Everyone running a business is going to make a mistake or two down the line, but you don’t want that to occur with your taxes. Because of that, we wanted to share a few of the most common tax mistakes small business owners make. We will also be sharing how to prevent these issues so you and us together as your CPA firm in Denver can handle your taxes in a simple and straightforward manner.
Reporting Income Incorrectly
Overreporting or underreporting your income can lead to an audit, something that nobody wants to deal with. If the problem is severe enough, it can also lead to fraud charges. In most cases, over or underreporting occurs due to a mistake related to balancing business payments and invoices. However, the IRS will look at what you report as income as well as what payments were reportedly made to you. If these two things do not match, you may be contacted about it.
Failing to Separate Expenses
Another reason to work with a CPA firm in Denver is that a small business can find it challenging to separate business and pleasure expenses. You should always have a demarcation between the expenses of your business and those that are personal. Even listing a single expense deduction that wasn’t related to the business can put your taxes into question. It’s not worth all the trouble it can lead to. Keeping records of all your expenses and receipts is a good option in case something comes up.
Skipping Deductions You Should Take
It might seem strange, but many small businesses don’t take all the deductions that they are allowed to. You might worry that it will cause problems, but if your business is eligible for a deduction, you should take it. There are many allowable deductions, such as daily printing expenses or a home office deduction. New small businesses may be able to deduct up to $5,000 in startup costs. The best way to determine what deductions are right for your business is by speaking with a CPA firm in Denver.
Improperly Classifying an Employee’s Work Status
If you have employees, you take on a whole new level of tax complications. It can be pretty minor to make a single mistake calculating payroll, which you then correct the next week. However, making a mistake in calculations of payroll deductions can have far more severe consequences. Having an awareness of payroll and employment taxes is something a CPA firm in Denver can help with. Even determining whether you are working with contractors or employees makes a huge difference when it comes to taxes.
These are some of the most common tax mistakes a small business can make. Each of them can be handled by having an experienced person to help you. Managing a business means having lots of accountability and being extremely accurate in all things. If you maintain proper records, are transparent and open, and bring in help, you can avoid these issues that plague other businesses.