Don’t Make These Mistakes This Tax Season

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small business taxes

Chances are when you are running a business, you’re thinking about making money, not how the money is going to be filed for tax season. Unless you’re financially savvy, it is wise to seek out a tax expert to make sure you’re set up for success. 

To help you decide whether you should outsource this work or keep it in-house, we’ll share the most common mistakes small business owners make when it comes to their taxes.

Choose the Best Set Up

There are several ways you can set up your small business, and all of the options have different impacts on how you file your taxes and how much you pay. You can incorporate, file as a limited liability corporation (LLC), a partnership, or a sole proprietorship. 

Honestly, you need to choose which set up fits your personal needs and particular business the best. All are different, so one is not necessarily “better” than another. 

Some options may be the simplest for a startup. Others may limit your personal liability or look more impressive, but if you’re not careful, you may not get the protection or tax benefits you want. 

Waiting Until the Last Minute

Waiting until the last minute to sort through your expenses and documentation is more likely to result in mistakes that could cost you money. It could be that you need to pay penalties or you miss out on deductions! 

Maintaining an organized record of your small business revenue and expenses can help you through tax season, but it can also prove beneficial to your business throughout the year. Keeping track of where your money is going can increase profitability by eliminating unnecessary expenditures. 

Not Anticipating Small Business Taxes

If you’re making money, it’s good logic to assume that you will have to pay taxes. But many small business owners don’t take this into account throughout the year, especially if their business is cyclical, and they are short on cash. 

The best advice to anticipate and prepare for tax season is to open a separate bank account to tuck away estimated taxes that will need to be paid. Make this money untouchable from your everyday expenses, and you’ll save yourself a lot of headaches come tax season. 

Not Paying Employees Correctly

If you’re a small business owner, you know that payroll taxes are expensive. Hiring independent contractors or paying staff cash may sound like an easy way to reduce costs of acquiring help, but take extreme caution in both scenarios. 

Paying your staff cash or “under the table” is not only a red flag when it comes to evading income tax, but if this practice is discovered, you could lose your business tax exemption. 

Independent contractors have to meet certain parameters and if the government decides they should have been counted as employees, then you could end up paying back-taxes and various penalties. 

Basically, payroll taxes are expensive, but it’s not worth the risk to avoid them.

Still Not Sure?

If this seems too confusing for you to handle on your own, or you’re afraid you might be making one of these common mistakes with your small business taxes, our team of experts can help. 

We can assess your individual needs and make sure your business is set up properly so you don’t miss any deductions or tax credits. Contact us today to get started.