The first tax year of a new business sets patterns — some that save money, some that create problems that take years to unwind. Getting your tax foundation right from day one is far cheaper than correcting mistakes after the fact.
This guide covers what every new Utah business owner needs to understand before the end of their first year: how to register correctly, what startup costs you can deduct, how to pay taxes during the year, and the planning moves that matter most when you’re just getting started.
Starting a new business in Utah? Call (801) 927-1337 or email admin@cpaone.net before you file anything.
Step 1: Get Your Tax Registrations Right
Before you generate revenue, certain registrations are required:
Federal Employer Identification Number (EIN)
An EIN is required for any business with employees, any business filing a partnership or corporation return, and any LLC with more than one member. Even single-member LLCs benefit from having an EIN to open a business bank account and keep business and personal finances separate. Apply free at IRS.gov — takes 5 minutes, issued immediately.
Utah State Tax Commission Registration
If you have employees or collect sales tax, register with the Utah State Tax Commission through their online portal (tap.utah.gov). This registers you for state income tax withholding and/or sales tax reporting.
Utah Workforce Services (if you have employees)
Register for a Utah Employer Account Number (EAN) to pay state unemployment insurance (SUTA). New employers receive an assigned SUTA rate; the rate adjusts annually based on claims experience.
Utah Division of Corporations
If you’ve formed an LLC or corporation, you’re already registered. Annual renewal ($20 for LLCs) is required each year on the anniversary of your formation.
Local Business Licensing
Many Utah cities require a local business license. Kaysville, Salt Lake City, Provo, Orem, and other municipalities each have their own licensing requirements and fees. Check with your city before you open.
Step 2: Deducting Startup Costs
The IRS treats costs incurred before your business officially opens differently from costs incurred after. Understanding this distinction saves money on your first return.
Startup Costs (IRC § 195)
Pre-opening expenses incurred to investigate or launch the business — market research, travel to scout locations, professional fees for business plan development, pre-opening advertising. You can deduct up to $5,000 of startup costs in your first year, with the remainder amortized over 180 months (15 years). The $5,000 immediate deduction phases out dollar-for-dollar when total startup costs exceed $50,000.
Organizational Costs (IRC § 248 / § 709)
Costs to form the entity itself — state filing fees, attorney fees for drafting articles of organization or operating agreements. Same treatment: up to $5,000 immediately deductible, remainder amortized over 180 months.
Practical example: If you spent $8,000 in startup costs and $3,000 in organizational costs before opening:
- Year 1 immediate deduction: $5,000 (startup) + $3,000 (organizational, under $5,000 threshold) = $8,000
- Remaining $3,000 of startup costs: amortized at $200/year over 15 years
Document everything with dates. The IRS distinguishes between costs incurred while investigating whether to start a business (amortizable) vs. costs incurred after the decision to open was made (potentially currently deductible). We review startup cost documentation during your first return to maximize the deduction.
Step 3: Choose Your Accounting Method
Your first tax return locks in your accounting method — changing it later requires IRS permission (Form 3115). The two primary methods:
Cash Basis
Income recognized when received; expenses deducted when paid. Simpler; matches actual cash flow. Available to most businesses with average annual gross receipts under $30 million. Most service businesses and small retailers use cash basis.
Accrual Basis
Income recognized when earned (regardless of when paid); expenses deducted when incurred (regardless of when paid). Required for C-Corps over $30M in revenue and for businesses with inventory that sell products. Better matches economic activity; required for GAAP financial statements.
For most Utah startups, cash basis is the right choice — simpler, and it allows some timing flexibility in your first few years.
Step 4: Estimated Quarterly Tax Payments
New business owners frequently receive a surprise tax bill in April. The reason: no employer is withholding taxes on business income. You’re responsible for paying throughout the year.
If you expect to owe $1,000 or more in federal tax, you must make quarterly estimated payments. The penalty for underpayment is modest (based on the federal short-term rate + 3%) but compounds, and the April catch-up creates cash flow strain.
Federal 2024 estimated tax payment due dates:
| Payment | Due Date |
|---|---|
| Q1 | April 15 |
| Q2 | June 17 |
| Q3 | September 16 |
| Q4 | January 15, 2025 |
Utah estimated tax payments are due on the same dates.
First-year safe harbor: In your very first year, there’s no prior-year tax to base payments on. We calculate your projected current-year tax liability and set a quarterly payment schedule that keeps you out of penalty territory.
See our quarterly estimated tax guide for a full breakdown of how estimated payments work.
Step 5: First-Year Tax Planning Opportunities
Section 179 Equipment Expensing
Any equipment, computers, furniture, or software you purchase and place in service during your first year can potentially be fully expensed under Section 179 rather than depreciated over 5–7 years. This front-loads your deductions into Year 1 — particularly valuable if you have other income (a day job, a spouse’s income) against which to offset startup losses.
Vehicle Expense
If you use a personal vehicle for business, document every business mile from the moment the business begins. The 2024 standard mileage rate is 67 cents/mile. Alternatively, deduct actual vehicle expenses proportional to business use. Either method requires a contemporaneous mileage log — a reconstructed log prepared at year-end is not accepted under audit.
Home Office Deduction
If you’re starting a home-based business with a dedicated workspace, document the square footage from day one. The home office deduction is available from your first month of business — don’t wait.
Health Insurance Premium Deduction
Self-employed business owners can deduct health, dental, and vision insurance premiums paid for themselves and their families as an above-the-line deduction. This deduction applies as soon as you have health insurance and net business income — it doesn’t wait until you’re profitable.
Retirement Plan Setup
Even in a low-income first year, setting up a retirement plan signals to the IRS you’re running a legitimate business and creates a tax-advantaged savings vehicle. A SEP-IRA is the simplest option — contributions can be made up to the tax return due date including extensions.
Common First-Year Tax Mistakes
- Not opening a separate business bank account — mixing personal and business transactions creates bookkeeping nightmares and weakens the argument that your business is a legitimate operation
- No mileage log — the IRS requires contemporaneous records; receipts and calendar notes prepared from memory at tax time are not sufficient
- Missing the quarterly payment schedule — the first April is often a shock; we set up payment plans for every new client
- Treating startup losses as automatic — losses in your first year can be deducted, but the IRS looks closely at businesses that consistently report losses; “hobby loss” rules (IRC § 183) disallow deductions if the activity is not engaged in for profit
- Forgetting to track basis — for LLC and S-Corp owners, basis tracking starts in Year 1; errors that start early compound
Start Your Business With the Right Tax Foundation
The decisions made in your first year of business have a long tail. Get them right from the beginning.
Call (801) 927-1337 | Email admin@cpaone.net | 612 N Kays Dr Suite 120, Kaysville, UT 84037
Related Guides:
- LLC Tax Guide: Filing & Planning
- Choosing the Right Business Entity Structure
- Essential Checklist for Launching a Business
- Guide to Estimated Quarterly Tax Payments
- New Business Launch Advisory
Author Bio | Missy Dennis, CPA | Partner | FJ & Associates, PLLC | Kaysville, Utah
Missy holds a Master of Accounting degree from the University of Utah and is a licensed Certified Public Accountant. She is committed to providing clear, accurate, and actionable guidance so clients can navigate complex financial decisions with confidence. With more than twenty years of public accounting experience, Missy Dennis specializes in: Tax preparation and tax advisory; Bookkeeping strategy alignment; Estate and trust taxation; Audit and consulting services; Low-income housing tax credits; Non-profit accounting; Small- and mid-sized business advisory.
