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Starting your own business can be exciting but filing your taxes as a first time business owner can be down right nerve wracking. If you’ve never waded into the arena of business taxes before, you may find that you are more than a little apprehensive and in need of some help.

One of the decisions you will need to make when preparing your tax returns as a first time business owner is which type of accounting basis you want to use. You have two options and they are a cash accounting basis or accrual basis. Before you randomly choose one, be aware that each has its own advantages and disadvantages. Furthermore, the type of basis that you select could well depend on the type of business that you operate.

With the cash accounting basis, income is counted when it is collected and expenses are counted when they are paid. The cash basis works well when receivable income exceeds expenses; generally with a business that has been established for some time.

With the accrual basis income is counted when it is earned and expenses are counted when they are incurred. The accrual basis works well because it allows a business to take unpaid expenses as deductions at the end of the year. This is ideal for a new business that very well may have more outstanding expenses at the end of the year than income.

In choosing which method you would prefer to use, be aware that you will generally be required to stick with whichever method you choose for the duration of your business. Furthermore, if you are operating a business with a large inventory or a business that is already taking in a large amount of revenue, you may be required to choose the accrual method. Be sure to check with your accountant to find out exactly which method would work best for your situation.

You will also need to make a decision regarding which depreciation method you would like to use. Generally, you will need to decide whether you want to take a first year deduction on most equipment and furniture or spread it out over the course of several years. Which depreciation method will work best for your situation will depend on several factors. First, in order to take a depreciation deduction you must have profits. Second, you will need to decide whether it will benefit you most to take the deduction now or spread it out during future years when your business may have more income and be in a higher tax bracket. Third, always check the rules on depreciation for any piece of equipment or furniture because some items have very specific regulations that will limit your choices.

Finally, one of the most popular deductions for many business owners is the home office deduction and as long as you can realistically take this deduction there is no reason why you shouldn’t. Just be aware that there are rules you must follow in order to take this deduction without unknowingly breaking the rules.

First, you need to measure the square footage of your entire home and then measure the square footage of the space within the home that is used for business. Keep in mind that this area must be used exclusively for business. This is the percentage of the home that is dedicated for business use and can be used for a deduction. Items that count are the percentage of the real estate taxes and mortgage interest. You may also be able to count home repairs under certain conditions as well as landscaping.