It’s normal for new businesses to make errors. However, there isn’t much margin of error when it comes to taxes. For many small business owners, unfortunately this is the part they understand the least. This leads them to make errors that could at best result in money lost, or legal troubles in a worst-case scenario. Let’s take a look at a few tax mistakes small businesses commit way too often.
Not Keeping Receipts
One of the biggest mistakes that you can make as a small business is not keeping receipts. If the IRS notices something suspicious on your reports, they may ask for an audit, and that means that you will have to show proof for any expenses. Some may assume that their credit card statements can work instead of receipts, but that’s not always the case. The IRS will want to see receipts for certain things, and if you can’t produce them, it will make the process complicated and long.
Another major issue is not tracking taxable activities properly. For instance, you are required to keep a mileage record for vehicles in your fleet. If you aren’t, you can kiss that business driving deduction goodbye.
Not Working with a Professional
It’s a big mistake to assume that you can do your taxes alone and that working with an accountant is an unnecessary expense. It is often advisable to hire a small business accountant to help manage your books and accounting while you focus on your business. If you’re located in Florida, a Florida CPA will be able to help you not only keep your books in order, but inform you of any scheme of benefits you may have access to. This is something that could instantly affect your bottom line.
A CPA will be able to ensure compliance. They may also be able to tell you about anomalies in your books or ways that you can run a more efficient operation. A good accountant is one of the first people you need to work with as a business owner if you want to avoid trouble and keep your finances under control.
Mixing Your Business and Personal Expenses
This is another very common mistake that businesses make. When you mix both your business expenses and personal ones, you might miss out on a business deduction, or you might mix up personal and business expenses. To keep things clear, make sure that you have a separate credit card and bank account for your business and personal purchases. Also, consider switching to an LLC or corporation if you’re operating as a sole proprietorship.
Claiming Deductions will Trigger an Audit
Claim all the deductions that you can. You should never leave money on the table out of fear that it will trigger an audit. Not only should you not fear an audit if your books are in order, but there’s no deduction that is more likely to trigger an audit than others.
If you’re a budding small business, make sure that you avoid these mistakes at all costs. This will allow you to not only stay out of trouble with the IRS but also run a much tighter ship.