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As a small business owner, it’s important to stay on top of your taxes and make sure you’re not making any costly mistakes. If you’re not careful, you could end up paying more in taxes than you need to or even getting audited by the IRS. When you turn to the team at Edgewater CPA Group, we can help mitigate your chances of this happening. Still, let’s look at three common tax mistakes that small business owners often make and how to avoid them.
Mistake #1 – Not Keeping Good Records
There are a lot of small business tax mistakes that can be made, but one of the most common (and costly) is not keeping good records. To avoid this mistake, make sure to keep good records throughout the year. This includes keeping track of all your income and expenses, as well as any receipts or invoices. You should also keep track of any mileage or travel expenses you incur. By taking the time to keep good records, you’ll save yourself a lot of headaches come tax time.
Mistake #2 – Underreporting or Underestimating
The second tax mistake small business owners make is underestimating or underreporting income. This can happen if you’re not keeping accurate records or intentionally trying to avoid paying taxes. Not only is this fraudulent, but it can also result in hefty penalties and interest charges. Another mistake to avoid is taking too many deductions. While taking advantage of all the deductions you’re entitled to is important, claiming too many can raise red flags with the IRS and lead to an audit. It’s best to err on the side of caution and only claim deductions to which you’re absolutely sure you’re entitled.
Mistake #3 – Mixing Personal and Business Expenses
Finally, small businesses’ third most common tax mistake is mixing personal and business expenses. This can be a problem because it can make it difficult to deduct your business expenses come tax time. To avoid this mistake, keep meticulous records of all your business expenses and income. That way, you’ll be able to easily separate your personal and business finances come tax time.
We Help You Avoid Small Business Tax Mistakes
When preparing your taxes and keeping your business records straight, turn to Edgewater CPA Group in Carmel, IN. We specialize in small business bookkeeping, payroll, and financial services. So, let’s prepare for the next tax season with a free consultation. Contact us at (317) 207-9269.