If you’ve made the leap and started your own business, you deserve a pat on the back! Starting your own business is an exciting adventure—you’re free follow your creative vision and figure out how to overcome obstacles along the way. Business taxes can be an area where new business owners stumble. We want to make sure you’re set up for success, so we’ve outlined some common pitfalls to avoid when it comes to business taxes.
Selecting the wrong entity
When starting your business, you can choose to designate yourself as a C-corp or an LLC. The decision can seem easy enough but there are tax implications to each one. Choosing the wrong designation for your business can impact your tax responsibilities and personal liability so it’s essential to get it right.
Overestimating startup cost deductions
You probably know the saying, “you have to spend money to make money.” It takes funding to start a business, but luckily, business owners can defray some of the cost through tax deductions. However, many new business owners make the mistake of overestimating their deductions. The IRS only allows $10,000 in deductions for total costs $50,000 or lower.
Missing tax payment deadlines
Running business is a complex undertaking and keeping track of your tasks and finances is no small feat. It’s understandable that you might miss tax filing deadlines because you’re busy keeping all the plates spinning, but the IRS is strict. If you miss a deadline, you could incur fines and fees that you didn’t budget for.
Mistaking contractors for employees
Many small businesses hire contractors, especially when they’re first starting out. They can be a great choice for your business. Contractors tend to be less expensive and are professional and efficient. However, be careful that you’re not asking contractors to fulfill employee-like expectations otherwise you could be responsible to payroll taxes. Failure to do so could result in crippling fines.
Disorganized record keeping
Its critical to keep sterling tax and financial records. You don’t want to be caught unawares by an IRS tax audit and not have access to invoices, receipts, and other financial information. If record keeping isn’t your strong suit, then consider outsourcing the job to a dedicated professional.
Hire a Trusted Professional
Avoid these mistakes by working with an expert. Neely’s Accounting Service has been guiding Roanoke business owners through startups and tax season for over a decade. We’re your local advocate in dealing with the IRS. Feel confident about your business tax process. Contact or visit us in Roanoke or Vinton.