Running a business requires you to keep a lot of plates spinning at the same time. Slacking off on one area of work can result in lots of extra work and added stress. One of these areas is your business’ accounting. If proper bookkeeping and accounting is not included as part of your regular work routine, then you are setting yourself up for disaster when April 15th rolls around.
At Your Balance Sheet, we’d like to give you some quick, but important, information regarding tax preparation, and also warn you of some common accounting mistakes small business can unintentionally make that can end up costing them big in the long run.
Before Doing Taxes
1. Get Educated
Before assuming that you know all there is to know about accounting, take a class or read a textbook to remind and educated yourself about how your business should do its accounting. Failure to do this can leave glaring holes in your accounts that come back to bite you when tax season arrives.
2. Track Expenses and Income
Doing your own accounting and tax preparation requires a year round tracking of your business’ income and expenses. Skipping a month will leave you with twice as much work the following month, and this can complicate your accounting even more, as you will often have difficulty reconciling transactions and getting your totals to balance
3. Tax Codes
In order to help your business save some extra money after April 15th has come and gone, work to keep yourself updated and aware of any tax code changes that might require extra preparation or serve to benefit your business. Knowing that these tax codes exist may require some time and research on your part, but taking advantage of them can yield great returns when trying to save money.
Putting in the time and effort to track your business’ income and expenses, as well as being aware of tax code changes will help you avoid making costly accounting and tax mistakes.
1. Improper Bookkeeping
By failing to keep accurate and consistent bookkeeping as well as keeping organized records, it is very likely that your accounts could have errors and you can end up making mistakes on your tax forms. Additionally, being unaware of tax code changes and legitimate write-offs could leave you paying more money on your taxes than necessary. These painful results can be avoided simply by maintaining your accounts and doing your research.
2. Combining Personal and Business Expenses
Another common mistake is to combine personal and business-related expenses. This threatens to impose serious tax debts, so be sure to abide by strict bookkeeping practices and keep these expenses separate.
3. Wrong Employee Forms
For businesses with employees, it is important to know whether you have hired them as a payroll employee or an independent contractor. The reason for this is because one will fill out a W-2, and the other fills out a 1099. If you should get these confused and the IRS catches wind, you could end up needing to unexpectedly pay for an employee’s Social Security and Medicare taxes. Be sure to avoid this by thoroughly researching the requirements of each, and then decide how you want to go about hiring employees. Keep track of this to ensure proper tax preparation and completion.
If, year after year, you find yourself with your head in your hands, staring down at a messy pile of receipts, spreadsheets, and tax forms, maybe its time for you to consider the possibility of outsourcing your business’ accounting.
Here at Your Balance Sheet, our purpose is to service you in any way we can. Whether that be cleaning up your bookkeeping, maintaining your daily accounting, producing monthly statements, and even doing tax preparation and filing for you, our customized services are here to meet you business needs. For more information about our services, don’t hesitate to contact us!