Posted on March 16, 2023.
As a small business owner, you know that taxes can be a daunting task to navigate. From keeping track of expenses to filling out forms, the process can be overwhelming. Unfortunately, mistakes can be costly and can even trigger an audit. Here are five common mistakes small business owners make with their taxes and how to avoid them:
One common mistake is misclassifying employees as independent contractors. Independent contractors are not subject to payroll taxes, but employees are. The distinction is based on the degree of control the business has over the worker. Misclassifying can lead to hefty penalties and back taxes.
To avoid this mistake, familiarize yourself with the IRS guidelines for classifying workers and keep detailed records of each worker's status.
Another mistake is failing to keep accurate records of income and expenses. Without proper records, it's easy to miss deductions and overpay taxes. Poor record-keeping can also raise red flags during an audit.
To avoid this mistake, keep detailed records of all income and expenses. Consider using accounting software to make the process easier.
Small business owners often overlook deductions they're entitled to take. Common deductions include business-related expenses, such as supplies and equipment, and home office expenses.
To avoid missing deductions, consult with a tax professional or do your research on the deductions you're entitled to take.
Mixing personal and business finances is a common mistake that can lead to confusion and raise red flags during an audit. It's important to keep separate bank accounts and credit cards for business and personal use.
To avoid this mistake, keep your personal and business finances separate, and keep detailed records of all business-related transactions.
Failing to file taxes on time can result in penalties and interest charges. It's important to mark tax deadlines on your calendar and plan ahead to ensure you have everything you need to file on time.
To avoid this mistake, set reminders for tax deadlines and stay organized throughout the year.
In conclusion, taxes can be a complicated process for small business owners, but avoiding these common mistakes can save you time, money, and hassle. If you need help with your taxes, don't hesitate to reach out to Bigfoot Tax Service. I can help you navigate the process and ensure you're not leaving any money on the table.
Contact me today at (530) 340-1410 to learn more about my services or to schedule a consultation.
Don't let tax preparation and financial planning slow down your business. At Bigfoot Tax Service, we offer trailblazing financial solutions to keep your business moving forward.
Contact us today and book your free consultation!