Did you know 35% of business returns filed by business owners contained avoidable mistakes, according to the IRS?
That’s nearly 4 out of every 10 business owners.
So if you’re self-employed or own a business, chances are you may be guilty of some of these same mistakes.
And if not corrected, these could lead to unnecessary audits and overpaying your taxes.
But even worse, when you don’t have your financial house in order, it can lead to much more devastating problems down the road.
I could tell you horror stories of people’s lives turned upside down because they neglected this area of their business for too long.
People who one day seem to be living the good life and the next day find out they’re on the hook for hundreds of thousands of dollars — money they didn’t have.
But we’ve all had our fair share of bad news this year!
So let’s focus on how to CORRECT these mistakes.
Because even if you’re making them, it’s not helpful to beat yourself up over things you can’t change.
So here are three (3) common tax mistakes I see business owners and self-employed folks making all the time:
Mistake #1: Poor record-keeping
Don’t rely on your memory alone. According to the Internal Revenue Service, sloppy record-keeping is the most common problem among business owners.
For example, many business owners use a personal credit card or cash for business purchases and don’t track those expenses.
Mistake #2: Misclassifying workers
Many business owners hire contractors or virtual assistants (VAs) to help with projects.
However, these workers are often erroneously classified as labor or payroll costs when business owners do their taxes.
The problem with classifying contractors or VAs this way is that their wages would be subject to payroll taxes.
This means you could be taxed 10% more than you should be.
Instead, they should be classified as outside services on the tax return.
Plus, if the amount you pay a contractor exceeds $600 per year, you must file a 1099 form. More on 1099’s HERE
Mistake #3: Late payments
Some business owners assume their tax payments are due when they file their tax returns on April 15th.
This is a common mistake.
However, the truth is the tax system for businesses and the self-employed operates on a “pay as you go” schedule.
This means owners and the self-employed are expected to make quarterly estimated tax payments on:
● April 15
● June 15
● Sept. 15
● Jan. 15
Failing to make these payments may flag your return for audit, and trigger penalties and interest charges when you finally do file the tax return! Learn more HERE.
These are just three of many tax mistakes I see business owners always make. Want to learn more about the topic? or just want a professional (Me!) to take care of the tedious paperwork tasks? See how I can help.
Cheering for you,