Small business tax mistakes
Whether you like it or not, you always need to file taxes, and you have to do it on time to prevent penalties. You also have to make sure that everything is accurate as well, otherwise you run the risk of overstating or understating your taxable income.
Avoid
- Not deducting startup costs
Deducting startup costs is a very good idea since you will get to pay less on various taxes. The IRS allows you to deduct startup cost.
- Mixing business with pleasure
Many small business owners are paying for personal expenses out of their business accounts and vice versa. This can be problematic as it could lead to a wide range of financial problems with expenses be convoluted. So, it’s crucial to keep your private costs away from business costs, otherwise you can end up with various IRS issues.
- Not picking the best business structure
Different company structures will have their taxation method. An LLC will be different than a C corporation for example. You have to understand the type of company structure that works for you and use that to your own advantage. Work with a professional to select the best business structure for your business.
- Doing taxes on your own
It’s important to hire a professional when it comes to filing your taxes. An accountant or CPA will help you manage your finances and file your taxes faster and with better results. Plus, this way you get to avoid any potential issues and/or penalties.
- You don’t pay taxes on time
Not paying on time is problematic, because you will have to deal with various penalties. These can add up the more you avoid paying your taxes. So, the idea is that you should always try to pay your taxes ahead of the deadline to ensure you don’t run into issues with the IRS.
- Over reporting your income
Not deducting the correct business expenses can result in you over reporting your income. As an example, are you considering food & entertainment, car expenses, home office expenses, etc. If not you are leaving money on the table and can possibly be paying too much taxes to the government.
AS A RESULT…
There are lots of small business tax problems that you can run into. This is why working with a reliable tax professional should be taken into consideration for the best possible outcome!