5 Common Tax Problems for Small Business
Even if you don’t like thinking about it, filing and paying taxes is a chore that must be completed every year. For many people, there is a fear that some step or detail of the filing process will be overlooked and they will be thrown into discord with the IRS. For small business owners, this worry may be even more prevalent due to the many steps that come with filing taxes as a business owner. Here are five common tax problems that business owners often encounter, and steps to go about preventing them.
Reporting expenses correctly
As a business owner, the expenses of your company are tax deductible and must be recorded properly. These expenses include anything from post-it notes to having lunch with clients or investors. Problems arise when the business owner either has no record of these expenses or when he or she fails to clarify between personal expenses and business expenses.
If you neglect deducting a sufficient percentage of taxes from your employees’ checks, the IRS has the ability and will very likely penalize you. This includes paying the entire amount owed on your taxes. Withholding the correct amount from payroll is a very common problem that businesses encounter.
In addition to reporting tax-deductible expenses, reporting income correctly is naturally just as vital. This includes, for example, keeping record of every item that brings income as well as income that results from any forgiveness of debt.
Failure to report or pay
Though there are occasionally acceptable reasons for filing taxes late, they are quite rare. Taxes have everything to do with being timely in order to avoid penalty. The IRS also has no sympathy for people who claim that they should not need to pay taxes for various personal reasons — that’s the reality.
Using the wrong form
As simple as it sounds and seems, using the correct tax form can be difficult, especially if your status has changed within the past year. Failing to sign forms before returning them, calculating incorrectly, and other simple mistakes commonly occur in the world of taxes.
Avoiding tax pitfalls
It’s safe to say that taxes can be overwhelming and confusing at best. Although easy access to computer programs or apps can help you file your own taxes by simply answering a series of questions, a reputable tax specialist will provide you with the real expertise and help you need as a small business owner.
Keep in mind that tax policies are in a constant state of change, and often difficult to track. Since failing to follow the correct tax codes in your area can result in penalty, a tax specialist is a valuable asset that keep your taxes up-to-code and maximizing your financial advantage. When it comes down to brass tacks, having an expert handle all the tax questions that come along with owning a business will ensure that you have everything completed on time and correctly. Beyond the financial benefits, peace of mind is a valuable asset.