With the tax deadlines approaching, do the numbers make you scratch your head?
Are you scared of the IRS chasing you for taxes or for making tax mistakes?
The problem is that some business owners don’t think about taxes until the deadlines or the due dates approach which makes tax filing for business owners a hectic and stressful time of the year and leads to unnecessary errors. These mistakes might not seem significant at first but could hurt your businesses going forward. Here are a few common mistakes you could avoid as a business owner while filing your taxes:
- Not Filing or Paying Taxes on Time
If you don’t pay on time, your business will be assessed by a penalty of 5% per month by the government and that will continue to increase until the return is filed. So, filing taxes on time should be set on priority to avoid unnecessary penalties. If you neglect to pay business taxes then you have to pay up to 25% penalty of the total tax bill plus a late-payment penalty of 5% each month after the deadline. So to avoid unnecessary hassle, businesses should not make mistakes while filing taxes as per the deadlines.
- Not Paying Estimated Taxes during the Year
If you are filing as a Sole Proprietor, Partner, Corporation Shareholder, and/ or Self-Employed Individual, you generally have to make a rough tax payment if you expect to owe 1000$ or more when you file your return. Instead, if you are filing as a corporation, you generally have to make an estimated tax payment for the corporation. If you think that it will owe a tax of $500 or more. Figure out how much you could pay in estimated tax through the Form 1040-ES worksheet.
- Not Applying for the Right Business Deductions
This is one of the major tax mistakes that almost every business owners end up doing. If you don’t want to pay more than what you actually owe on your taxes, business deductions help you out significantly in cutting down costs. There are so many deductions that your business may qualify for, which include office furniture and supplies, advertising, licenses, equipment, start-up expenses, and more.
- Not Tracking Expenses Accurately
It’s very difficult to take any tax deductions if you don’t keep a proper record of incurring those expenses. This means that you have to be particularly detailed with each and every business record that you make. You could maintain a timely bookkeeping record of your expenses with the help of software like ZohoBooks, QuickBooks, XERO, FreshBooks, etc. to avoid making mistakes while filing tax. Business expenses records need to be managed with meticulous care and you should save each receipt, keep a daily travel log for mileage, and track and categorize every expense.
- Not Separating Business and Personal Expenses
If you have soiled the financials by mixing your personal and business expenses, you could be creating a big mess that will have to be cleaned up when tax time rolls around. Separating your business and personal expenses by maintaining separate bank and credit card accounts, keeping receipts separate, and paying a salary to yourself instead of drawing directly from your business accounts could be helpful in avoiding common mistakes for business.
Tax filing is not as scary as some people make it out to be if you have professionals helping you out with the same. Mercurius Advisory Services offers top-notch professional services with the filing of taxes, bookkeeping, etc. We provide you with a hassle-free tax filing experience so that you don’t have to worry about deadlines or the approaching due dates. To sail smoothly through this tax filing season, go visit our website to know more about us and the services that we provide.