The tax session for this year is finally over and many entrepreneurs and customers can now breathe again. We probably don’t have to mention this but, the fact remains that there is a pretty big difference between personal finances and the business ones when it comes to takes. The everyday customer may have it easier and won’t have to think about taxes for a whole year. However, in the case of small business owners this does not apply given the fact that entrepreneurs have to plan ahead for the next quarterly tax filing.
Small business owners have to file their taxes four times a year. It’s quite common for this aspect to cause some anxiety but you don’t have to panic or feel overwhelmed. You can approach each filing with confidence with only a handful of tools. You will need proper planning and the right financial tools. If you’re one of the few lucky ones that managed to do this, I tip my hat to you. If you’re part of the business owners that always have trouble with filing taxes, here are seven things most entrepreneurs omit. So make sure you don’t overlook the following aspects:
1. Not managing to keep up with your financial records. This is not only the most common mistake among small business owners, but also the first thing you should put on track when it comes to your takes. Keeping up-to-date records may seem logical but it’s harder than you might think. At the end of the day, you’d do anything than assess those pesky accounts payable, the receivables and the cashflow, so all these aspects remain overlooked. One way of dealing with this problem is to employ several financial tools that get the job done. Recently, cloud has a vast number of applications that communicate between themselves and automate the backend services. Moreover, if you don’t have all that much time available for all these aspects, you can do all your takes via a smartphone.
2. How to know you’re on track if you don’t have something to compare it to? That’s what skipping the annual budgeting and financial forecast leads to. Just create a simple and concise plan that focuses on the insights of your business and your knowledge of market trends so that you can assess and plan in a professional manner.
3. Not taking meetings with your accountant on a regular basis. Instead of worrying about your tax problems, focus on taking regular meetings with your accountant and benefit from their expertise. According to a recent survey of approximately 400 accountants, 65 percent of them recommend business owners to meet with their accountants at least once a month to ensure a good financial state of their business.
4. Employee misclassification. Unfortunately, in today’s business environment there is a growing tendency to outsource jobs to contractors rather than employing someone. If you didn’t know by now, the IRS is paying special attention to this aspect as of late.
5. Choosing the wrong business structure and filing it incorrectly is one mistake you don’t want to make. Not incorporating is not the way to go. Small business owners usually choose between a LLC and a S.Corp. This translates to filing your taxes when you file your personal income taxes. Make sure to keep them separate though. The upside to this is that if something wrong happens to your business, your personal assets will not be at jeopardy of losing.
6. Mixing your personal expenses with your business ones will only lead you to lead the taxman to make an audit. Small businesses are afforded write offs and tax breaks, which are usually unavailable for most of the population. Among these we mention mileage, utilities, travel expenses and others. Excessive deductions are pretty tempting for some business owners but in most cases it doesn’t pan out well.
7. An LLc, a Corp or an S. Corp. Whichever suits you the best, be sure it is the right decision. Even though you may find it hard to decide at times and confusing, put some thought into it. The majority of small business owners usually choose an S. Corp or LLC. Having the idea on how your business should be structured is important, but, more importantly, make sure to file.