Very few business owners look forward to tax season, and those who don’t work with a tax accountant, may even dread it. Running a business takes a lot of work, and although taxes are an essential part of that work, they can feel like more of a last-minute chore than something you should prioritize. Unfortunately, when taxes take a back seat, it can quickly and easily lead to costly errors and missed deductions, not to mention additional stress.
To avoid such tax turmoil, you can combine working with experienced Coral Gables accountants with avoiding the following, commonly made mistakes:
Filing late or missing deadlines
Missed deadlines are among one of the most common mistakes made by small business owners, and yet working with a tax professional year-round, can prevent this from ever happening.
Missing deadlines for quarterly estimated tax payments
For the self-employed, sole proprietors, and owners of pass-through entities, estimated tax payments must be made on a quarterly basis, every year. Failure to comply results in penalties and interest.
Working with an accounting firm all-year round is the simplest and most convenient way to never miss another tax deadline.
Mixing personal finances with business finances
Tracking deductible expenses and keeping clean financial records is tricky when the lines are not clear between your personal and business finances.
Set up separate accounts to protect your liability and make preparing your taxes far simpler.
Not keeping accurate records
Consistent bookkeeping throughout the year, that includes reconciling bank and credit cards every month, securing digital receipt storage, clearly categorizing expenses and reviewing quarterly profits and losses, can prevent last-minute tax scrambles and errors.
Wrongly classifying workers
Wrongly classifying employees as independent contractors can lead to back payroll taxes as well as penalties and interest. As far as tax filing errors for small businesses go, this is right up there among the most costly.
Missing legitimate deductions
Underclaiming legitimate deductions such as vehicle mileage or home office, could see you miss an opportunity to reduce your taxable income.
Forgetting about self-employment tax
Budgeting for the self-employment tax that funds Social Security and Medicare, can help prevent cashflow problems.
Wrongly reporting income
Often triggering an audit, mismatches between income reported, and information provided on a tax return, can happen when 1099-NEC tax forms aren’t reconciled, cash payments are omitted, or income from third-party payment platforms isn’t reported.
Opting for the wrong entity structure
Affecting how much tax you pay, the entity structure you choose for your business should be selected with a long-term strategy in mind.
Not staying up-to-date with changes to tax laws
Fortunately for those working with a tax preparation service in Coral Gables, worrying about tax law changes isn’t an issue, as they’ll do that on your behalf. But it’s worth keeping in mind that changes can happen at any time, and to be prepared for added layers of complexity or cost.
The easiest way to avoid tax turmoil and breeze through the season every year, is to work with a small business tax accountant. But hiring them two weeks before a deadline is not a smart strategy; working with them year-round helps ensure that your records are always up-to-date, and when it’s time to file your returns, your overall tax liability is kept as low as possible. Proactive planning is the key to a stressless tax season, every single year, and if you aren’t already working with a tax professional, consider hiring one today!