6 Common Small Business Tax Filing Mistakes and How to Avoid Them

You put a lot of time and money into keeping your small business up and running. But do you know where your money went at the end of the year?

Most business owners realize that they need to file taxes. But many don’t know how to file them correctly. If you make common tax filing mistakes, you’ll end up paying the price.

Don’t let a simple mistake result in a lot of unnecessary money being taken from you. Keep reading to learn about common small business tax filing mistakes and how to avoid them.

1. Not Knowing Which Expenses Are Tax Deductible

This mistake can lead to overpaying your taxes and missing out on deductions that could save you money. To avoid this mistake, it is important to educate yourself about tax deductions and credits. Many resources available online can help you with this; be sure to check them out.

2. Not Keeping Good Records Throughout the Year

A common small business tax filing mistake is not keeping good records throughout the year. This can lead to missing deductions and expenses, which can cost you money.

To avoid this mistake, make sure to keep track of all your business expenses and income throughout the year. This can be done using a simple spreadsheet or accounting software. Additionally, be sure to keep receipts and other documentation for all of your expenses.

3. Not Knowing Which Tax Form to File

As a small business owner, it’s important to know which tax form to file to avoid mistakes, penalties, and interest.

To avoid this, talk to your accountant or tax preparation services about which form you should be filing. They will be able to help you figure out which form is suitable for your business.

4. Filing Your Taxes Late

Failing to file on time is another common small business tax filing mistake. This can result in interest and penalties and can also make it more difficult to get a refund. To avoid this mistake, be sure to file your taxes by the tax filing deadline or file for an extension if you need more time.

5. Incorrect Social Security Numbers

If you have employees, be sure to double-check their social security numbers. You can find your employees’ correct social security number through their social security card or by looking it up online. You can also avoid this mistake by using payroll software that automatically fills in your employees’ correct social security numbers.

6. Not Knowing Which Business Entity to Choose

Businesses can choose from several business entities, each with different tax implications. The most common business entities are sole proprietorships, partnerships, limited liability companies (LLCs), and corporations. The wrong business entity can lead to higher taxes, so choosing the right one is crucial.

Avoiding Small Business Tax Filing Mistakes

If you are a small business owner, it is important to be aware of the small business tax filing mistakes to avoid them. Common mistakes include failing to file on time, taking too many deductions, and not accurately reporting income. By taking the time to understand and avoid these mistakes, you can help ensure that your business complies with tax law.

If you found this article helpful, read more content from our Business section.