As a business owner, you’ll need to pay business taxes to stay compliant with IRS regulations. Certain mistakes on your business taxes could set you back financially and cause you more stress. If you want to take some of the hassles out of paying your business taxes, you should try to avoid making these four common mistakes.
1. Not Making Tax Payments Throughout the Year
For personal taxes, you can usually submit your tax forms and make any payments that you owe to the IRS once a year. For business taxes, however, you should pay what you think you’ll owe for the year to the IRS in multiple payments (usually on a quarterly basis) throughout the year. If you only pay your business taxes once a year to the IRS, you could be penalized and will have to pay more money.
2. Misclassifying Employees
The business taxes that you pay for your permanent staff are different than what you’d pay for independent contractors. If you classify your independent contractors as employees, higher taxes will be owed. You could also be taxed more for temporary employees if you count these workers as permanent staff members. To avoid these mistakes, you should be sure that each employee is given the correct tax forms based on their specific worker categories.
3. Mixing Business and Personal Finances
It’s important that you keep your business and personal finances separate from one another to avoid confusing the two when you’re paying your taxes. If you accidentally include some of your personal expenses with your business expenses, you could face penalties and have to pay more on your taxes. You might also end up overpaying if you mix your business and personal expenses. A good business tax planning service can help you keep your business expenses organized better.
4. Making Tax Deduction Errors
Certain business expenses may qualify as tax deductions, and you could be spending more money than you should on your taxes if you don’t take advantage of these deductions. Business insurance, home office equipment, and business travel expenses are among the most common tax deductions that can save businesses money. However, you could get an unexpected tax bill if you try to include deductions that don’t qualify for tax breaks.
By avoiding these mistakes, you’ll be able to operate your business with fewer problems and worries. Tax professionals are available throughout the entire year to help you calculate your business taxes correctly.
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