If you started a new company in the last twelve months, chances are you’ve had a crazy year. You’ve been hustling hard to get your business up and running, and now you’re about to hit a major (and majorly important) milestone: your company’s first tax season.

If this is your first time founding a business, then it’s probably also your first time dealing with business taxes. This can seem overwhelming, but don’t panic. Here are the steps you’ll need to take to get everything buttoned up (and get you back to running your business).

Step 1: Close Your Books

“Closing the books” means finalizing your financial reports for a certain period – in this case, the fiscal year. It’s critical to do this before you tackle your taxes. Until the books are closed and the final numbers are confirmed, you’re essentially working from estimates. And if there’s ever a time you need your numbers to be confirmed correct, it’s when you’re filing your taxes with the IRS.

When you close your books, you’ll transfer your net income or loss for the year from your profit & loss (P&L) sheet into a permanent entry in your balance sheet, and zero out the P&L sheets so you can start fresh for the new fiscal year. The actual process involves reconfirming your balance sheet items (are your asset and liability balances correct? Have you recorded depreciation against all your assets? Are there any math errors?), recording any 2019 expenses or revenue which haven’t been paid or received, and tying up any loose ends for the year (are all your transactions categorized?).

How long does it take to close your books? Well, it really depends on the condition your books are in when you need to close them. If you’ve been running a tight bookkeeping ship (or paying someone else to do it for you), then year-end close may only take a few weeks. Your books will already be clean and accurate, and closing will just be a matter of double-checking work and then making some final adjustments.

If you’ve been letting things slide, however, then closing the books may be a much larger task. Running a business is a huge undertaking, and it can be easy to let something like bookkeeping fall into the “do it tomorrow” category (sometimes for weeks at a time). Unfortunately, tax time is when all that deferred work comes due. 

It may be stating the obvious, but the easiest, most-cost effective way to avoid a huge, disruptive headache at tax time is to not let your books get problematic in the first place. It’s worth the effort to stay on top of your bookkeeping throughout the year. If you can’t (or just don’t want to), hire someone who will. It’ll be worth it every tax season.

Once the books are closed, it’s time to move on to the taxes themselves.

Step 2: Determine Which Taxes You Owe

Paying your personal taxes is fairly straightforward: you owe taxes to the federal government, and also to the state (unless you live in a state with no income tax). For businesses, the situation can be more complex.

Businesses also owe federal and state taxes, of course. If you’re an S-Corp, these are due March 15, and if you’re a C-Corp they’re due April 15, just like your personal taxes (though you can get an extension – more on that later). Even if your business is pre-revenue, you’ll still need to file these returns. However, there may be other taxes that your business is required to pay, depending on its location and status.

Some cities also tax businesses that operate within them. San Francisco and New York are both examples of cities with their own business taxes – if you have a presence in these cities, you’ll need to file and pay the additional tax (and note that you’re likely to owe this whether you’re pre-revenue or not). Depending on where you incorporated your company, you may need to pay taxes there as well. Delaware, for instance, is a popular state for companies to incorporate in – and also requires those companies to pay a franchise tax.

Be certain to carefully research tax requirements for your specific geography and company type, so you can make sure you don’t miss any necessary filings. Making a mistake here can cost you a lot in penalties, so if you don’t have the time to do this yourself, hire a professional to do it. 

Step 3: File For an Extension if You Need It

As we noted above, if you’re an S-Corp, your federal taxes are due 3/15, and if you’re a C-Corp they’re due 4/15. However, the IRS also allows businesses to file for an automatic six month extension.

If there’s any question at all about whether you’ll be able to get your taxes ready and filed by the standard deadline, then it’s a good idea to ask for the extension. The extra six months will give you time to close your books properly (including any catch-up work if you haven’t been keeping up with it), and to put together a filing with complete confidence that your numbers are correct. Note that there’s no penalty or negative connotation to getting an extension – in fact, it’s commonly considered standard practice.

If you’re planning to claim complex, significant tax credits, like the R&D Tax Credit, then filing for the extension is an especially good idea. These credits can save you a lot of money, but they also require a significant amount of documentation to support your claim in case of an audit. If you’re going to claim one on your filings, then it’s worth it to take the extra time to make sure you get it right.

Step 4: Pay on Time

This part might go without saying, but step 4 is to pay any applicable taxes on time. But wait, you might think, you got the extension from Step 3! Doesn’t this mean you don’t have to pay anything until your extension date? 

Actually, no.

If you get the extension, then you don’t need to file your final tax return until the extended date (September for S-Corps, October for C-Corps). However, you’ll still need to make any estimated payments by the March/April 15 date. If you finish your final returns and discover that your estimate was incorrect, you can then either get a refund or pay the difference when you file the full returns.

If this all sounds complex, well, it is. There are a lot of things to pay attention to, and combined with common nervousness about taxes, it can all seem overwhelming. With some advanced planning and careful attention to detail, however, you can get your books closed, your tax obligations figured out, and your filings in the mail by the deadlines (and if you just don’t have time and energy to do it, you can always hire a pro to do it for you.)

And after that? Pat yourself on the back for surviving a rite of passage – and then get back to growing your business.