Running a small business means you have a lot of responsibility, including keeping up with and properly filing your taxes. If you’re not a tax professional, chances are, you find the tax code to be cumbersome and difficult to understand.
It’s easy for small businesses to make tax filing errors in Union City, NJ. Generally, the best way to avoid them is to stay organized, always be truthful and hire a tax professional to help you navigate these confusing waters.
Here are some of the most common small business tax mistakes in Union City, NJ:
- Mixing business and personal expenses: If you’re a small business owner, especially a sole proprietor, it’s all too easy to mix up your business and personal finances. Keeping your business finances entirely separate is the only way to ensure that you don’t accidentally commingle funds—something the IRS frowns upon. You can only deduct business expenses from your business tax returns, and vice versa, so make sure you keep your business records separate.
- Poor record-keeping: Bad (or no) organization and laissez-faire record keeping has caused millions of headaches for small businesses and tax professionals in America. Generally, even if you don’t have quarterly filing obligations, you want to make tax time more than once per year—it could help you qualify for significant deductions, and will help you stay organized throughout the year. Use a program like QuickBooks to keep track of your income, expenses, payroll and taxes to ensure smooth sailing all year long.
- Sending the wrong forms or payments: Your business structure will determine which kinds of forms you’ll need to file, but there will be different requirements than you’re used to for paying once-yearly personal income tax. Some forms, like payroll and sales tax reporting, need to be done quarterly, while others will be submitted directly to your employees. You can stay on top of it by hiring an accountant, or using the IRS’s tax calendar to keep informed of important dates.
- Underreporting your income: If you’re one of the lucky business owners who has to file quarterly taxes, you’ll have to guess how much to pay based on your estimated tax bill for the year. It’s impossible to predict every circumstance, but the IRS expects you to estimate fairly accurately—you can suffer fines and penalties up to 20 percent of your entire tax bill if they decide you were “unreasonably careless” or even negligent in reporting your income.
- Missing deductions: There are a number of different deductions you can take—these are the expenses that are “ordinary and necessary” in running your business. Don’t run out and buy a private plane for your home craft business, but do speak with an accountant to learn more about what kinds of deductions you might qualify for and how to report them on your taxes.
Ready to tackle your taxes while avoiding small business tax mistakes in Union City, NJ? Call Kedean’s Generation for accounting services today—we’ll schedule a consultation and set you up for success.
Categorised in: Tax Preparation