Entrepreneur’s Daily Dose has several great tips for small businesses today. Among them are three common pitfalls businesses fall into when preparing their taxes. Avoid simple mistakes that can cost your company money by following these rules:
Keep meticulous records. When using your own credit card or cash for business expenses, track that spending in an accounting program, keep receipts, or better yet, hire an accountant or business management company, like Benay, to go over your records periodically to make sure every purchase is accounted for.
Properly classify all workers. When making use of independent contractors, remember that these costs should be classified as outside services and that if the amount paid to them exceeds six hundred dollars in one year, you will still need to file the appropriate 1099 forms. Costs that should be classified as wages are subject to payroll taxes and could easily inflate your estimated tax if misclassified. Consider a professional service to review these numbers.
Don’t assume that your businesses taxes are paid on the same schedule as your personal taxes. Rather than a single payment on April 15th, businesses must make quarterly payments throughout the year based on their estimated taxes. Neglecting to make these payments on time increases your risk of being audited and may qualify you for penalties and interest charges.
Running a successful small business is challenging enough without losing profits to simple tax mistakes that could have otherwise been avoided. Follow these rules and with the help of a good accountant or bookkeeping service, you can focus on what really matters: growing your business.