As a small business owner, you need to perform different types of tasks, including marketing, production, and other operations. In addition to these roles, there is an additional role which is to manage the accounts and file the taxes. The tax filing should be without an error, and when you make an error in taxes, it can cost you seriously.
Therefore, you should try to avoid mistakes while preparing taxes for small businesses.
In this article, we will study the common mistakes to avoid while preparing for the taxes in Southfield. If you want detailed information about such common mistakes, you can consult an expert small business accountant in Southfield, MI, to have proper knowledge about taxes.
What are common mistakes to avoid when preparing taxes for small businesses?
- Not Selecting the Proper Entity: Selecting the proper entity for the company is very critical. There are various small businesses, such as sole proprietorships or LLCs. You must decide the type of entity based on multiple factors, such as the number of employees, financial goals, and other factors. If you need more clarification about the kind of entity, then you must consult an expert accountant who can tell you about it based on your business performance and other factors.
- Deducting Start-up Costs Incorrectly: Start-up costs are deductible, but not all costs come under deductibility. New small business owners commonly overestimate their start-up costs. You must understand the difference between the start-up cost and organizational cost. Start-up costs are those costs that are incurred to research the acquisition or creation of the business, and they also include the costs of setting up the active business. On the other hand, there is an organizational cost, which is the direct cost of creating a corporation or partnership. So, you must be aware of the difference and deduct only start-up costs.
- Commonly Missed Deduction: There are various widely missed deductions such as business magazine subscriptions, postage stamps, printing marketing materials, and other such costs are also deductible. In addition to this, home office charges, accounting and bookkeeping charges, tax preparation fees, insurance, business use of vehicles, travel expenses and other such costs are also deductible. Still, it is commonly missed while preparing for the taxes.
- Overreporting or Under-reporting: Reporting higher than the income or not reporting all of your income, both these conditions can trigger an audit. So, you have to avoid this common mistake while filing the taxes.
So, these are some of the common mistakes to avoid while filing taxes, and you must ensure that you are getting help from an expert accountant who can help you deal with such mistakes effectively.
