Tax season can be stressful for any business, but it can be especially challenging for small businesses. With so many different tax rules and regulations to keep track of, it’s easy to make a mistake. Here are 10 common tax pitfalls that small businesses should avoid:
- Not keeping good records. Good record-keeping is essential for small businesses for tax purposes and general financial management. Be sure to keep track of all of your income and expenses, as well as any other relevant financial information.
- Not understanding your business tax structure. The type of business entity you choose greatly impacts your taxes. Be sure to understand your business structure’s tax implications before making a decision.
- Misclassifying employees as independent contractors. This common mistake can lead to costly penalties from the IRS. Be sure to correctly classify your employees as either employees or independent contractors.
- Not understanding business expense deductions. There are many different types of business expenses that are tax-deductible. Be sure to know which expenses you can deduct and how to properly deduct them.
- Missing estimated tax payments. If you expect to owe more than $1,000 in taxes for the year, you are required to make estimated tax payments throughout the year. Missing estimated tax payments can result in penalties and interest.
- Not filing your taxes on time. Filing your taxes late can result in penalties and interest. Be sure to file your taxes on time, even if you can’t afford to pay them all at once.
- Failing to pay payroll taxes. Payroll taxes are taxes that are withheld from employee paychecks and paid to the government. Failing to pay payroll taxes can result in serious penalties.
- Not understanding the tax implications of international transactions. If your business engages in any international transactions, be sure to understand the tax implications. This can be a complex area, so consulting with a tax professional is a good idea.
- Failing to audit your tax returns. It’s a good idea to have your tax returns audited by a tax professional every few years to ensure that they are accurate and that you are taking advantage of all available deductions.
- Not seeking professional help when needed. If you have any questions or concerns about your business taxes, be sure to seek professional help from a tax attorney or CPA.
Small businesses can save time and money by avoiding these common tax pitfalls.
Here are some additional tips for small businesses to avoid tax pitfalls:
- Use a tax preparation software. Tax preparation software can help you to file your taxes accurately and on time.
- Hire a tax attorney or CPA. If you have any complex tax issues, hiring a tax advisor to help you is a good idea.
- Stay up-to-date on tax changes. Tax laws change frequently, so staying current on the latest changes is important. You can do this by reading tax publications and visiting the IRS website.
By following these tips, small businesses can avoid common tax pitfalls and save themselves time and money.
Remember…This is not legal advice. Nothing in this presentation is intended as legal advice. The information contained herein is general information. Please consult a tax attorney or CPA for application to your specific facts and circumstances.
So, If you would like to talk with me directly about your specific situation please feel free to contact my office directly 240-283-1162.