7 Small Business Tax Errors and How to Avoid Them
A very small percentage of small businesses are audited by the IRS each year. As a result, you shouldn’t have to worry too much about your small business getting audited anytime soon.
But that doesn’t mean you shouldn’t still be aware of the small business tax errors you might be making and do what you can to avoid them. If you don’t go through the tax preparation process in the proper way, it could increase your company’s chances of getting audited by the IRS at some point.
There are a handful of mistakes that small businesses tend to make when filing business taxes. It’ll be important for you to make sure they’re on your radar from the start.
Here are seven small business tax errors to be aware of and what you can do to stop each of them from taking a toll on your company.
1. Attempting to File Business Taxes Yourself
It’s entirely possible to file your personal taxes on your own. It should actually be pretty easy for you to do it in most cases.
But filing business taxes is a much different story. There are all kinds of potential complications that could arise when you’re filing taxes on behalf of your business.
For this reason, you shouldn’t ever attempt to file business taxes yourself. Instead, you’ll want to enlist the services of a tax accountant. They can familiarize themselves with your small business and lead you down the right path when it’s time to file your business taxes.
2. Hiring the Wrong Tax Accountant
Hiring a tax accountant to help you with filing business taxes is a fantastic idea. But you shouldn’t bring just any old tax accountant on board to assist you.
It’ll be important for you to search for local tax accountant options that’ll do a great job for you. They should have a wealth of experience when it comes to filing business taxes as well as a wonderful reputation within your community. It’ll let you know that you’re going to be in good hands when they handle your taxes.
3. Waiting Until the Last Minute to File Taxes
No one actually enjoys the tax preparation process, especially when they’re filing business taxes. Most small businesses need to be ready to send money to the IRS once they’re done filing taxes.
Because of this, some small business owners will put off preparing their taxes until the last minute. You should try to avoid doing this, even though it won’t be fun writing a big check to Uncle Sam.
If you wait until the 11th hour to file your taxes, it’ll increase the chances of you making other small business tax errors. It’s why you should avoid this particular mistake at all costs.
4. Claiming Too Many Tax Credits and Deductions
There are a whole host of tax credits and deductions that you should be able to claim when you’re filing business taxes. They’ll help to bring your tax liabilities down and save you money over time.
You shouldn’t be shy about claiming all these different tax credits and deductions. But at the same time, you also shouldn’t claim too many of them and raise red flags with the IRS.
Your tax accountant should be able to make sure you only claim the tax credits and deductions that you’re eligible for. It’ll keep you in good standing with the IRS while still allowing you to reduce your tax bill in the end.
5. Failing to Claim Enough Tax Credits and Deductions
While you will want to be careful about not claiming too many tax credits and deductions, you’ll also want to try not to leave any money on the table by failing to claim the ones you qualify for. It could result in you making larger business tax payments than you need to.
This is, once again, why it’s so imperative to hire a great business tax accountant to represent you. They’ll catch every single tax credit and deduction that you’re eligible for and help you steer clear of leaving any of them off your tax returns.
6. Neglecting to Set Aside Money for Business Tax Payments
After filing business taxes, you’ll need to be prepared to pay the IRS what you owe them. This is going to require you to set aside money throughout the year so that you can get your business tax payments made on time.
If you don’t have enough money hanging around, it could threaten your entire business. You’re going to put yourself into a really tough spot if you owe the IRS money and can’t pay them since it could subject you to a long list of penalties.
7. Choosing Not to File or Pay Business Taxes at All
Of all the small business tax errors on this list, this will be the worst one of the bunch. There are some small business owners who will neglect to file or pay their business taxes at all at times.
If you do this, you’re going to be asking for trouble with the IRS. They’re going to come after you at some point and make you pay them what you owe.
If you know you won’t be able to pay the IRS, the least you can do is file your business taxes and work out a payment plan with them. It’ll sure beat the alternative.
Don’t Make Any of These Small Business Tax Errors
As a small business owner, you have a million and one different things that you need to worry about at any given moment. It’s what makes it so easy to make many of these small business tax errors.
But now that you’re aware of them, you should set out to avoid them as best you can. The simple act of hiring a tax accountant should help you sidestep most of these errors and leave your small business in a pretty good place.
Look for other articles that’ll help you run your business more efficiently by browsing through the rest of our blog.
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