Small Business Tax Preparation Mistakes to Avoid This Tax Season
Tax season is here, and for business owners, it can be doubly stressful. Not only do you have to worry about your personal taxes but business ones too. Don’t make these mistakes in your tax preparation this year:
• Forgetting to take a mileage deduction or limiting your deductions to just mileage.
Business driving is often miscalculated, but it can really reduce your taxes. You can’t take mileage for commuting from your home to your office, but you can for driving to another location. You can also deduct gas and oil, tires, insurance, lease payments and tolls, provided you can show they are legit business expenses.
• Not keeping receipts of small expenses.
You might be surprised at how much you spend each week for your business in magazines, petty cash purchases, classes and more. Get an app to track purchases and save receipts.
• Exaggerating your deductions.
Overdoing your deductions can be just as detrimental as not reporting deductions, just in a different way. Make sure you don’t deduct 100 percent of meal costs on your taxes. It may lead to an audit when you take too much.
• Forgetting about the other tax obligations you have.
April 15 is just one deadline that you will need to meet. Don’t forget to keep up with payroll, local taxes, property taxes and sales tax. Be compliant.
• Not separating business and personal finances.
It’s hard enough to maintain a good accounting system, but when you comingle finances, it gets even more confusing.
• Making mistakes with payroll taxes.
It’s estimated that about 40 percent of small businesses get fined almost $1,000 per year in penalties for incorrectly calculating payroll taxes. It’s worth finding a payroll company to outsource this headache to.
• Not keeping business records up-to-date.
You don’t want to spend your weekends working on bookkeeping before tax preparation season. Just spend time each month reconciling accounts, entering information into your accounting system and organizing.
Muth Capital has financing options for your business in any season. Ask us about lending opportunities to help your business get organized.