Small business owners have to wear many hats and there is always a lot to do. Paying taxes may seem like another item to quickly get through so it can be removed from the “To Do” list. Accidentally failing to comply with tax laws, violating tax codes, or improperly filling out forms can lead to possible penalties. The following are common business tax mistakes small business owners should avoid;
Underpaying estimated taxes – Business owners should generally make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed. If they don’t pay enough tax through withholding and estimated tax payments, they may be charged a penalty.
Depositing employment taxes – Business owners with employees are expected to deposit taxes they withheld plus the employer’s share of those taxes through electronic fund transfers. If those taxes are not deposited correctly and on time, the business owner may be charged a penalty.
Filing late – Just like individual returns, business tax returns must be filed in a timely manner. To avoid late filing penalties, taxpayers should be aware of all tax requirements for their type of business and the filing deadlines.
Not separating business and personal expenses – It can be tempting to use one credit card for all expenses especially if the business is a sole proprietorship. Doing so can make it very hard to tell legitimate business expenses from personal ones. This could cause errors when claiming deductions and become a problem if the taxpayer or their business is ever audited.
Using a certified public accountant is the easiest way to avoid these errors. Contact Jellison CPA with your small business tax questions.