If you own a small business, you often have to balance multiple responsibilities to keep your company moving forward. Due to the sheer number of tasks you need to manage to keep your business profitable, it can be easy to neglect proper tax preparation. This can lead to errors on tax returns that lead to audits, fines, and other serious consequences. Here are some of the most common errors to watch out for.

Top 3 Small Business Tax Return Mistakes

1. Reporting Information Incorrectly

Inaccurate reporting of income is the biggest culprit behind a small business tax audit. Common mistakes include including sales tax as part of your reportable income or submitting information on your tax forms that differs from the Form 1099-MISC documents you receive from vendors. Over- or under-reporting your taxable income because of such mistakes will result in major headaches later.

2. Misclassifying Employees

If you have others that work for you, pay attention to how they’re classified in your tax documents. Independent contractors aren’t technically employees, which means you don’t have to pay payroll tax on their income. However, to comply with relevant payroll laws, you will need to pay payroll taxes and provide benefits for W-2 employees. Improper classification of workers will cause serious trouble with the IRS.

3. Neglecting Deductions & Business Expenses

You can reduce your tax burden by applying qualifying deductions and business expenses to your return. For example, you can deduct a portion of restaurant meals with clients directly related to business activities. Startups can deduct as much as $5,000 of the costs associated with launching their business. However, forgetting carryovers or improperly applying deductions could cause you to overpay on taxes or get audited. Get professional tax help to ensure you’re not missing anything.

Do you have questions related to business activities or expenses? Contact Sharrard, McGee and Co., PA. With locations in Greensboro and High Point, NC, this accounting and financial services firm has provided the Triad area with business insight for nearly 40 years. To learn more about their services or to schedule a free consultation, visit them online or call (336) 272-9777.