Managing your taxes is one of the most significant duties of being a small business owner.
Regrettably, tax filing errors in small businesses are highly common and can result in expensive fines, audits, and lost chances to save money on taxes.
For small business owners, navigating the tax system and small business tax filing may be difficult. Due to the complexity of tax rules and the ongoing evolution of regulations, it is simple to fall into pitfalls that could seriously harm your company. Maintaining your company’s financial stability and compliance requires knowing typical tax errors and knowing how to avoid them.
In this article, we’ll talk about five typical tax errors made by small business owners, tax services, and tips for avoiding them.
Five common mistakes that you must avoid as a small business owners
1. Not maintaining accurate records
A prevalent tax error committed by proprietors of small businesses is failing to maintain precise documentation of their earnings, outlays, and further monetary dealings. When it comes time to file your taxes, this could cause issues because you might not have the supporting paperwork for your credits and deductions.
Ways to Prevent It
Ensure you maintain correct and current records all year to avoid this problem. This entails keeping tabs on your earnings, outlays, and other pertinent financial dealings. You can use a spreadsheet, accounting software, or simply a plain notebook, depending on what works best for you. Capital Tax Services can help you set up your small business and help you with the tax filing for your small business.
2. Mislabeling Employees
Tax errors involving incorrect personnel classification as independent contractors are another frequent occurrence among small business owners. Numerous problems may arise from this, such as underpaying payroll taxes, which may incur penalties and interest.
Ways to Prevent It
Make sure you know the difference between an employee and an independent contractor to prevent misclassifying workers. When it comes to the manner and timing of their labor, employers typically have more influence over workers than they do over independent contractors. Examine the IRS criteria for worker classification, and if you still do not have clarity, consider consulting a tax expert at Capital Tax Services.
3. Not Methodically Paying Taxes
Several small business owners must make anticipated annual tax payments rather than deferring payment of their full tax liability until tax season. Underpayment penalties may ensue from failure to comply, and these can mount up rapidly.
Ways to Prevent It
Ensure you’re paying your anticipated taxes on time and in the correct amounts to avoid underpayment penalties. Although the IRS offers recommendations for estimating tax payments, it’s a good idea to consult with a tax expert at Capital Tax Services for your small tax filing in case you’re not sure you’re paying the correct amount.
4. Excessive Discounts And Credit
Small business owners sometimes fail to take advantage of all the credits and deductions available, which can lead to overpaying taxes. The home office deduction, auto costs, and the small company health care tax credit are examples of frequently disregarded credits and deductions.
Ways to Prevent It
Learn about the tax benefits available to small business owners to ensure you’re utilizing all the credits and deductions you qualify for. To find ways to lower your tax burden, visit the IRS website, speak with other small business owners, or engage with a small business accountant.
5. Filing Taxes on a regular basis
Penalties, interest, and even audits may result from filing your taxes incorrectly or after the deadline. It’s important to make sure your tax return is accurate and done on time because these can be expensive and time-consuming.
Ways to Prevent It
Give yourself plenty of time to prepare your return in order to prevent filing your taxes incorrectly or late. Well, in advance of the tax deadline, begin arranging your financial records and make sure all of your calculations and data are correct. To ensure your return is accurate and filed on time, use tax preparation software or consult our expert at Capital Tax Service for small business tax filing and consultation. Do not hesitate to ask the IRS for an extension if you need more time to file; however, remember that this does not increase the time you have to pay any outstanding taxes.
Final Words
We are here to assist you with any business opportunity or issue as a true business partner. To assist you in making the best choices for the long-term success of your company, our Tax Professionals are available for small business tax help and filing.
We genuinely think that your success directly affects our success and treat every client relationship as a collaboration. We take great satisfaction in assuring you that the one-on-one support you receive is the result of years of advanced training.
We can assist you with all of your income tax obligations, including filing your federal, state, and municipal returns, at Capital Tax Service Inc. in Kent, Washington. We are fully aware of the ways in which tax laws, at all levels, impact you and your company. We look for methods to reduce your federal, state, and local tax responsibilities as part of our astute tax preparation services. Our services are available in the following South King County regions: Kent, Renton, Auburn, Maple Valley, Tukwila, Bonney Lake, Federal Way, Orting, Puyallup, Tacoma, and adjacent communities.
