One of the biggest fears business owners have is getting in trouble with the IRS. No one wants that, we have looked at some of the top mistakes you can make and how to avoid them.
Mistake #1: Not Planning for All Tax Types
There are more than just Federal Taxes! Other taxes that you need to ensure you are aware of and file when applicable are:
- State income taxes
- Franchise tax
- Excise tax
- Payroll tax
- Self-employment tax
- Sales & use tax
- Property tax on business property
- Some business may also have taxes that are specific to their industry
Mistake #2: Being Out of Compliance
You should also be prepared to document annual compliance:
- Annual reports
- Meeting minutes
- Paying annual filing fees
If you’re not sure of what your annual requirements are you need to consult your tax advisor or attorney.
Mistake #3: Mixing Business and Personal Funds
Items you should avoid doing to ensure that you are mixing funds:
- Depositing business checks into your personal account
- Depositing personal checks into your business account
- Having 1 account – you have a minimum of 2 accounts
- A Separate Business account
- A Separate Personal account
- Using the wrong credit card
- Business credit cards should be for business transactions only
- Personal credit cards should be for personal transactions only
While the IRS doesn’t require separate bank accounts, not having them can expose you to potential legal issues and it also makes bookkeeping much more difficult. If you have been running your business through your personal account, today is a good day to go open a separate account for your business. This will save you a lot of time, money, and energy at tax time as you have a good amount of time to get your bookkeeping in order.
Mistake #4: Bookkeeping Issues
A big mistake that business owners make is not keeping up with their books monthly/weekly/daily, whatever works for you. The biggest thing is to not leave it to the end of the year.
If you are not accounting inclined, please save yourself the headache and make sure your business is protected by hiring a professional so you can concentrate on running your business. You got into the business you are running it for a reason: you know how to do it. We got into accounting and bookkeeping for a reason, we know how to do it. Trust the professionals, in the end you will save yourself a lot of time and money.