5 Common Small Business Tax Filing Mistakes to Avoid
When you own a small business, the tax season is a time that you should be extremely nervous about. There are a lot of rules and terms you should follow to successfully file tax returns with the right amount of money owed. Or you could end up owing more money than you should.
To understand how to avoid common tax filing mistakes, you need to know what they are and how you can be aware of them.
Keep reading to determine which small business tax filing mistakes you should look out for.
1. Failing to Send the Proper Form
Tax forms may vary depending on the type of business and its size. As a business owner, you must ensure your tax forms are up-to-date and accurate to avoid an audit or penalty. Filing the wrong form can lead to fines, interest, and other expenses.
To ensure the proper form is completed and sent to the Internal Revenue Service (IRS) on time, you should become familiar with the various forms, contact your accountant or tax advisor, or use a tax software program.
2. Underreporting
Underreporting is one of the most common small business tax mistakes to avoid. Underreporting is a form of tax fraud where someone intentionally or unintentionally omits income from a tax return.
This typically happens when businesses do not report all their income or do not accurately report their expenses. As a business owner, it is essential to always accurately and truthfully report all income, deductions, and expenses on tax forms.
3. Mixing Your Personal and Business Expenses
When you mix the two kinds of expenses, it becomes difficult to track income and expenses for your business accurately. This can draw the attention of the IRS and other tax authorities and put your business in a position to face expensive penalties and audits.
To avoid this problem, keeping your business and personal expenses separate is essential. Work with your accountant to set up an accounting system that allows you to track the company’s cash flows clearly.
4. Poor Recordkeeping
Poor recordkeeping is one of the most common small business tax filing mistakes to avoid. Proper recordkeeping includes keeping accurate tax records, invoices, receipts, and other important documents related to business taxes.
To avoid this, you should set up systems for tracking expenses, regularly review your financial records, and prioritize filing for taxes two-three weeks before the deadline.
5. Not Hiring an Accountant
Not hiring an accountant is a significant mistake many small business owners make when it comes to filing taxes. Without the help of a professional Accountant & Tax Prep, small business owners can easily make errors.
An accounting professional can ensure that taxes are properly filed, deductions are correctly applied, and that business owners are taking advantage of any changes to the tax code.
Avoid These Common Small Business Tax Filing Errors
Common small business tax filing mistakes can be avoided through proper planning and understanding of the tax laws. By properly utilizing resources and asking questions when necessary, you can reduce the risk of making costly filing mistakes.
Take advantage of the resources available and commit to doing your taxes right. Don’t wait – get started on your taxes now!
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