Do you know if your small business taxes were filed correctly?

Taxes for small business owners can be a lot to manage. Between the deadlines, paperwork, rules, rebates, penalties, and more, owners are at risk of missing something and making a filing error.

To avoid any mistakes from impacting your small businesses, we’ve outlined the most common ones and explained what you need to do to prevent them.

1. Missing Deadlines

One of the simplest mistakes that we see business owners make is forgetting a deadline. Although this may seem like a small oversight, the IRS does not take kindly to it and typically charges fees and penalties for late filers. Plus, being consistently late could flag your account and put you at risk of being audited.

To avoid these repercussions, be sure to mark all the deadline dates in your calendar. Automated reminders should be put into phones and computers at least a month in advance of the deadline to ensure you won’t forget.

2. Forgetting About Deductibles

With all the things that an owner has to do in a day, thinking about tax deductions is likely not one of them. But deductions can save owners a significant amount of money at the end of the year and is something that should be prioritized.

As soon as a receipt is received, it should be filed and categorized based on the type of expense it was and the date it occurred. Getting in the habit of saving and filing expenses as soon as they come in ensures that poor record keeping won’t become a habit and that your return will be maximized.

3. Ignoring State and Local Tax Laws

Depending on the area you operate in and the type of business that’s run, state and local tax might need to be paid on it.

Things like sales tax and franchise tax are not covered under federal tax laws and could be something your company needs to pay. Failing to be aware of state and local tax obligations is not an excuse to avoid paying, as the IRS will likely apply a penalty fee for the error.

4. Misclassifying Workers

Misclassifying employees and independent contractors is a simple mistake to make but one that could cost you, since employees have different tax obligations compared to contractors. This means that once the error is corrected, you could owe money in back taxes and penalties.

5. Bad Bookkeeping

Incomplete records make filing taxes for small businesses awful. Not only will poor recordkeeping result in wasted time and added stress, but it usually leads to costly errors.

That’s why every receipt, invoice, payroll record, and financial statement needs to be saved, with the accounts reconciled regularly. Doing this will streamline tax preparation and prevent lost files since all of the company documents will be in one place.

To help with this, consider using a bookkeeping app like QuickBooks where records can be uploaded in real time and automatically filed, categorized, and saved on your behalf.

But if the idea of handling taxes on your own (even with an app) is still causing you stress, consider seeking the help of a professional like us at A.P. Accounting & Tax Services. We can work with you throughout the year to identify deductions, flag deadlines, and create strategies to reduce your tax burden.

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