Blog # 70
Four Common Errors can be Costly to Small Businesses
A small business owner wears many different hats.
They wear their boss hat one day, the employee hat the next day and when tax season comes around, it might be their tax hat.
They may think of doing their taxes as just another item to cross off their to-do-list.
However, this approach could leave taxpayers open to mistakes.
Accidentally failing to comply with tax laws, violating tax codes, or filling out forms incorrectly can leave taxpayers and their businesses open to possible penalties.
Using an Enrolled Agent (EA) as a resource is an easy way to avoid these kind of errors.
Being aware of common mistakes can help alleviate the stress of tax time.
A few mistakes small business owners should avoid:
Underpayment of estimated taxes- business owners should make estimated tax payments if they expect to owe $1000 or more. If they do not pay enough tax through withholdings and estimated tax payments, they may be charged a penalty.
- Depositing employment taxes- business owners with employees are expected to deposit taxes they withhold, in addition to the employer’s share of those taxes. If those taxes are not deposited correctly and on time, the business owner may be charged a penalty.
- Filing late- business tax returns must be filed in a timely manner, to avoid late filing penalties.
- Not separating business and personal expenses– it can be tempting to use one credit card for all expenses especially if your business is a sole proprietorship. Doing so will make it hard to tell legitimate business expense from personal ones. This could cause errors when claiming deductions and become a problem if the business is ever audited.