blog image

Common Business Tax Mistakes

November 17, 20232 min read

Did you know 35% of business returns filed by business owners contained avoidable mistakes, according to the IRS?

That’s nearly 4 out of every 10 business owners.

So if you’re self-employed, or own a business, chances are you may be guilty of some of these same mistakes.

And if not corrected, these could lead to unnecessary audits and overpaying your taxes.

But even worse, when you don’t have your financial house in order it can lead to much more devastating problems down the road.

I could tell you horror stories of situations where people’s lives were turned upside down because they neglected this area of their business for too long.

People who one day seem to be living the good life and the next day find out they’re on the hook for hundreds of thousands of dollars -- money they didn’t have.

But I think we’ve all had our fair share of bad news this year!

So let’s focus on how to CORRECT these mistakes.

Because even if you’re making them it’s not helpful to beat yourself up over things you can’t change.

So here’s 3 common tax mistakes I see business owners, and self-employed folks, making all the time:

Mistake #1: Poor record keeping

Don't rely on your memory alone. Sloppy record keeping is the most common problem among business owners, according to the Internal Revenue Service.

For example, many business owners use a personal credit card or cash for business purchases and don’t keep track of those expenses.

Mistake #2: Misclassifying workers

A lot of business owners hire contractors or virtual assistants (VAs) to help with projects.

However, these workers are often erroneously classified as labor or payroll costs when business owners do their taxes.

The problem with classifying contractors or VAs this way is that their wages would be subject to payroll taxes.

This means you could be taxed 10% more than you should be.

Instead they should be classified as outside services on the tax return.

Plus, if the amount you pay a contractor exceeds $600 per year, you will need to file a 1099 form.

Mistake #3: Late payments

Some business owners assume their tax payments are due when they file their tax returns on April 15th.

This is a common mistake.

However, the truth is the tax system for businesses operates on a “pay as you go” schedule.

This means owners are expected to make quarterly estimated tax payments on:

●                April 15

●                June 15

●                Sept. 15

●                Jan. 15

Failing to make these payments may flag your return for audit, and trigger penalties and interest charges when you finally do file the tax return!

These are just three of many tax mistakes I see business owners make all the time.

blog author image

CHN Advisors

Back to Blog

832-901-0167

4810 West Panther Creek

Dr, Suite 200, The Woodlands,TX 77481

©2024 CHN ADVISORS, ALL RIGHTS RESERVED.