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Top 4 Small Business Tax Preparation Mistakes and How to Avoid Them

Did you know that 64% of business owners handle their bookkeeping? This is a tremendous problem. 

Business owners who keep their books often make important mistakes, which results in losing thousands of dollars each year. When you don’t know what you don’t know, it’s hard to catch errors and fix them before they cost you money. 

If you are wondering what are the top small business tax preparation mistakes and how to avoid them, this short and simple guide is for you.  

1. Not Filing a Tax Return 

This may seem obvious, but it’s important to remember that if you earn any income from your business, you are required by law to file business taxes.  

If you don’t file a return for one year, the IRS will send you a notice asking for more information about your business activity. If you ignore this notice, they will eventually assess back taxes on the income that should have been reported on previous returns. 

2. Not Having All the Information at Hand 

If you’re self-employed or own a small business, chances are good that you’ll have to pay quarterly estimated taxes.  

Many small business owners do not pay enough in estimated taxes each year, which results in underpayment penalties. You can avoid this by keeping track of your income and expenses throughout the year so you know what your quarterly payment needs to be. 

3. Forgetting About Deductions and Credits 

As a small business owner, there are several deductions and credits available to you that could help reduce your overall tax liability.  

You can take deductions for common business expenses, including the cost of running your office, purchasing software and equipment, travel costs, and even meals when you are on the road. This is in addition to expenses that you may have incurred while traveling for work purposes.  

You can also deduct some costs associated with advertising your business or promoting products or services. If you need erc forms, you can click here. 

4. Not Having Your Receipts Organized 

If you’re like most people, you probably have a drawer or file cabinet full of receipts from this year’s purchases. This makes it harder to keep track of what you’ve spent on work-related items versus personal spending. 

To make sure you don’t lose any deductions, make sure your receipts are organized so that each expense has its folder or envelope. You might even want to scan some receipts into your computer as an extra precaution against losing them in the mail or at home.  

Avoid These Small Business Tax Preparation Mistakes 

Failing to keep your business records organized isn’t just a bad tax management strategy. It’s also a recipe for disaster if you ever find yourself questioned by an auditor.  

As a business owner, you’re responsible for keeping track of all your expenses. This not only keeps you from making small business tax preparation mistakes but also makes it easier to monitor where your money goes each year. 

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