Small business owners are subject to what can sometimes seem like endless taxes at the federal, state and local levels. At the same time, when you’re starting or operating a small business, taxes can be the last thing you think about or want to deal with.
Unfortunately, not handling your taxes correctly can be incredibly problematic and can even lead to the end of your small business.
Below are some of the top tax mistakes you should ensure you’re not making as we head into 2017.
Not Knowing All Your Applicable Taxes
Owning a small business certainly isn’t easy, and that doesn’t just apply to day-to-day operations. There are a myriad of tax liabilities you’re responsible for paying as a small business, and one of the top mistakes many companies make, particularly as a startup, is not knowing what you’re responsible for and what needs to be paid.
Make it a priority in your business to learn what you owe, especially if you have employees. It becomes even more complicated if people are working for you, so you might consult with a CPA who specializes in working with small businesses.
Poor Record Keeping
Record keeping is essential when you’re running a small business. You’ll need to keep well-maintained records not just for purposes of business operations, but also for your taxes.
Keeping detailed records is good not only if you’re audited, because you’ll need to show your deductions, expenses and more, but also so that you can minimize your tax bill.
If you keep great records from the start, you’ll be able to identify more legitimate deductions, and you’ll have the peace of mind of knowing you have the proof to back them up.
Combining Business and Personal Expenses
When you’re a small business owner, it can seem simpler to go ahead and combine all of your business and personal expenses and finances. While it can be simpler as you’re doing it, it can make your taxes a lot more complex.
It can not only be more challenging when it’s time to file, but this can also be a tip-off to the IRS in terms of a potential audit.
It’s best to keep business and personal expenses entirely separate, but even if you don’t, don’t think about claiming personal expenses on your business taxes.
Payroll can seem relatively straightforward, but in reality, it’s not, particularly as it pertains to taxes. You’re likely doing yourself a favor if you go ahead and outsource payroll in your small business because there can be significant penalties for issues related to this area of your business.
When you outsource payroll management, you can avoid the potential of paying high penalties or even going out of business because of mistakes.
As a final note, it can also be wise if you do face issues with the IRS to hire a law firm that handles tax-related issues. You might not want the expense, but ultimately it can save you significant amounts of money over the long-term and help you better protect your small business.