5 Tax Mistakes Your Small Business Should Avoid
When it comes to tax season, there’s so much to think about and you’re worried about getting things wrong. It’s easier than you think to make small mistakes on your taxes, that build up into bigger, and more expensive issues, down the line. Here are some of the most common mistakes that small businesses make, and how you can avoid them.
1. Only Dealing With Taxes Once A Year
Once it’s tax season, are you scrambling to find all your receipts for the year, so you can start recording your income? It’s stressful enough, and doing it this way means that you’ll be way more likely to make mistakes on your filings.
Even if you’re a small business, it’s a good idea to get on board with an accountant, or at least use accounting tools that are available online. If you’re keeping track of things throughout the year, then you’ll be able to make that filing much more smoothly.
2. Estimating Numbers-
This is related to the first point. If you’re only handling your taxes once a year, once it comes time to file, you may not know exactly how much mileage you used in the previous months, or how much your other expenses were. It’s tempting to estimate, but that can cause problems later on.
“When filing your taxes, you need to be as specific as possible” says Janet Bowman, a finance writer with Revieweal and Best Essay Services. “You’ll want to keep track of all these expenses, so at the right time you have all the numbers ready and waiting.”
3. Not Using Your Cash Register Properly-
This is something that’s so easy to do as a small business. Some people may take payment in cash from customers, and then not put it through the cash register. They may also take money out of the register to pay for small bills and other items. This affects your records of the cash you’ve made, and will make doing your taxes harder.
Ensure that all sales go through the register, so all sales are recorded accurately. Avoid taking cash directly out of it for other uses if you can, as that will also affect your records.
4. Claiming Home Office Expenses
There are lots of small business owners out there that are claiming home office expenses, as they believe that they can do so. It’s true that you may be doing at least some of your work from home. However, you may actually be claiming them incorrectly.
“Typically, to be able to claim for your home office expenses, you need to have a full home office space” says Gary Dunn, a journalist at State Of Writing and College Assignments. “Check exactly what you can claim for before you go and do it.”
5. Bending Deduction Rules
On the subject of deductions, it’s very tempting to push them as far as you go. For smaller businesses, especially ones just starting out, every penny counts. As such, you want to be able to save money where you can. That’s why so many businesses use deductions even if they’re not quite eligible for them.
However, this can hurt you later on, especially if you’re assessed later down the line. Make sure that you know the rules, and stick to them. That doesn’t mean you can’t have your deductibles, but you need to be sure you’re using them properly.
These are five mistakes that many small businesses are making when it comes to their tax. If you make sure you avoid them, you’ll be able to file taxes much more accurately when that time comes around again. For specific questions schedule a call with one of our CPA’s here