For most small businesses, tax season 2019 has officially come to a close. However, if you’ve filed for an extension or had such a difficult time with your taxes that you’re planning ahead for next year, then taxes are probably still at the forefront of your mind.
Tax season can be incredibly stressful for small businesses, especially with tax laws being so complicated. This opens the door for mistakes that can cost small businesses money and increase the chances of undergoing a dreaded audit. If tax preparation is keeping you up at night, here are five of the most common tax mistakes small businesses make and how you can avoid them.
Inaccurate Reports of Income
For small businesses that have their hands full of juggling a ton of responsibilities, accurate record keeping can easily fall to the wayside. This is problematic because it can lead to inaccurately reporting income to the IRS. This is an offense that the IRS takes very seriously, even if it wasn’t intentional.
You’re probably not going to receive a serious penalty for an honest mistake, but you will likely have to pay the amount due plus some significant fines. To eliminate the potential of inaccurate reporting, maintain accurate records of all income for your business, and don’t save updating your records for the week before the tax deadline.
Filing Late Due to Lack of Funds
If you know that you’re going to be late filing and paying your taxes, it’s important to file for an extension. However, whether you file for an extension or not, you’re still going to see interest and possibly penalties on the amount you owe.
A business might delay filing their taxes for as long as possible because they’re unable to afford their tax obligation. If this is the case, contact the IRS and inquire about a payment agreement. The IRS is much more accommodating when you take the initiative rather than waiting for them to come after you.
Failing to Claim Deductions
As a small business, there are numerous deductions that you’re allowed to take. One of the biggest mistakes that businesses make is not being aware of these deductions and missing an opportunity to reduce their tax liability. Scheduling a consultation with a professional in business tax preparation in Richmond, VA is your best option for maximizing business deductions.
Not Having a Grasp on Payroll Taxes
Growth is a great thing for small businesses. When a business reaches the point where they’re ready to branch out and hire employees, it creates a whole new set of tax related responsibilities. For instance, you’ll need to understand the difference between W-2 employees and 1099 contractors, along with knowing the process for calculating, reporting and paying employee payroll taxes. Not having a grasp on payroll taxes can make tax preparation a nightmare.
Taking Matters into Your Own Hands
Finally, the last and biggest tax mistake that small businesses make is attempting to handle the overwhelming challenges of taxes on their own. Small business taxes are complex, and one small error can cost your business significantly. Don’t leave anything as important as the financial future of your small business up to chance. Contact Steiner Business Solutions for experienced and detailed tax preparation services in Richmond, VA today.