Common Tax Issues That Small Business Owners Face
Around tax time, Uncle Sam often hits small businesses the hardest. One of the biggest reasons why small businesses are hit so hard is because many of the tax laws and structures are difficult to navigate, which leaves bootstrap companies in the lurch. When it comes to small business accounting, it is important to not only know how to navigate the waters of tax law – you also want to be aware of some of the common problems that small businesses run into. These problems will lead to higher taxes and a higher probability for a tax audit, so it is important to know what these issues are if you want to avoid them from happening in the first place. Here are some common tax issues that business owners face.
First and foremost, many businesses think that they can write off anything and everything, but this is a cardinal mistake. The truth is that having too many deductions will raise eyebrows. Usually, a business is only allowed to write off certain expenses, like startup costs, travel, supplies and anything business related. Any write-offs that seem unusual will be questioned, so be sure to remain prudent when making deductions.
Another big issue has to do with improper or insufficient reporting of deductions. Many businesses find themselves in the situation where they didn’t keep good track of business expenses and now have to scramble through receipts and other documentation to find proof. So, it is important for small businesses to keep track of all business receipts and to log the payments and expenses into the books immediately after the charges go through. If you don’t keep good expense records, your business may be left having to pay more than it should in quarterly or annual taxes.
Next, your business needs a qualified tax accountant. You will soon realize that you and your company are too busy to keep track of all the books. This is especially the case if your business is quickly growing. So, you want to make sure that you start looking for a good business tax accounting firm. For instance, if you search SDA CPA Group, P.C. online, you will find a great tax accountant in the Atlanta, Georgia region. You can also search ‘business tax accountant’ and the name of your city – you should get a list of qualified and certified tax accountants.
Lastly, one of the biggest issues that small business owners face is not separating business expenses from personal expenses. At the end of the day, your business has a very different tax structure than your personal tax structure, so you don’t want to meld the two. It may be easy to use your business checking account to pay for personal items, but what you will find is that it will be hard to decipher the difference when tax time comes around. The solution to this is to always have two accounting books – one for your business and one for your personal finances. Mixing the two could result in a lot of frustration when tax time comes around.