These common tax errors may cost your small business
Posted on December 9, 2019
If you own or manage a small-to-medium-sized business, there are an amazing number of details to master. If you also do your own taxes, it’s incredibly difficult to stay on top of quarterly filing dates, not to mention complying with constantly changing IRS tax codes, state regulations and updates.
In short, trying to do it all can cost you, leaving your business and employees open to potentially damaging mistakes when filing and paying taxes. Being aware of the most common mistakes can help, as we near the end of 2019.
Here are a few mistakes business owners should avoid, according to the business CPA team at Teipen Selanders Poynter & Ayres:
- Missing a tax deadline is a rookie mistake. Just like filing individual returns, business tax returns must be filed in a timely manner to avoid late filing penalties. Business owners must stay on top of all county, state and federal tax requirements — and deadlines — for their type of business.
- Don’t underpay estimated taxes. Most business owners make estimated tax payments, generally quarterly, if they expect to owe tax of $1,000 or more when their return is filed. Not only is it simpler, in general, to pay quarterly, if your company doesn’t pay enough tax through withholding and estimated tax payments, your business will likely be charged with a penalty. Be sure your quarterly tax estimate covers what is owed. A CPA can help you ascertain a tax estimate for your business.
- Depositing employment taxes is critical. Business owners with employees must deposit taxes on employee monies withheld — plus the employer’s share of those taxes — through electronic fund transfers. If those taxes are not deposited correctly and on time, the IRS will charge your business with a hefty penalty.
- Be sure to separate business and personal expenses. It can be tempting to use one credit card for all expenses, especially if the business is a sole proprietorship. Don’t do it. It can be difficult to prove legitimate business expenses from personal ones, especially months from the purchase date. Not only can this sloppy practice cause errors when claiming deductions, it can become a much bigger problem if the taxpayer owner or business is ever audited.
It is next to impossible for business owners to understand everything there is to know about tax laws, tax codes, and using updated forms correctly. TSPA strongly recommends using a certified public accountant that is familiar with your type of business. That is the safest way to avoid tax and compliance errors.
If your growing business is ready for a business-savvy CPA team to help guide you through tax challenges and changes, we are here to help.