Common Mistakes Small Businesses Make on Their Tax Return
1. Excluding income
As a business owner, it is essential that you always strive to report income information accurately and honestly. Being negligent or committing simple math errors while informing about income can lead you to face penalties from the IRS (Internal Revenue Service).
2. Overstating Expenses
You will probably have several transactions of your business’s goods and services. While filing the estimated tax bill for the year, you’re most likely won’t guess the exact amount and may overstate expenses. The IRS keeps a close watch on the data you provide, and they will want you to be accurate with the amount. Therefore, make sure to avoid mistakes as the IRS is continually searching for false or incorrect data.
3. Procrastinating with the filing of taxes
A tax year runs from the 1st of January to the 31st of December, so ensure to watch the filing due date. Looking at taxes after the 31st of December may find you filing for an extension and needing more time to complete your returns.
4. Failing to provide auto expenses
If you’re self-employed or own a business and use your vehicle for your business can deduct the auto expenses on your tax return. It is best to learn more about deductions of personal and business expenses through a financial expert so that you get a clear picture of how to file your returns.
5. Business not correctly structured
A well-structured business will help you better manage your assets and accounts correctly, especially when the tax season comes around. It can even play a significant impact on your business’s growth and profitability.
6. Need more time
If you need more time to prepare and file your tax return, make sure you get an extension at the earliest opportunity. Also, ensure that you file it before the extended due date!