3 Small Business Tax Mistakes (and How to Overcome Them)
Tax season can be deemed as the bane of every business’s existence. No one enjoys the process of tax filing, particularly when it comes to piles upon piles of invoices, tax returns, payroll, and expense reports. The sheer stress of the tax season is enough to make anyone’s toes curl, even with the help of a skilled professional.
Done right, however, managing your taxes should be a breeze—performed year-round for optimal results. Keeping up with your taxes makes the tax season dramatically easier, ensuring that you stay away from pitfalls and errors that could potentially affect your bottom line.
To help you better understand how important it is to keep up-to-date with your taxes, we’ve gathered the three most common small business tax mistakes:
The Costly Mistakes
Failing to Keep Proper Documentation and Records
If you wish to properly prepare your returns during filing season, it’s important to keep a thorough and accurate records system. Without them, you can easily overlook legitimate write-offs. Invoices are also necessary to justify certain aspects of your taxes, along with receipts for business expenses.
You’ll also need to properly document everything, preferably in a ledger you can write notes on. Stick or clip in receipts, invoices, and other papers that show your income and expenses. More importantly, make sure to have everything digitized.
Failing to Separate Your Expenses
Running a small business means having the freedom to earn as you wish. Unfortunately, this can blur the line between business and entertainment. Once the lines become unclear, you risk the wrath of the Australian Tax Office (ATO) they need access to a clear distinction between your business expenses and personal expenses.
Think of it this way: was the lunch meeting truly necessary, for instance, or was it just a quick break from the stresses of the office? Did you use your car today to run business errands, such as customer package shipment? Or was it mostly for a personal reason?
Any extra mileage or side trips should not be counted as part of the business taxes. Keep in mind that the ATO will scrutinize everything single detail, so be meticulous in documenting.
Failing to Take Advantage of Deductions
Small businesses are more than qualified for tax deductions. Most business owners end up skipping out on these deductions, however, especially since careless mistakes can end up with penalties from the ATO. However, this shouldn’t stop you from missing out on extra cash. You have several allowable deductions, most of which can be the following:
Home office expenses
Daily printing expenses
Medical reimbursement and insurance costs
For start-up businesses, you can deduct thousands of dollars from your taxes, depending on the business type and size. It’s best to hire a qualified tax professional, however, as this will help you determine which expenses are eligible for deductions.
The Bottom Line
Managing your small business is about commitment to agility and growth. This also includes your business taxes, which should then be handled with accuracy and accountability. You need to be as open and transparent with your finances as possible, all the while ensuring that your records remain organized and up-to-date. The tax season can be stressful, but doing things right allows you to avoid costly mistakes.
For the best possible outcome, enlist the help of the best tax accountant in Gold Coast. New Wave Accounting ensures that you have access to end-to-end accounting and bookkeeping services, all designed to help you grow and scale your business.
Run your business better with us—reach out today!