Taxes are painful, business owners, but you’ve got to pay them to prevent hassles. Did you know that the IRS collected more than $4.1 trillion in taxes in 2021? And the number increases every year. That sounds gross, right?
And as a business owner, you must do more than file returns and pay your taxes on time. Steer clear of mistakes as you don’t want to leave any money on the table or face penalties. But let’s face it, entrepreneurs; navigating the tax maze can be confusing, overwhelming, and downright scary for newbies.
But don’t worry guys, we’ve got you covered with a list of common blunders you need to ditch to stay safe and keep your business on the right track. Here you go!
Blunder #1- Mixing personal and business expenses
Well, it is common for small business owners to use their credit cards for buying things for business and paying company bills. But it’s a recipe for disaster, guys. You may find yourself struggling to keep track of your business expenses in the first place.
Even worse, mixing expenses can raise a red flag with the IRS, which is the last thing you want to deal with. Use separate credit cards and maintain separate bank accounts to draw the line.
Blunder #2- Not maintaining accurate records
Not maintaining accurate records can surely land you in big trouble with the taxman. Failing to keep detailed and correct records of your financial transactions sets you up for potential errors in tax reporting.
Additionally, you may end up missing deadlines and facing penalties. The solution is simple- just stay ahead of records and keep them organized.
Blunder #3- Going without a strategy
Well, going without a strategy is another mistake you should avoid as an entrepreneur. For example, it makes sense to pay estimated taxes throughout the year instead of leaving them until the last minute. The massive expense may stress you out and topple your startup budget.
Why not rely on proven Tax Planning Strategies to navigate the journey easily? You can collaborate with experts to show you the way and help you stay afloat despite the challenges.
Blunder #4- Misclassifying workers
Misclassifying workers can lead to serious legal and financial trouble. If you’re hiring freelancers or independent contractors, classify them correctly for tax purposes. Misclassifying permanent workers as independent contractors can lead to hefty penalties and legal issues.
So, do your due diligence and classify your workers correctly. It can save you from big problems down the line!
Blunder #5- Not making the most of deductions and credits
Are you making the most of valid tax deductions? Are you claiming the credits you are eligible for? If you’re missing out on either of them, it’s time to reassess your plan. As an entrepreneur, you can explore plenty of legit deductions and credits.
They can lower your bills and help you keep your hard-earned cash. Research thoroughly and take advantage of all the deductions you’re entitled to
There you have it, folks. You must absolutely ditch these tax blunders as an entrepreneur. These mistakes can cost your business a bomb, but a little awareness and planning are enough to stay ahead of them.