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The first tax season is always frustrating for many new home-based business owners. They fought tooth-and-nail all year to make a profit, only to find that it may be cut in half by the IRS.

Knowing what your tax liability is going to look like come April 15th, is key to avoiding a painful tax bill, as well as an emotional meltdown. By planning properly, you can set-aside the funds you need, as well as take advantage of some of the unique deductions for small-business owners.

Let's start with a list of the painful surprises:

1. Self-Employment Tax. There are many joys to be one's own boss, but making both the employer and employee contribution to the Social Security system is not one of them. Most people don't even realize that when they see money go out of their paycheck to "FICA", that their employer also has to make a matching contribution. The total amount of 15.3% must be contributed of the profit made by small-business owners.

2. Sales Tax. Depending on the state and county you live in, you may be required to collect sales tax on goods you sell. If you don't collect the required amount, or don't set it aside, the year-end letter from your local tax authority can be a killer. In California, state and local sales tax runs 7 - 8.25% of total sales, not just the profits.

3. Quarterly Estimated Payments. Small business owners are required to file a "Schedule C" as part of their household's annual tax return. But, if you are making any profits at all, you are likely required to submit a portion of your estimated annual profit in advance. These estimates take the place of the withholding you'd see on a normal paycheck. Failure to file them on a quarterly basis throughout the year can result in a noticeable penalty.

4. Getting audited. Households with a home-based business have a noticeably high rate of getting audited than households that don't. Make sure you keep adequate records of all your costs and revenue, or the IRS will have a field day with you.

5. Your Marginal Tax Bracket. For non-incorporated businesses, the IRS figures the tax on your profits based on your household's entire income. So if your spouse has a job that pays well, and you already are in a high tax bracket, that same bracket will apply to the net income from your business.

But, it's not all painful. The IRS offers some great opportunities to home-based owners to lower their tax bite.

1. The Section 179 Deduction for Equipment. Normally when you buy equipment for your business (not inventory), you

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