Running a successful small business takes a lot of hard work and perseverance. And as the owner, it’s important to understand your tax needs and liabilities. So often we see business owners who are doing a great job at keeping up with their books, but are not aware of their tax responsibilities.
Take a look at the four most common tax mistakes that small business owners make – and try to avoid making them as well!
1. Choosing the Wrong Business Structure
This is an issue that can affect you right from the start. Should you set up your small business as a sole proprietorship, limited liability corporation (LLC), partnership or S corporation? All business structures have pros and cons, and it’s important to choose the right form for your situation, especially when it comes to the tax liabilities. Our team at Ferguson, Timar & Company can help you decide what’s best to file as.
2. Last-Minute Bookkeeping and Record Gathering
Most small businesses will have simpler bookkeeping and accounting methods than bigger corporations. However, a huge mistake is to just set everything aside during the year and then wait until just before your taxes are due to sort it all out. Keep accurate records and track business expenses throughout the year and you will be much more prepared for your taxes.
3. Falling Behind on Estimated Tax Payments or Tax Deposit
Self-employment tax, income tax and payroll tax deposits are liabilities that you need to plan and make sure enough money is put away for. Likewise, if you fall behind on your quarterly estimated tax payments, it can be hard to catch up. The more proactive you are with estimated payments and tax deposit preparation, the better off you will be. Set the necessary tax funds aside in a separate account or factor it into your bookkeeping so that you are not spending it on anything other than taxes.
4. Not Taking Advantage of All Tax Deductions and Benefits
If you don’t understand your liabilities or know about what you can and cannot deduct as business expenses, you may just be throwing money away. Take advantage of every tax benefit you have as a business, and learn how to do it wisely. Missed deduction opportunities can be costly, but so can false information and improper deductions.
It is smart to consult with a small business tax professional before you make these common tax mistakes. At Ferguson, Timar & Company, we specialize in small business tax consultation, accounting and tax preparation. We’ll help you be fully prepared when it comes time to file your tax returns. Ferguson, Timar & Company will help you maximize your deductions while minimizing your risks. Contact us today for more information.