It is very easy for small businesses to make tax mistakes as there are so many responsibilities the owners must take on. If tax mistakes are made, however, pricey costs may ensue. You can avoid mistakes by ensuring you review the returns and other tax documents you submit, even reviewing them with a certified accountant or tax professional. It is important to avoid tax mistakes so there are not deadly or financial costs to your business. Learn from the mistakes listed below to avoid making the same tax mistakes with your small business.
1. Neglecting Owed Tax Authorities
Small business owners often forget some of the tax authorities they owe taxes to. Ensure you understand all of the tax authorities that have your business has to pay taxes to. Research and learn about what is required for your small business. There are IRS related taxes, state taxes, sales taxes, property taxes, payroll taxes, local taxes, excise taxes, self-employment taxes and any other taxes that your business requires.
It is okay to feel quite surprised by the list of tax authorities, especially if you have employees under you. These tax authorities could add to a need to file tens of tax returns. Errors may commonly occur when filing multiple returns, which is why it is encouraged to contact an accountant or tax expert.
2. Ignoring Self-Employment Taxes
Ignoring self-employment taxes is one of the tax authorities that may be forgotten as mentioned above. There are tax payments that come with self-employment taxes, especially if you make over $400.
The amount of self-employment taxes greatly affects how taxes impact small business owners. It is important to make quarterly tax payments to avoid any penalties and added interest to make the payments for costly. Pay four times throughout the year to avoid a large bill come the spring.
3. Doing Payroll Yourself
Outsourcing your payroll is one thing that can greatly benefit your business and your tax security. Payroll is very complicated, and there is a high likelihood of making mistakes on taxes if mistakes are made on the payroll. There are fines and costly penalties even for minuscule mistakes such as being a day late on payroll or paying an employee more or less than they are due.
Making mistakes on payroll taxes can prove deadly for small businesses. Liability will not automatically protect you from the consequences of these mistakes. By outsourcing payroll, you will pay a much smaller fee than you would for mistakes and will have experts willing to assist you. It will also provide more trustworthy payments as there is always a chance of fraud.
4. Out-Dated Records
Keep your accounting up to date every year to help taxes go more smoothly. It is unnecessary to spend time reviewing receipts and payments if all of your financial details are in order. Take some time every week to enter financial information into your accounting. It will assist you in future loan applications or in keeping track of how your business is doing so you can maximize profits.
It is very easy for small business owners to make mistakes on their tax returns and documents every year. Ensure these tax documents are reviewed, and no errors are made by working with certified accountant or tax experts such as us at Bumgardner Morrison. Avoid the deadly and costly consequences of making tax mistakes by booking a meeting with us today.