If there is one incredibly frustrating thing that all business owners need to deal with, it’s taxes! After all, no one likes giving away their hard earned cash, do they? However, it’s not only the paying part that can be irritating – tax laws can be complicated. There are numerous rules and regulations, as well as many various types of tax. With that being said, we are going to take a look at the common tax mistakes that business owners make so that you can avoid them!
Missing Out on Deductions and Other Tax Benefits
Deductions and tax benefits are complicated to understand. Business owners can lose the benefit of deductions if they are unaware of them. For example, you may not know that you are eligible for energy credits. Many business owners also make the mistake of losing receipts or forgetting to track certain expenses. Furthermore, you may miss out on the tax benefits from your company if you take specific deductions. All of this comes down to the fact that you need to improve your recordkeeping. You should make it as automatic and easy as possible. You can make the most of online apps to do this.
Understanding Tax Requirements
Business owners today are selling more of their products and/or services overseas. This has become easier than ever before thanks to the Internet. Moreover, there are many companies that already use foreign suppliers. You need to make sure that you are handling all tax requirements right in this regard. It may be worth looking into a tax attorney for foreign companies to be sure that this is the case. After all, if you are dealing with different companies in different capacities, it can quickly get confusing.
Paying Employees ‘Under the Table’ or as Independent Contractors
There is no denying that paying taxes on employees is a hassle, and expensive too! This is why some business owners decide to pay their staff as independent contractors, rather than an employee. They may even give them cash in hand. While this may seem like the easier approach, you should be aware of the consequences. You could end up with a huge problem on your hands if you get found out, and it is likely that you will. You could end up with big penalties and you will need to pay the tax back as well. Tax evasion is illegal, and it could cause monumental problems for your business.
Getting Behind on Estimated Tax Payments and Deposits
Another mistake that a lot of business owners make is getting behind on tax deposits and estimates. Small businesses can often be pinched for money, especially when they are just starting out. A surprising number of gross receipts should be kept away for payroll tax deposits, income tax, and self-employment tax. If you get behind on these estimated payments and tax deposits, you can find yourself in a position whereby it is incredibly challenging to get caught up. One of the best ways to ensure that this does not happen is put cash away in a separate account for your taxes ass soon as you get it. That way, you know the money for your taxes is always incoming from the gross income from which it is applicable to.
As you can see, there are a number of mistakes that business owners often make when it comes to tax. If you are currently making any of the blunders that have been mentioned above, there is no need to start panicking. However, you do need to make sure you deal with the issue and put it right as soon as possible.
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