Barbara Schreihans, CEO and Founder of Your Tax Coach.
As a business owner, managing taxes can be one of the most challenging aspects of running your business. Many business owners are unfamiliar with this area, so it can cost a lot of time and money. Even making minor mistakes with your taxes can lead to significant financial costs, including penalties, audits and lost opportunities for savings. Understanding and avoiding common tax mistakes can help you navigate the complex tax landscape more effectively.
Based on my experience as the founder of a tax strategy firm, here are three common tax mistakes I’ve seen business owners make and how you can avoid them.
1. Not Keeping Accurate And Complete Records
Failing to keep accurate records can cost leaders so much time and money. This oversight can lead to errors in tax filings, missed deductions and complications during an audit.
At the minimum, I recommend using accounting software to streamline the process and reduce human error. Keep all of your receipts, and take the time to ensure you are maintaining detailed records of receipts, invoices and bank statements to prove your deductions and income. You can also consider hiring a bookkeeper to manage your financial records for you and track all income, expenses and transactions.
2. Missing Available Deductions And Credits
Most business owners don’t fully know the tax code, so they miss out on dozens of valuable deductions and credits—deductions and credits that are in the tax code specifically to incentivize business owners like you. I’ve found this often happens because business owners either lack awareness or fear triggering an audit.
If you want to save money on your taxes, educate yourself on the deductions and credits available to your business and how to stay compliant. Common deductions include home office expenses, business travel and equipment purchases. Credits can range from research and development credits and retirement credits to employee retention credits. Stay informed about changes in tax laws and regulations to help ensure you’re taking full advantage of available tax benefits.
3. Overlooking Professional Tax Guidance
Trying to DIY your business taxes could cause some business owners to make costly mistakes. Tax laws are complex and ever-changing, and expert guidance and resources can help ensure you are compliant and maximizing your tax benefits.
If you’re a newer business owner or have a limited budget, explore free or low-cost resources for business owners, such as guides, masterclasses and workshops on tax education.
Owners can also research tax professionals who can provide tailored advice and strategies for their specific business. A tax expert can help you navigate the complexities of tax laws and identify potential deductions and credits. Work with them to develop a comprehensive tax plan that aligns with your business goals. They can also assist with tax preparation and filing, ensuring accuracy and compliance. This could help you save in the long run by optimizing your tax outcomes and reducing the risk of errors and audits.
When looking for a tax professional, ensure you work with someone reputable and trustworthy. Check their credentials, read reviews and ask for references from other business owners.
When you focus on keeping accurate records, leveraging available deductions and credits and using expert tax guidance, you can avoid common tax mistakes and ensure compliance with tax laws. While researching and learning about taxes isn’t always the most fun for business owners, it can save you money—and that’s always fun.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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