7 Tax Mistakes Small Business Owners Want to Avoid at Year-End
We see it all the time.
Small business owners - blind sided at the end of the year because things were missed, proper accounting decisions weren't made, etc.
That's why I've compiled a list of 7 important tax tips small business owners should consider to avoid an unexpected tax invoice.
Tip 1 - Failing to Separate Business and Personal Finances
Why it’s a mistake: Mixing personal and business expenses complicates bookkeeping and can trigger IRS inspection.
How to avoid it: Use separate bank accounts and credit cards for your business and create clear documentation of all transactions.
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Tip 2 - Neglecting to Review Financial Statements
Why it’s a mistake: Skipping a review may lead to overlooked income or expenses, resulting in inaccurate tax filings.
How to avoid it: Review your profit and loss statements, balance sheets, and cash flow statements before year-end.
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Tip 3 - Overlooking Retirement Contributions
Why it’s a mistake: Missing opportunities to contribute to retirement plans can result in higher taxable income.
How to avoid it: Contribute to a SEP IRA, Solo 401(k), or other retirement accounts to reduce your tax liability.
Tip 4 - Missing the Deadline for Tax-Advantaged Purchases
Why it’s a mistake: Waiting too long to make equipment purchases or invest in business improvements can push deductions to the next year.
How to avoid it: Plan purchases of qualifying business equipment to take advantage of Section 179 or bonus depreciation.
Tip 5 - Forgetting to Reconcile Payroll and 1099 Payments
Why it’s a mistake: Inconsistent or inaccurate payroll records can lead to compliance issues with the IRS.
How to avoid it: Reconcile payroll and ensure all contractors receive accurate 1099 forms.
Tip 6 - Underestimating Taxable Income
Why it’s a mistake: Miscalculating income or failing to account for all revenue streams can result in underpayment penalties.
How to avoid it: Reconcile accounts receivable, inventory, and other income sources to ensure accurate reporting.
Using secure accounting software can help.
Tip 7 - Not Consulting a Tax Professional
Why it’s a mistake: Trying to navigate complex tax laws without professional help can result in missed opportunities or costly errors.
How to avoid it: Work with an accountant or tax advisor to review your tax strategy and ensure compliance.
(I know one if you're in need!)
Owning and running a small business is hard enough. Don't add the stress of questioning if your finances are done properly to the mix.
Schedule your appointment today, and let's start the new year off with fresh, clean books!
Schedule your FREE consultation here!
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