We all make mistakes from time to time, whether it was failing to use your turn signal or forgetting an anniversary, but some mistakes can be far costlier than others. In terms of monetary loss that is, because nothing is worse than forgetting an anniversary. Making a mistake while doing your small business taxes can cost you dearly.
Being an owner of a small business, you want to do what you can to avoid costly fees, penalties and audits. The best way to avoid these money-eating mistakes is by employing tax services in Greeley. But if you don’t take well to advice and decide to do your own taxes, here are a few mistakes you will certainly want to avoid.
Losing Track of Receipts
Being the owner of a small business means you run around wearing all sorts of hats. It’s all too easy to get caught up in a frantic moment and stuff an important receipt in your pants pocket or glovebox, only to never be seen again. The problem is you can’t deduct what you have not documented. So this means you are likely to pay more taxes than you need to.
Mixing Personal and Business Expenses
Many small business owners operate out of their personal bank accounts and therefore make purchases that are for their business and personal. But the IRS is only interested in your business-related expenses and if you are confused about what expenses were personal and what expenses were for the business, it could land you in a little hot water. Your best bet is to have a separate business bank account.
Not Filing on Time
When business owners don’t have the cash on hand to pay their taxes, they often fail to file a tax return at all. All this does is results in a failure-to-file penalty that will accrue until you do file your taxes. Even if you can’t pay your taxes, at least file for an extension and avoid paying the penalties.
Not Claiming Home Office Deduction
If you are running your business out of your home, don’t forget to take a deduction for it. There are some business owners who feel this is a red flag for auditors, but just over half of all businesses in the United States are run from homes, so your fear of an audit is not real.
Keeping Poor Records
One of the most important aspects of running a small business is keeping good records. When you keep good records, it is easier to properly deduct expenses, track inventory and report employee payrolls. Keeping good records is all about being well-organized and not relying on your memory. You should have accurate records of all business purchases including rent, gifts, office supplies, travel expenses and advertising.
Taxes are a challenge for small business owners. There is just so much going on that it is hard to keep track of it all. If you are going to bed at night full of worries concerning your taxes, it might be well worth employing a tax service.
