Filing small business taxes is REQUIRED for every business, although no one enjoys it. The problem is that some business owners think of taxes only in the weeks leading up to the March 15 deadline of every year. But there is a lot more to consider.
Read through these six common mistakes small business owners make so you can avoid making them with your filing.
- Not Filing or Paying Taxes on Time
First and foremost, there are some changes to filing deadlines that business owners need to be aware of. C-Corp filing dates will be pushed back, while Partnerships’, LLCs’ and S-Corps’ filing deadlines are moving up.
Make sure you’re aware of your filing deadlines and whether or not they’ve changed. Small business owners who miss their deadlines will have to request an extension from the IRS and make any estimated payments if they expect they owe money. Any money owed to the IRS is still due on tax day even if an extension is granted.
- Not Applying the Right Business Deductions
When you go into business, everyone seems to have advice on how you should set it up. Some people think everyone should have a corporation, and will happily help set it up – for a fee. Other people recommend Subchapter S Corporations, partnerships, or a sole proprietorship.
The truth is, no form of business is perfect for everyone.
For example, a sole proprietorship, which reports income and expenses on Schedule C attached to your Form 1040, requires no setup with the IRS and the least record keeping.
However, you may limit your exposure to liability with a limited liability corporation (LLC) (although not always as much as you might think). A regular corporation seems impressive, but you may pay higher total tax if you’re not careful.
Do your homework or get professional advice, and start with the simplest form of business that meets your needs.
- Filing Independently
Not working with an accountant well versed in small business tax deductions makes the process more painful than it needs to be. Working with an expert or CPA allows you less stress and more time to worry about your business.
- Being Unorganized
Once you’ve made the jump from an employee to become a small business owner, you’ve outgrown the shoebox method of filing important documents. If you’re not already doing it, start scanning receipts (photos work well, too) and logging them electronically.
If you’re using a program, such as Excel, be sure to back up everything regularly. Or you can use a cloud-based program like Google Docs. All hard copies should be filed as well, placing receipts and records in manila envelopes marked by months and years. Store them in a dry, safe place.
Small business owners should ensure that they’ve accurately filed each form, correctly itemized deductions and write-offs, and seek guidance when not clear on tax related matters. Use these tips to get returns filed accurately and on time to get the most tax savings.
We have over 15 years’ experience of consulting on tax problems and strategies. Talk to us on how to reduce your tax now or for any other tax related questions: https://gbocpa.com/