Four Common Tax Errors Small Businesses Should Avoid

Tax Errors Can Be Costly
For Small Businesses

As a small business owner, you often wear many different hats. You might have to wear the boss hat one day and the employee hat the next. Most days, you probably wear both! When tax season comes around, you might be wearing your tax hat.

You may think of doing your taxes as just another item to quickly cross off your to-do list. However, this approach could leave you open to mistakes when filing and paying taxes.

Accidentally failing to comply with tax laws, violating tax codes, or filling out forms incorrectly can leave you and your business open to possible penalties. Seeking the help of a certified public accountant is one of the easiest ways to identify these kinds of errors.

Being aware of common mistakes can also help tame the stress of tax time. Here are four common mistakes small business owners should avoid:

Underpaying Estimated Taxes

As a business owner, you should generally make estimated tax payments if you expect to owe tax of $1,000 or more when your return is filed. If you don’t pay enough tax through withholding and estimated tax payments, you may be charged a penalty.

Depositing Employment Taxes

If you are a business owner with employees, you are expected to deposit taxes you withhold, plus the employer’s share of those taxes, through electronic fund transfers. If those taxes are not deposited correctly and on time, you may be charged a penalty.

Filing Late

Just like individual returns, business tax returns must be filed in a timely manner. To avoid late filing penalties, you should be aware of all tax requirements and filing deadlines for your type of business.

Not Separating Business and Personal Expenses

It can be tempting to use one credit card for all expenses, especially if the business is a sole proprietorship. Doing so can make it very hard to tell legitimate business expenses from personal ones. This could cause errors when claiming deductions and become a problem if you or your business is ever audited.

Contact your tax professional if you need advice in avoiding common tax errors that can be costly for small businesses.