Tax preparation is extremely complex, especially for self-employed taxpayers or those who run a small business. As accomplished as they may be in their respective fields, many business owners lack the accounting expertise or time to keep detailed records and claim every exemption to which they’re entitled. Below are some common errors that could increase your tax liability or trigger an IRS audit.
Accounting Mistakes During Tax Season
1. Forgetting Startup Deductions
Every business owner knows that most expenses are deductibles, but many don’t realize they can write off the costs of starting their enterprise. In addition to filing fees, advertising, and branding costs, you can also deduct anything spent on market research.
2. Failing to Claim Your Mileage
Business owners are entitled to an exemption for using their own vehicle for work purposes. Meeting a client, visiting a job site, or going to your business location counts as work travel, as long as you have a home office for which you claim a deduction.
3. Neglecting Minor Purchases
Expensive equipment and upgrades may be easier to remember, but don’t forget to write off the expenses for office supplies and software. These costs quickly add up, significantly reducing your tax liability after claiming your deductions.
4. Deducting Too Much
Many business owners claim deductions for purchases that are not actually exempt. Hiring an accounting professional to handle your tax preparation will avoid the consequences of exaggerating your deductions.
5. Forgetting About Other Tax Obligations
Federal income taxes aren’t the only obligations you’ll have to meet. Depending on your industry and the size of the business, you may also have to pay for sales, payroll, and state and municipal governments.
6. Mixing Your Finances
Even if you’re self-employed, strive to keep your business and personal finances separate. Not only will this streamline your tax preparation, but it will also help you avoid attracting unwanted attention from the IRS.
7. Making Minor Payroll Errors
Mistakes on your payroll will anger your employees and may result in fines from the IRS and other government agencies. Hiring an accounting firm to handle your payroll will save money in the long run.
8. Falling Behind on Bookkeeping
Inaccurate records invite mistakes, which can complicate your tax returns. If you’re struggling to keep up with your bookkeeping, a third-party provider can manage these chores for you.
From business tax preparation to comprehensive consulting services, A-Z Business Solutions provide a wide range of services designed to help your business succeed. Their accounting professionals are known throughout Tampa, FL, O’Fallon, MO, and Chesterfield, MO, for accuracy, dedication, and personalized services. Visit their Facebook for more on their tax prep services or call (855) 559-2665 to schedule your free consultation.