Tax season can be a nightmare for most business owners. One small mistake can cause you to pay additional taxes, interest, penalties and fees. It’s not surprise that many taxpayers make some mistakes every year. However, for business owners, these mistakes can lead to hefty penalties and delay refunds. To make your tax season less stressful Gurian CPA has compiled a list of common tax preparation mistakes that every business should avoid. Save your hard earned money by avoiding these common accounting and tax mistakes a lot of business owners make.
1. DIY Approach
As a business owner or self-employed, you most likely prefer the DIY approach for preparing taxes. Although, if you’re not aware of your deductions and latest tax rules, then this may not be the best approach for your business taxes. While you’re an expert in your line of business, Gurian CPA is an expert in ours. It is always advised to have a tax and accounting professional handle your business accounting and taxes to ensure that everything is done correctly. Which leaves you more time to do what you do best, run your business!
2. Wrong Income Reporting
If you are incorrectly reporting your income, you’re sending an invitation to the IRS for an audit. The best practice is to accurately and genuinely update all records of your payments. This is another example of why hiring an expert can be more beneficial when it comes to your business taxes and accounting. We understand how hectic it can be to run our business, so allowing a professional to handle your taxes and accounting is just one less thing you have to worry about as a business owner. Although there is no way to 100% proof your return in order to avoid an audit, Click Here for some tips to reduce your chances of being audited by the IRS.
3. Misclassification of Employees and Contractors
This is also another big red flag that can trigger a tax audit from the IRS. Independent contractors are not employees and each will fill out different tax form when it comes to filing their taxes. Independent contractors will fill out a 1099 form and your actual employees will fill our a W2 form.
4. Payroll Mistakes
A mistake in the calculation of IRS payroll deductions may create havoc in your business. Be sure to get accurate and precise information regarding your employees and the taxes owed in order to file your payroll taxes correctly. Clients at Gurian CPA already have this covered when they take advantage of our payroll services.
5. Mixing Business and Personal Expenses
Not keeping track of your business and personal expenses and keeping them separated will almost always create a mess when it comes time to file your business taxes. Gurian CPA always advises that you have a separate card or accounting that is used for business expenses. By making sure that you have your business and personal expenses separated, ensures that filing your business taxes is seamless and leaves no worry that you’ve mixed your expenses. This is the most important tax preparation mistakes every business should avoid.
6. Not Taking Tax Credits
Although less popular than tax deductions, tax credits are still very powerful and should be considered.
If you’re in the 25% tax bracket, a $1,000 tax deduction can save you $250, while a $1000 tax credit can save your the full $1,000.
Click Here to view all eligible tax credits your business is able to claim.
7. Delay in Filing and Paying Your Taxes
Make sure to file your taxes before the deadline and to file for an extension if needed. Arrange your payments timely by making quarterly estimated payments in advance to ensure early refunds as well. Estimated quarterly tax payments are due in April, June, September and January. A delay in filing and paying your taxes can be the most costly mistake of all. Click Here to see important tax deadlines for this current tax season.
The above tax mistakes are commonly made by many business owners. Gurian CPA wants to ensure that you and your business are on top of your taxes this year, and that you’re not making the same mistakes that many business owners before you have made. By avoiding these common tax mistakes for business owners your tax filing season should be a little less stressful. Be sure to contact your local tax professional with additional questions or assistance with any tax situation that may arise!
By Paige Knight
