Being an entrepreneur, tax season is frustrating, and the hassle of preparing to report, collecting information, and submitting them on time is tough. Filling a business tax return is a crucial step for every firm, and the issue is some think of it only a few weeks before filing a tax. In that way, the chances of committing a mistake are higher. Here are some big tax mistakes are done by small business owners.
- Forgot to keep records
While your customers are waiting or you have not entered every paycheck, bill, invoice, and receipt on time that crosses your desk, you can forget to enter. It means you won’t have proof of deductions with you which you must provide in the tax return. Here you can consider using a digital accounting tool to help your employees to enter the details. A specialized tool can also enter details from images. It is a suitable way to maintain a proper account and eliminate mistakes.
- Including all startup expenses in a go
While launching a new business, you would try to keep track of every penny you spend, and everyone wished to save as much as they can from tax returns, and doing so, they commit mistakes. While including the yearly expenses one day, you may miss out on some receipts or lost a few of them. In a way, you will have to either pay a fine afterward or a higher tax amount. To avoid that, it is always better to include the expenses of a business daily. If maintaining the accounts is difficult for you, you can always ask for help from tax agents near you.
- Overreporting income
Being a financial planner, you would like to talk about gross income instead of net income. In the notes of a financial planner, you must not include a personal budget on sales. Instead, you must include the take-home pay, and it is another big mistake done by small firms. To file a business income tax return, speak to the professionals, so you know how it needs to be done.
- Trying to deduct your meal expenses fully.
While wining and dining different clients at a single time, you must know that the bill can be deductible to a certain extent. Before that, you have to check if it attains the tax rules and regulations. Some people include the entire bill, which can create trouble for you. It is better to hire tax agents who know tax filing and can address the issue.
- Missing tax benefits and deductions
If you are unaware of the business deductions, you can miss out on the perks you received. Another aspect is the tax benefits where certain deductions are included, like itemized deductions. By considering this, you can organize and keep your record keeping properly. It can enhance your accuracy level and get you all tax benefits.
- Paying salaries to employees as independent contractors
Payroll taxes are more complicated and expensive. Considering that, you can pay your employees as independent contractors in spite of signing them as employees. Or else, you can also consider paying them in cash. It is always better to find the easiest way out after thinking about the consequences. When you pay as independent contractors, they are considered employees under your control. As a result, you may need to pay a fine while submitting a return. To avoid all these things, it is recommended to lodge a tax return under the guidance of experts.
- Missing business and personal finances
For business expenses, you must keep your credit cards and account separately. It helps in finding deductible expenses and also gives a clear idea of where you must cut down. For example, groceries are never counted as a business expense. But if you purchase refreshments for staff, it is counted. To have a better distinction, paying for business expenses on the company’s credit card would be easy.
- Not having a proper tax plan.
Every tax advice is not the same, and many of them prepare it like record-keeping and filling in the details in the tax forms with details that took place last year. To maintain records properly, you can hire a tax professional who is helping the team to figure out what needs to be done. He is like a coach, and by handing over the tax to him, you can lower your stress level. As a result, as the tax season approaches, you will be prepared with the necessary things.
- Underpaying than the estimated tax
Paying the correct tax amount is important; otherwise, you may need to pay a fine. For those who are doing it for the first time, you must take some help from tax agents. Without proper calculation or submitting the tax amount lesser purposely can lead to many problems. When you hire experts, they know what and how things need to be done in order to avoid fines. It is a way to reduces expenses that a small business may need to pay.
- Not giving much attention to startup expenses.
In the first year of opening a business, it is easy to keep track of every expense. It means you forget to keep track of where you have spent money. The issue is common and faced by all small business owners. Many businesses set up a site, purchase domain names, even rent space before finalizing the business formation. But you can deduct the expenses by preparing a proper plan and then opening doors to your business. With that, you will include things you need and not spend unnecessarily. That’s why it is important to pay attention to startup expenses.
In the end
It’s time to look for a qualified and certified tax agent near me to prepare the records and submit them accordingly. Irrespective of how small your organization is, everyone works to make it a profitable one. Taking an extra step by hiring a well-known tax agent is the first step to go ahead with. It will help you avoid committing the above mistakes.
