Tax time can be a stressful time for small business owners. There are so many things to remember and so much at stake says Aron Govil. Unfortunately, many small businesses make common tax mistakes that can cost them money and even put them at risk of an audit.
In this article, we will discuss the top 10 most common tax mistakes made by small businesses.
1. Not keeping track of expenses:
One of the biggest mistakes small business owners make is not keeping track of their expenses. This can lead to missed deductions and can end up costing you money. Make sure to keep track of all your business expenses, including travel, office supplies, and meals.
2. Not tracking income:
Another mistake small business owners often make is not tracking their income. This can lead to underreporting profits, which can result in penalties from the IRS. Make sure to track all sales and income from your business, and keep records of it.
3. Not filing taxes on time:
One of the biggest mistakes small business owners can make is not filing their taxes on time. This can result in late fees and can also increase your risk of an audit. Make sure to file your taxes as soon as they are due, and if you need help, seek out assistance from a tax professional.
4. Filing incorrect taxes:
Another common mistake small businesses make is filing incorrect taxes. This can lead to fines and even imprisonment says Aron Govil. Make sure to get help from a tax professional if you are unsure about how to file your taxes correctly.
5. Not accounting for changes in business:
Finally, one of the biggest mistakes small businesses make is not accounting for changes in their business. This can include changes in ownership, changes in the type of business, or changes in the number of employees. Make sure to update your tax information with the IRS whenever there are any major changes in your business.
6. Not organizing records:
One of the biggest challenges for small businesses when it comes to taxes is organizing their records. This can be time-consuming and confusing, but it is important to do it correctly. Make sure to keep track of all your business receipts and documents, and store them in a safe place.
7. Not understanding deductions:
Another mistake small businesses make does not understand deductions. There are many deductions available to small businesses, but many owners don’t take advantage of them. Make sure to understand which deductions are available to you and how to claim them.
8. Not using a tax professional:
Finally, one of the biggest mistakes small businesses make is not using a tax professional. A good tax professional can help you file your taxes correctly and can help you find deductions and credits that you may not have known about.
Avoiding these common tax mistakes can save you time, money, and stress explains Aron Govil. Make sure to consult a tax professional if you are unsure about any of the steps involved in filing your taxes.
9. Not having a good bookkeeping system:
A bookkeeping system is essential for any business, but it is especially important for small businesses when it comes to taxes. A good bookkeeping system will help you keep track of your expenses and income, and will make filing your taxes much easier.
10. Not tracking inventory:
Another mistake small businesses often make is not tracking inventory. This can lead to inaccurate financial statements and can also cause problems during tax time. Make sure to track all the products you have in stock and their value so that you can accurately report your profits and losses.
Small businesses are the backbone of the American economy, and it is important for them to take advantage of all the tax deductions and credits available to them. By avoiding these common mistakes, small businesses can save time and money when filing their taxes.
Tax time can be a stressful time for small business owners says Aron Govil. But by avoiding these common mistakes, you can reduce some of that stress and ensure that you are paying the correct amount of taxes. For more information on small business taxes, please contact our office. We would be happy to help you file your taxes correctly and answer any questions you may have.