The Tax Mistakes Far Too Many Businesses Are Making

by Mike on March 8, 2017

The Tax Mistakes Far Too Many Businesses Are Making

For a lot of businesses, especially start-ups, their main focus is on customer acquisition and sales, which means that taxes are often put on the backburner. Although it’s all well and good to focus on your customers and the sales that you’re making, you also need to make time for the other aspects of running a successful business, because if you don’t, you could end up in a rather sticky situation. Of all the business tasks that small businesses and startups put on the backburner, taxes are one of the most important, especially as the penalties for messing up your taxes can be somewhat harsh and include fines and sometimes even jail time.

To make the process of navigating the minefield that is business taxes a little easier, below is a list of the most common mistakes businesses make when it comes to their taxes (and how to avoid making them).

Failing to file a tax return

The first and most common mistake businesses make is failing to file their tax return at all. The reason that many businesses fail to file a tax return differs, sometimes it can be down to simply forgetting that the deadline was drawing near, other times it can be because the company doesn’t have the money to pay, and so, decides not to file a return. The fact is if you fail to file a tax return you could end up in a lot of trouble as it’s seen as being a criminal act and the IRS are able to prosecute you for it, potentially leading to jail time. So, filing it a must, regardless of your circumstances – it’s better to owe the IRS money than to not file at all. If you have failed to file a tax return for a year or more, then you may need help from a specialist company, such as IRS Problem Solvers. Whatever situation you’re in, don’t panic – you can get back on track with your taxes, as long as you get the right help, that is.

Not keeping proper records

In order to be able to properly prepare your tax return, you need proper documents that detail every penny spent and received. The more through your records, the better. If you’re going to make deductions from your profit, you need to have the records in place to back these deductions up. If you attempt to make deductions and then can’t back them up because you don’t have proper records in place, you could end up in a lot of trouble. So, you need to account for every penny spent, from money used for petty cash to the amount spent on a new computer – it all needs to be accounted for.

Not doing deductions properly

Another common mistake that many businesses make when it comes to their taxes is failing to do deductions properly. When it comes to making deductions, you can’t just deduct an estimated amount for all expenses; you need to work it out properly. This means using bills and spending records to work out exactly what you can deduct money for. Don’t make estimates, ensure every deduction is spot on, that way if you are investigated you can prove that you’re making deductions fairly and aren’t deducting more than you should be. It’s also important to realize that if you run your business from home, you can make more deductions than you can if you run it from a commercial office. So it’s worth taking the time to read up on what deductions you can make, to ensure that you’re not over or under deducting.

Refusing to get help

One of the biggest mistakes that many business owners make when it comes to their taxes is refusing to get professional help. The fact is that taxes can be somewhat tricky to file correctly if you don’t know what you’re doing, which is why it’s best to use an accountant to make the process a little easier. You might think that by doing your accountants yourself you are saving money, but often an accountant can save you more money on your deductions, so paying a few hundred dollars for one could be worthwhile. Plus, if you’ve got a professional dealing with your taxes, you’re less likely to be investigated.

Tax returns can be incredibly tricky because there’s a lot more to them than meets the eye, which is what causes a lot of problems for businesses. However, if you take note of the tips and advice above, you can avoid making any of the most common tax mistakes that business owners tend to make.

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