Small business owners often struggle with keeping up with their taxes. Taxes can be confusing, especially for those who don’t have a background in finance. Besides, as a result, many small business owners make common tax mistakes that can cost them money and time. In this blog post, we’ll discuss some of the most common tax mistakes small business owners make. Moreover, learn how a Tax Accounting Firm In Huntington Beach can help avoid them.
Failure to Keep Accurate Records – Tax Accounting Firm in Huntington Beach
One of small business owners’ most common tax mistakes is not keeping accurate records. Without accurate records, it’s impossible to file accurate tax returns. In addition, you can support your claims with the right auditing. A Tax Accounting Firm In Huntington Beach can help you set up an effective record-keeping system and ensure that you’re maintaining accurate records.
Mixing Personal and Business Finances
Another common tax mistake small business owners make is mixing personal and business finances. Keeping these two separate is important to avoid confusion and ensure you claim all of your business expenses. Besides, a Tax Accounting Firm In Huntington Beach can help you set up a separate business bank account and track your business expenses to ensure you claim everything you’re entitled to.
Missing tax deadlines is a common mistake that can lead to penalties and interest charges. Small business owners need to be aware of all of the tax deadlines, including estimated tax payments, payroll tax deposits, and filing deadlines. Besides, an accountant can help you stay on top of these deadlines and avoid costly penalties.
Failing to Claim All Deductions
Small business owners often miss out on deductions that they’re entitled to. This is often because they’r unaware of all the deductions available or don’t have the necessary documentation to claim them. Moreover, a professional accounting firm can help you identify all the deductions you’re entitled to and ensure you have the necessary documentation to claim them.
Failure to Pay on Time or File on Time
We understand running your own company takes work, and taxes may be intimidating. Moreover, getting disoriented and missing the tax filing date is simple. However, you’re not alone; many company owners make the same error! You may clear up the issue and get back on track with the IRS with the aid of an accountant. Here’s something more to keep in mind: Failure to File and Failure to Pay are the two penalties. Failure to file usually results in a higher fine than failing to pay. As a result, even if you can’t pay your taxes right now, you should at least file! Moreover, you may file a form 4868 for sole proprietors or a form 7004 for all other business organizations if you merely need an extension.
Maintaining Subpar Records and Making Payroll Errors
It’s not every company owner’s strong suit to keep orderly, accurate records, but it is ours! It might be simple to forget to add that purchase receipt to your files or update QuickBooks as often as required during a hectic day. In any case, you already have a tonne on your plate! Yet, there is a high cost associated with this error. Besides, you must keep accurate, clear records for the IRS or risk losing deductions and money! You may even maintain and arrange your data using digital accounting software solutions.
Neglecting the Value of Little Things
Don’t allow the IRS to steal your hard-earned money by failing to deduct everything that qualifies for a deduction! Petty payments, business magazine subscriptions, and even ingredients for a casserole for a charity meal are all examples of modest things that are often deductible. It is possible to deduct the cost of producing promotional materials and postal stamps.
Moreover, ensure you know every little detail that might reduce your company’s tax liability. Before you know it, they may mount up to hundreds of dollars! Save those receipts, and your accountant can help you determine what you can write off to save money.
Attempting to Claim the Incorrect Costs – We often overestimate the goods we can write off, just as we ignore the write-off value of little products.
Not understanding the restrictions on deductions
Did you know that just 50% of food and entertainment expenses solely for business reasons may be deducted? If you attempt to deduct the whole sum, the IRS will raise a red flag. Also, as previously stated, you can only deduct initial expenditures up to $5,000. Besides, while preparing for your 2017 tax returns, it’s critical to understand the wide variety of perks and restrictions. You could be passing on free money. Nevertheless, you can also raise questions. It’s a razor’s edge. Let our qualified accountants assist you.
Incorrectly Classifying Employees
Misclassifying employees is a common tax mistake that can result in penalties and interest charges. Small business owners must understand the difference between employees and independent contractors and properly classify their workers.
Making tax preparations for their firm is one of the biggest issues small business owners confront. A Tax Accounting Firm In Huntington Beach can help you understand the classification rules and ensure that your workers are classified correctly.