Negosentro.com | Knowing Where the Traps Are: 4 Tax Mistakes You Might Be Making as a Small Business Owner | Running small business isn’t always easy breezy, and neither are taking care of your taxes. There are plenty of mistakes that you want to avoid, but when it comes to the IRS, you definitely want your business and its finances off of their radar. When you work with tax attorneys who can provide you with focused representation you can worry less about the IRS and taxes and focus more on growing your business. Here are a few tax mistakes that are easy to make as a small business owner.
1. Overreporting Income
If your business is for profit and sells items or services that include charging customers sales tax, it is important that you don’t report the sales tax as income. When you do this, the IRS thinks you are making more money than are. The whole point of sales tax is to help offset the taxes your business will need to pay the government. Overreporting your income will cut into your profits, and if the error is sizeable enough, you may end up tanking your business.
2. Bad Record Keeping
You do not have any knowledge about accounting or bookkeeping to keep good records. Just by keeping your receipts and copies of your invoices, you are well on your way. Looking at your records once a month can do a lot to untangle any messes before they get so out of hand that you feel helpless. Bad record keeping can lead to your overlooking write-offs and deductions. It can also mean trouble if you take certain write-offs and deductions and don’t have proof that you are entitled to said deductions. And last but not least, bad records will put you on any bookkeeper’s bad side.
3. Filing Certain Forms
If you fail to file the correct forms or schedules for your business, you might as well walk into the IRS and volunteer for an audit. If you don’t want the IRS to reject your claims for losses on the grounds that your business is actually a hobby, filing Form 5213 can prevent this. You will also want to make sure that you properly classify those you employ. There is a difference between employees and independent contractors according to the tax code and the forms that go along with each option. Carefully examine any form you’re considering filing.
4. Using the Wrong Tax Professional
It’s okay to hire help with your taxes. If you don’t know what you’re doing, it can cost you a whole lot more in the end. If anyone is advising you to be dishonest, it’s best to find another tax pro. When a tax preparer comes under the microscope of the IRS, so do all the client’s they have taken on. You do not want to be under that microscope.
When it comes to taxes, you have to be critical and careful. It takes time and attention to handle your taxes properly. Falling into tax traps are costly and time consuming, so do your best to avoid them.