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Top 5 Tax Mistakes Made By Business Owners and How to Avoid Them

ADMIN

October 15, 2021

A big part of your success as a small business owner is dependent on your record keeping and tax planning efforts. It is important that you take the proper steps to ensure absolute accuracy and consistency of your business’s bookkeeping and tax preparations.

You don’t want to make any tax or financial record-keeping errors that are frequently made by small business owners. In fact, continue reading to learn the top 5 tax mistakes made by business owners and how to avoid them.

Most Common Tax Errors Small Business Owners Make in the United States

Selecting the Wrong Business Type

Is your business a sole proprietorship? A partnership? Is your business a limited liability corporation (LLC)? Perhaps your business is a group? It is important that you choose the proper form of business when starting up. Many small business owners make the mistake of choosing the wrong business type, and therefore setting themselves up for a whole heap of challenges come tax season. It can also cause them to lose out on several tax benefits and rebates.

Whether your business is a Subchapter S Corporation, partnership, or a sole proprietorship, it is important that you obtain professional advice from a licensed Indianapolis business CPA to ensure that you are choosing the right form of business for your overall objectives.

Procrastinating on Record-Keeping Until Tax Season

One of the most common mistakes made by small business owners, especially first-time business owners, is waiting until tax season to catch up on all of the business’s bookkeeping and financial records. This is one of the worst things you can do for your small business success. When you are doing a good job of keeping your records organized and accurate, you can better plan your taxes and be more successful in the long run.

Failing to Make Tax Deposits and Estimated Payments

Small business owners often allow themselves to get behind on their tax deposits and estimated tax payments. Although it is likely that you are strapped for cash, especially if you’re just starting up as a small business owner, it is important that you are always setting money aside for tax purposes.

Tax payments like income tax, self-employment tax, and payroll tax are typically more than you would imagine them to be. It is very difficult to get caught back up on tax payments and deposits if you fail to keep up with them as you operate. As soon as you are receiving money, put some away in a separate account strictly for tax payments only.

Paying Employees Under the Table

Many small business owners try to reduce their payroll tax liabilities by paying their employees under-the-table or as independent contractors. Both of these decisions are extremely risky to the overall success of your business, but more importantly, illegal. Do not make this common mistake. Always sign your employees up legally and in accordance with all local and federal regulations. If you do choose to pay your employees under the table or as independent contractors, and you are discovered by the IRS, you will face several consequences, including back taxes, fines, and even criminal charges like tax evasion.

Losing Out on Tax Deductions and Benefits

When you are working with a professional Indianapolis IN business CPA who specializes in business tax planning and record-keeping, you can ensure that you are taking advantage of all tax deductions and related tax benefits. But many small business owners make the mistake of doing their taxes on their own, which causes them to miss out on business deductions and related tax benefits.

Are you looking for a business accountant who can help you with all of your bookkeeping and tax planning needs? Contact Aspire CPA at (317) 469-4500, or email our office at acct@aspirecpas.com, and speak with a licensed Certified Public Accountant to learn how our business accounting and tax services in Indianapolis, Indiana can help grow your bottom line.

Related Posts:

Top 3 Software Programs for Organizing Business Receipts Digitally
Common Tax Deductions for Small Businesses
Fundamental Facts About Business Tax

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