As a business owner, tax avoidance and tax evasion can carry serious consequences.
On the other hand, missing important deductions can cost you money you could’ve otherwise kept.
Tax issues are common for small business owners, but they don’t have to be. Keep reading to learn more about some of the most common tax issues faced by businesses and how to avoid them.
Under-Reporting Business Income
Some business owners give in to the temptation to under-report their income to avoid paying more taxes. Thanks to technology, there is usually a paper trail for business transactions. Small mistakes happen, but making a habit of this can land you in hot water.
Paying employees under the table can get you into big trouble with the IRS. If the IRS finds you haven’t properly reported what you’ve been paying employees and avoiding relevant taxes, you could face penalties and back taxes as well as criminal charges.
Under-Reporting Sales Taxes
Sales tax can be complicated, especially for online businesses. Some business owners might not even be aware of newly defined jurisdictions that make them liable for sales taxes.
Mixing Business and Personal Expenses
This can be a gray area that can get business owners in trouble with the IRS. It’s more common with corporations but can affect sole proprietors as well.
This can also come up if you are working from home and claiming deductions for your home office. You also want to avoid over-reporting business expenses.
Lifestyle creep is a concept that describes individuals and business owners increasing their spending on nonessential items during the year but getting into trouble come tax season. While these purchases can be fun and improve your appearance to others, they can also land you in a higher tax bracket and can be concerning to the IRS.
Preventing and Resolving Common Tax Issues
Preventing tax issues is easier than fixing them down the road. But rest assured, even if you find yourself in trouble with the IRS, you can get out of tax debt and get a fresh start.
The most likely consequence of making these tax mistakes is lost money. Now more than ever, every penny counts for business owners.
Avoid common small business tax problems by hiring a bookkeeping service and tax professional all in one. This will ensure you are properly documenting and reporting everything you need to stay in compliance with the IRS.
Your accountant will also ensure you get the most out of your taxes and save you money and will go a long way to help you if you do get audited.
Consult a Tax Professional Today
Prevention is worth more than a cure when it comes to tax issues.
Preventing common tax mistakes can save you time and money. The best thing you can do to stay on top of your taxes and get the most out of tax season is to hire a professional tax advisor.
Click here to schedule an appointment with a tax professional today.
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