Tax Preparation: Small Business Tax Prep Mistakes to Avoid
When you begin your tax preparation for the most recent year, you will likely be thinking about all of the details that require your attention. While you are focusing on everything you need to do, be sure to avoid some of the common pitfalls of filing business taxes. From improperly claiming deductions to neglecting to file on time, the tax preparation process may lead to a variety of errors. The following are a few of the top mistakes to look out for this tax season.
Choosing an Incorrect Entity
Make sure that you select the proper entity for your business. If you are unsure about whether your business should be classified as a non-profit, an LLC, or a sole proprietorship, consult a certified public accountant (CPA) for clarification.
Not Keeping Business and Personal Life Separate
You will need to ensure that your personal expenses are kept apart from your business expenses when filing. If you have used a personal bank account to pay for business expenses, however, this fact should be noted. If you work from home and wish to claim a home office deduction, you must utilize a space in your home that is entirely distinct as an office and not a living area.
Stretching the Truth
Resist the urge to exaggerate deductions, such as gifts to clients or the cost of meals during business trips. The professionals at the IRS are trained to detect such exaggerations, and making these claims could result in your business being audited.
Failing to File or Pay
Even if you are overwhelmed by other responsibilities and financial commitments, you must file and pay taxes to avoid paying penalties. If you know that you cannot file on time, you can apply for an extension. You may also qualify for a business payment plan if you are unable to pay all that you owe immediately.
Tax preparation is an intimidating prospect for countless business owners, but a qualified, reputable CPA can help you stay on track. You may also secure financing for your company if your taxes are steeper than you expected. Contact Growth Lending Group to discuss financing options for your business.