Tax Reporting for the First Year

Most businesses do not start on January 1, so the first year of business may be a “short year” (less than a full 12 months). From a tax-reporting standpoint, a return must be filed for the short year. For example, if a business that reports on a calendar-year basis starts to operate on August 10, 2012, it must file a return for 2012. It does not have to prorate deductions for the period in which it operates.

Indicate on the appropriate tax return that this is the first year of the business. This is done as follows:

  • Schedule C—Line H
  • Form 1065—Line H(l)
  • Form 1120S—Line F(l)
  • Form 1120—Line E(l)

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