While the majority of your staff is collecting bonuses, taking vacations, and celebrating the holidays, you’re preparing your organization for the upcoming year. Now is the time to shore up your finances, complete a SWOT analysis, set company goals, and most importantly, prepare for tax filing season. Although filing taxes is a complicated process for millions of Americans, businesses are held to a different standard.
Your Tax Obligation
Whether you’re a sole proprietor or your organization has several employees, you have a legal obligation to pay federal and state taxes. You must also accurately account for all income and expenses to ensure that you’re paying your tax obligations in full. Non-compliance or mistakes will lead to legal and financial hardships for your business.
Common Filing Mistakes
Although mistakes happen, what can you do to ensure your small business doesn’t succumb to an adverse fate? You start by educating yourself on common tax filing mistakes so you can take better action to avoid them. Continue reading to learn more.
While you have the option to complete your small business taxes yourself, it may not be the wisest decision. Tax laws are complex, and they vary by locality. Unfortunately, a lack of knowledge or comprehension isn’t an excuse for not upholding your responsibilities. If you file your taxes and make mistakes, the consequences are yours to endure. Not to mention, doing your own business taxes could also cause you to miss opportunities to earn credits, save money, and potentially, get a refund. Paying for an accountant to complete your small business taxes is an investment worth considering. It ensures that your company remains in compliance with local and federal laws while saving the most money possible.
Hiring The Wrong Accountant
Another common mistake entrepreneurs make is hiring the wrong accountant to complete their taxes. Consequently, they run into issues ranging from missed filing dates and reporting inaccuracies to lost data and penalties from federal and local entities.
Whoever you hire or outsource to file your taxes should have the appropriate educational credentials, certifications, and professional experience. A qualified business tax accountant should also have efficient resources like a secure client portal for accountants and digital filing solutions to ensure safe and accurate processing. Small business owners must do their due diligence to check credentials, evaluate reviews, and schedule consultations to make the most informed decision when searching for an accountant.
Mixing Business And Personal Records
It may seem easier to use one checking and savings account to spend, save, and manage finances as a sole proprietor. Be that as it may, this can complicate the tax filing process. Claiming tax deductions or credits require entrepreneurs to have accurate financial records and receipts to back their claims.
When all your money is going in and out of one account, qualifying purchases as a business expense is more challenging. Maintaining separate financial accounts is essential whether you work alone, have an assistant, or have a full staff.
Small business owners who opt to file their taxes alone increase the potential to report inaccuracies with serious financial consequences. Underreporting income, overreporting expenses, failing to pay quarterly or mid-year estimated taxes, and missing deadlines are all possible when you have no prior experience completing business taxes. If you’re going to do your taxes yourself, it is best to educate yourself. Take a tax filing course, use online platforms that offer additional assistance, and have someone evaluate your documents before submission to reduce the chances for errors.
Entrepreneurs have multiple obligations to operate legally in the United States. At the top of that list is paying federal and local taxes. Failure to file company taxes in an accurate and timely fashion could result in thousands of dollars in fines, hindering your company’s bottom line. Fortunately, there are practical solutions to avoiding financial backlash and ensuring you get an excellent start to the new year.