Mistakes on tax forms can cost your small business time and money. Even though mistakes are common and can happen to anyone, there are things that you can do to be proactive when it comes to filing accurately.
Don’t be late to file
Make sure you’re keeping up with the current tax news, for the tax deadline in 2020 has been extended to July 15. If you miss the tax filing deadline, your business can be assessed a 5% per month penalty by the IRS. The fee will continue to increase until filing is complete. If you fail to pay your taxes, you will be charged 6% interest and a late payment penalty. If you need more time to file your taxes, you can also request an extension.
Apply the right business deductions
Much of your small business expenses can qualify as tax deductions. It is first important, however, to do your research and learn what you can and cannot deduct. Small business deductions have limits and restrictions, so keep in mind that some deductions may not apply to you. Some examples of deductions are expenses for accounting and bookkeeping, tax preparation, advertising and marketing, use of your car or truck for business purposes, insurance expenses, legal and professional fees, business travel and meal expenses, and office supplies.
Separate Business and Personal Expenses
Keep your business and personal expenses organized. When tax time comes around, you won’t be wasting time cleaning up a big mess if you keep things separate. You can stay organized throughout the year by maintaining separate bank and credit card accounts and saving receipts.
Use an Accountant
When in doubt, it’s best to hire an accountant. Attempting to file for your small business yourself may increase your risk of misfiling your return. You may also miss out on deductions that you don’t know your business is qualified for.
If you would like to learn more about how we can help you and your business improve its accounting practices, reach out to our team. For more information on other accounting topics, check out our blog.