Below Are Common Mistakes To Avoid During Business Tax Preparation
The season for filing tax returns is often stressful and sometimes unnerving. If you do not adequately prepare to file your business' taxes, you might find yourself scrambling at the last minute to make the filings on time. As a result, you are more likely to make mistakes that can jeopardize your business's financial health and, consequently, its operations. Thus, it is crucial to plan in advance to guarantee tax filing season does not blindside you and your business. Below are common assumptions business owners make regarding business tax preparation that often land them in tax evasion troubles.
Assumption #1: You Do Not Need Separate Accounts Because the Business is Yours
Having separate business and personal accounts might seem straightforward; however, many business owners do not remember to separate them. Consequently, it contributes to accounting records that are challenging to comprehend and untangle. For instance, if you have a shared business and personal checking and savings account, you might make personal charges that seem like business expenses, thus making the sorting process difficult. Moreover, if it is impossible to distinguish between the personal and business expenses charged on the account, you might find yourself personally liable for business tax arrears. Thus, open separate personal and business accounts to ease business tax preparation.
Assumption #2: It Is Unnecessary and Hectic to Update Accounting Books Regularly
Business owners must keep accurate, detailed, and current records of their operations. Accurate and up-to-date records help business owners determine their businesses' financial positions every time they conduct an accounts analysis which should be at least once a month. Keeping records also shields business owners from rushing to find a year of expense reports, purchases, sales, and other financial information during business tax preparation. Lastly, detailed record keeping can help protect the business from legal issues as it makes it easy to prove your expenditure and earnings in case of an audit.
Assumption #3: Hiring an Accountant Increases Your Business's Expenses
Many business owners try to minimize their accounting expenses by personally filling and filing their annual tax returns. However, doing so might be ill-advised as you might not be aware of changes to tax regulations or have adequate information concerning tax breaks. Thus, it is more prudent to hire a tax accountant for business tax preparation. They will help you sort out your financial records and determine the business' financial health. A tax accountant will help you find tax-saving options available to your business. For example, they can help you claim depreciation on your business' assets or file for startup tax deductions if your business is new. A tax accountant is the safest bet to help you sort out your pending tax bill and plan for future taxes.
To learn more contact a business tax preparation service in your area such as Martinson & Carter CPAs, PA.