4 Tax Mistakes Often Made by Business Owners

4 Tax Mistakes Often Made by Business Owners

Tax season is just around the corner, which means business owners need to begin getting prepared. While doing so, it is important that the following common missteps are avoided:

1. Filing late: Probably the easiest mistake to avoid is filing taxes late. According to Nolo, this could result in the Internal Revenue Service charging business owners an additional 5 percent each month on the balance due. However, the late fees do have a maximum of 25 percent for the first five months.

2. Accounting errors: When preparing taxes for the year, the most important aspect if the amount of revenues and expenses the business had. To ensure this is accurate, Business News Daily said a profit-loss statement should be compiled. Knowing where money is going and how it is being spent could help business owners save money.

3. Inaccuracies: One of the most important things business owners need to remember when filing taxes is to ensure that everything is accurate. According to Nolo, tax law could hit a company with a 20 percent penalty if it is found the business was negligent in reporting income or the amount owed in taxes. For this reason, it is recommended to employ a professional who can look over the tax filing, and make sure there is nothing that could lead to fines or penalties.

4. Commingling: Throughout the year, business owners will take in income. Business News Daily said it is important to keep this money, and any funds for expenses, separate from personal income and costs. Business bank statements should only be used for business expenses. If business and personal funds are commingled, it could increase tax debts.