For entrepreneurs, one of the most stressful times of the year is, without a doubt, tax season. Not only does one have to ensure they have all of the necessary paperwork, they must also find the time to file their return — something that may feel like an impossible feat, seeing as entrepreneurs are often stretched thin by both their business and personal life. However, if they neglect to make the proper preparations, they will likely pay dearly for any and all errors.
With that in mind, let us explore the most common tax mistakes entrepreneurs make, and how each one can be avoided.
Failing to keep records
For some, half the battle of filing taxes is proving they have accurately tracked the growth of their business over the years. After all, failing to provide such records could cause one to miss out on a number of important tax deductions. Furthermore, in the event of an audit, a company could even lose out on legitimate because they cannot furnish their expenses, payroll, sales, or any other financial transaction they have encountered in the previous fiscal year.
Neglecting to work with an expert
No matter how confident you may feel in your filing abilities, it is always best to work with a financial expert, as they are best equipped to answer your questions and mitigate any issues while preparing your return. However, it is imperative you take time to find the right person for the job. After all, this individual will be handling your business’ most sensitive information. With that in mind, be sure you conduct thorough interviews and choose the expert you feel you can trust the most.
Combining business and personal expenses
Nothing spells trouble like allowing overlap between your business and personal accounts. Regardless if you kept receipts and can prove the expense was withdrawn from your business account, you will still be unable to deduct the cost on your return. Therefore, it is best that you keep all business accounts separate from your own. Otherwise, you may end up harming your professional endeavors with your personal spending habits.
Evidently, there are many factors entrepreneurs must consider before filing their tax returns. One can ensure they are setting themselves up for success by heeding the above advice, following the action plans provided by their trusted financial advisor, and resisting the urge to procrastinate this annual undertaking. After all, failing to plan equates to planning to fail.