Tax season usually means extra work for small business owners, but this stress can be exacerbated if you’re making common tax mistakes in your bookkeeping. Knowledge is power, so our business accountant compiled a list of the most common tax errors that small businesses fall prey to and how to avoid them.
What are the most common tax mistakes for small businesses?
With all the complexities and regulations surrounding business tax, it can be easy for small business owners to find themselves at error when tax time arrives. There are a few very common tax errors that business accountants come across frequently.
Falling behind on record keeping and paperwork
Although recording keeping can feel like a job in itself, it is an essential part of running a small business. Falling behind on paperwork might not feel like a big problem at first but come tax time you will likely feel the impact of not having well-maintained records. This can lead to issues such as discrepancies, delays, failure to comply, or missed deductions. Engaging with a good business accountant will help to ensure that your records are up to date all year round, making tax time a breeze.
Incorrectly defining your employees
It’s common for small businesses to employ individuals in a variety of formats. For example, your business might have some full-time employees with a couple of contractors on hand for extra support. Having well-defined employee roles is crucial, and it’s important for small businesses to avoid falling into the trap of having casual or spoken arrangements without formal contracts and agreements in place. Maintaining defined employees in your workplace will help to ensure that you aren’t liable for any missed obligations such as superannuation, potential penalties or general interest charges.
Omitting potential deductions
As a small business owner, you could be missing out on valuable tax deductions either because of incorrect record keeping or from simply not knowing that you’re eligible for them. Office expenses, private health insurance policies, super contributions, and travel expenses should all be recorded and provided to your tax agent at tax time as potential deductions or to ensure the correct levies and/or offsets are applied.
Insufficient separation of personal and business expenses
An issue unique to small businesses is the potential for personal and business expenses to become muddled. As a small business owner, you may be tempted from time to time to use company funds for personal expenses – or vice versa. These blurred lines can cause confusion and issues at tax time, so there should be a clean separation of all your personal and business expenses during the year. Your business accountant can help you to ensure that your personal and business finances are kept separate and organised.
LBW: Geelong’s business accountants
If you require some expert assistance and guidance to ensure tax time goes smoothly, the accountants at LBW are here to help. Our team are experienced in ensuring compliance, managing business tax documents, and assisting you to plan for the future. If you are a business owner seeking expert assistance, we invite you to contact the team at LBW.
