax filers, the most damaging tax mistakes are rarely about obscure accounting rules. They’re about missed deadlines, inaccurate records, and procedural oversights. 

And, these errors can cost thousands in penalties and, worse, undermine your credibility with tax authorities and financial stakeholders.

Mistake #1: Missing Federal or State Deadlines

The IRS failure-to-file penalty is 5% of unpaid taxes per month, up to 25% of the balance. The failure-to-pay penalty adds 0.5% per month (max 25%). States impose similar or even harsher penalty schedules.

How to prevent it:

• Use a central compliance calendar with federal and state deadlines clearly marked.

• Set multiple reminders, at least 30 days, 7 days, and 1 day before each due date.

• File early to leave room for last-minute e-file rejections or technical issues.

If you discover it late:

• File as soon as possible. Penalties accrue daily.

• Pay as much as possible upfront to stop interest from compounding.

Mistake 2: Mixing Personal and Business Expenses

The IRS requires you to prove that every deduction is both ordinary (common in your line of business) and necessary (helpful for running your business).

When personal and business spending are mixed, it’s harder to make that case. In an audit, this lack of separation can lead to deductions being disallowed, and it often forces the auditor to dig deeper.

For LLCs and corporations, the risk goes beyond taxes. Commingling funds can weaken your limited liability protection,  making it easier for a court to “pierce the corporate veil” and hold you personally responsible for business debts or lawsuits.

How to prevent it:

• Use accounting software that automatically flags charges that look personal.

• Review your expense categories monthly so errors don’t pile up.

If you’ve already mixed personal and business expense, here’s what you MUST do:

• Go through your records and identify any personal charges.

• Reclassify them in your books and remove them from your deduction totals before filing.

• Keep a written log of what was corrected and when, this documentation can be useful if questions come up later.

Remember, for a first-year business owner, separating finances isn’t just about cleaner books, it’s a credibility signal.

Investors, banks, and even potential partners see a well-kept business account as evidence of professionalism and operational maturity.

Mistake 3: Incorrect Entity Type or Filing Status

You might be running your business as an LLC but still filing as a sole proprietor because you never formally elected S-corp status, leaving payroll tax savings on the table. 

Or you might believe you’re an S-corp because your accountant “set it up,” only to discover the IRS never processed your Form 2553. 

In some cases, a business that has been dissolved at the state level continues filing as a C-corp, creating a “ghost entity” situation that can trigger penalties and extra compliance headaches.

All of these situations come under grave mistake. And, the consequences go beyond the obvious risk of a rejected return.

The IRS gives certain tax breaks only in the first year of electing a new status (e.g., late S-corp relief, special depreciation rules). 

Filing under the wrong status can lock you out permanently.

Plus, if your state records list one entity type while the IRS has another on file, you may be required to file returns for both classifications until the mismatch is resolved, effectively doubling your preparation costs and compliance workload

How to prevent it:

✅ Verify IRS records annually: Call the IRS Business & Specialty Tax Line (800-829-4933) and confirm your entity classification on file. Don’t assume your EIN letter from years ago is still valid after elections or reorganizations.

✅ Cross-check with state filings: Your Secretary of State’s business database will show your legal entity status. If your state says “inactive” or “dissolved,” you can’t keep filing as if you’re active without fixing it.

✅ Track election timelines: Form 2553 (S-corp election) must generally be filed within 2 months and 15 days of the start of the tax year. Missing this window means you default to your old classification unless you apply for late election relief.

How To Correct A Wrong Entity Type Or Filing Status After Submission

If you’ve already filed under the wrong entity type or status, you need to move fast to stop the problem from spilling into future filings and compounding across federal and state systems.

Here’s what you should do in such situations:

📌 Call the IRS Business & Specialty Tax Line (800-829-4933) to confirm whether your current-year return has been processed. If it’s not processed yet, you can refile immediately under the correct entity type with an explanatory cover letter referencing your EIN, the original filing date, and the correction reason.

📌 Prepare an amended return using the correct form (Form 1040X for individual returns with Schedule C, Form 1120X for corporations, or the state equivalent). Include a clear statement explaining the misclassification, the correction, and any elections you intend to make.

📌 File the missing election form (e.g., Form 2553 for S-corp status) with a Late Election Relief request under Rev. Proc. 2013-30. Attach supporting evidence showing reasonable cause. This could be dated incorporation documents, payroll setup records, or signed shareholder agreements proving you operated as the elected entity from the start of the year.

📌 Keep a copy of the incorrect return, the corrected return, all correspondence, and proof of submission. Save IRS or state acceptance notices for the amended filing in your compliance folder.

💡 doola’s Emergency Action Checklist ( If You Spot a Filing Error) 1. Assess The Urgency Determine if it’s a missed deadline, a payment shortfall, or a factual/classification error. The type of mistake dictates the speed and method of correction. 2. Stop Penalties From Growing If the filing is late, submit immediately. If taxes are owed, pay as much as you can right away, even partial payments reduce interest and penalty accrual. 3. Document The Error Record when and how the mistake was found. Keep receipts, correspondence, and any relevant system logs,  these are vital if you request penalty abatement or face an audit. 4. Correct The Filing File an amended return, submit missing forms, or reclassify transactions. Reference the original filing when making corrections to ensure clarity for tax authorities. 5. Communicate With Your Tax Partner If you’re working with a CPA or doola, inform them immediately so they can prepare amendments, handle submission, and manage follow-ups with the IRS or state. 6. Prevent Recurrence Set multiple reminders for key dates, keep your books current, and conduct annual compliance reviews to catch potential errors before filing season.

How doola Makes First-Time Filing Easy

Whether you’re forming an LLC or a corporation, and whether you’re based in the U.S. or overseas, doola streamlines your entire first-time tax filing process from start to finish.

Onboarding & Information Gathering

You provide your entity details (LLC, C Corp, S Corp, or partnership), EIN, state of registration, prior-year returns (if any), and financial data.

If you’re using doola Bookkeeping, your records sync automatically to ensure accuracy and completeness.

Federal & State Filing Setup

doola identifies the exact IRS and state forms you need,  such as 1040, 1120, 1120-S, 1065, 5472, Schedule C, and K-1s.

If applicable, sales tax registration is initiated in your primary state, and reseller certificates are obtained for eligible e-commerce businesses.

Preparation & Tax Consultants Review

Licensed CPAs prepare your returns, applying every eligible deduction and ensuring full compliance with IRS and state regulations.

Submission & Confirmation

doola files your federal and state returns electronically, and you receive official submission confirmations from both the IRS and your state tax authority.

How doola Reduces Risk and Maximizes Deductions

In your first year of filing, avoiding penalties and optimizing savings is as critical as meeting the filing deadline. doola’s integrated approach covers both:

• Penalty protection: Prevents costly IRS fines, including $25,000 for late Form 5472/1120 filings and $250 per Form 1099.

• Specialized for E-Commerce: Sets up sales tax compliance and reseller certificates for Shopify, Amazon, and Etsy sellers.

• Global accessibility: Designed for founders without a U.S. SSN or physical presence, making U.S. compliance accessible worldwide.

• Integrated compliance:  Bookkeeping and tax filing work hand-in-hand, ensuring accurate deductions and audit-ready records.

Sign up today and see how doola can make your first filing stress-free, penalty-proof, and optimized for maximum savings.

FAQs

When is my first business tax return due?

For most businesses, federal returns are due March 15 for S-Corps and partnerships, and April 15 for sole proprietors and C-Corps (if on a calendar year). States may have different deadlines, so always check both.

What tax forms do I need for my LLC?

It depends on how your LLC is taxed:

• Single-member LLC: Schedule C with your personal Form 1040.

• Multi-member LLC: Form 1065 plus K-1s for members.

• If elected S-Corp status: Form 1120-S.

Can I file business taxes without an accountant?

Yes. The IRS e-file and state portals allow DIY filing.

However, an accountant or service like doola can help avoid costly mistakes, ensure compliance, and maximize deductions.

Do I need to pay quarterly estimated taxes in my first year?

If you expect to owe more than $1,000 in taxes, yes, even in year one. The IRS expects payments in April, June, September, and January.

What if I missed my first filing deadline?

File as soon as possible to reduce penalties and interest. The longer you wait, the more it compounds. You may also be eligible for a one-time penalty abatement if you have a clean record.

How do deductions work for a home-based business?

You can deduct the portion of your home used exclusively for business, calculated by square footage or the simplified $5/sq. ft. method (max 300 sq. ft.). Keep utility and rent/mortgage records to substantiate the claim.