Filing taxes might be one of the most tedious aspects of owning a business, but it’s also one of the most important. Even minor mistakes on your payroll or income taxes can have serious consequences, including steep fines and penalties. Below are some of the most common tax accounting mistakes that can get small business owners into trouble.

3 Common Business Tax Mistakes

1. Forgetting to Report Income

Leaving income off your tax returns can invite an audit, which can be frustrating and stressful even if the situation is eventually resolved. Keeping track of your payments and daily receipts is essential for ensuring the accuracy of your tax returns and calculating your liability. Before filing your taxes, double-check your books, or consider hiring a tax accounting professional to compile your income statements.

2. Incorrectly Classifying Employees

Incorrectly classifying your staff can have dramatic consequences. Hiring independent contractors typically involves less paperwork and lower expenses. While this makes them attractive to many business owners, the IRS has strict guidelines differentiating between company employees and independent contractors. In addition to paying payroll taxes, you might also have to pay penalties and late fees if you make mistakes regarding the makeup of your company’s staff. Consulting with a tax accounting professional can help you avoid these costly errors before you file your tax returns.

3. Forgetting to Claim Deductions

Failing to claim deductions for which you qualify essentially means that you’ll pay more taxes than necessary. While this doesn’t cause any legal issues, it does drain funds from your business. Depending on your industry, you may be able to write off the costs of materials, supplies, payroll costs, equipment purchases, and a variety of other purchases. If you’re unsure which deductions you should claim, consult an experienced tax accounting professional.

Business tax accounting can be confusing and overwhelming, which is why companies throughout Gig Harbor, WA, rely on Linda M. Shiraiwa CPA, PS Inc. With their in-depth knowledge of the current tax code and their proven record-keeping systems, they’ll take the stress out of preparing and filing your taxes, eliminating your chances of making common but costly mistakes. Visit their website for more on their tax preparation services, or call (253) 858-6030 to make an appointment today.