Common Tax Mistakes and How to Avoid Them
If you’re a small business owner, you are used to wearing many different hats — some more comfortable than others. One almost universally uncomfortable hat? The tax preparing one. I’ll spare you a cliche joke about sure things in life, death, and taxes…but the sentiment is true. All business owners have to handle taxes — whether or not they have the time, knowledge base, or inclination to do so. As the simultaneously least exciting and potentially most high-stakes task on a to-do list, business owners are prone to making a few common errors with their taxes, even if they’ve already outsourced this particular task to an expert.
With a bit of preparation, you can avoid the worst tax mistakes. Or, at the very least, mitigate the fallout of making them.
DEADLINES MATTER. FULL STOP.
Hopefully, you already filed your 1099s, considering the deadline was January 31st. But, if you didn’t, there is a solution. File your taxes anyway.
Bluntly speaking, you are going to face some consequences from missing a deadline. It’s not ideal and will create some added work and added expenses. But, the alternatives are so much worse. The IRS is pretty good at keeping track of who is, and isn’t, paying their taxes. It might take a while, but they will eventually get around to noticing that you haven’t exactly kept your taxes up to date. And, at that point, they won’t be pleased. The legal consequences and additional expenses will be real and unavoidable.
So if you’ve already missed a deadline, this is an excellent time to speak with an experienced tax professional. An expert will know what your next steps should be, how much it will cost you, and what it will take to get everything back on track. Dealing with a minor inconvenience today keeps an annoying setback from turning into a devastating situation.
DATES TO KEEP IN MIND:
March 15: S Corp taxes are due. Be prepared to file Form 1120S and pay whatever taxes you owe.
April 15: LLC taxes are due. Be prepared to pay your income tax, in full, by April 15th.
BE AWARE OF TAX CODE CHANGES (EVEN IF YOU’VE ALREADY OUTSOURCED)
If you read the first part of this blog, and smugly congratulated yourself for outsourcing your taxes years ago, don’t get too excited. These mistakes probably won’t have the same legal consequences as filing late or not at all, but they can cost you time and money. The tax code isn’t known for its simplicity, and small changes can have a big impact on your business. A good tax professional will give you a heads up about any changes that stand to impact your business, but it’s still a good idea to educate yourself as well. And, if you’re taking a DIY approach to taxes, it’s more than a good idea — it’s essential.
“But Mallory,” you say, “taxes are complicated! I don’t have time to memorize the tax code. I have a business to run.” I’m not going to debate that very valid argument. You’re right. The tax code IScomplicated. It IS time-consuming to learn the ins and outs of every change. Which is why I’m not recommending you even attempt to reach that level of expert knowledge. Being aware of changes isn’t the same thing as understanding the changes.
Being aware is simply knowing that the tax code recently changed, and understanding the basic implications of the changes. With even that relatively low base level of knowledge, you can start to prepare for the changes. If you’re working with a tax professional already, you can reach with any questions you have. And if you aren’t, knowing that changes are coming might give you a heads-up that this year is more complicated than others. What you do with that information is up to you. Maybe you reach out to an expert for help, or you carve some time out of your schedule to learn about the changes in more detail. Either way, basic preparation keeps you from being blindsided.
Taxes may never be fun, but they don’t have to be scary. If you’re a small business owner, and you’re worried about filing your taxes correctly, and on time, it might be time to let a professional take tax preparation off your plate. Office Accomplice can deliver the bookkeeping help you need to navigate tax season as smoothly as possible. Just get in touch, and we can discuss how Office Accomplice can support your business.
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