Most small business owners would rather think about anything besides taxes, and bookkeeping can be a thorn in their side as well. Just about every business move you make has a potential accounting or tax ramification, and it’s all too easy to make a wrong move that can cost your business at tax time. A bookkeeping service Atlanta knows and trusts can help to alleviate your stress and anxiety. Here are eight of the most common (and costly) small business accounting mistakes:
1. Not Keeping an Expense Log and a Tax Diary
Many small business owners make the mistake of thinking that since they save their receipts, no further documentation is needed. An expense log will give you a feeling of organization and control, and a simple tax organizer book can help you to answer key IRS questions ahead of time. Staying on top of these numbers during the business year can help you to document your expenditures correctly and completely.
2. Making All Workers Independent Contractors
Having employees can certainly be costly, while with independent contractors, you can avoid having to contribute to their tax withholding. However, you’ll also lose quite a bit of control over the worker, which could impact your business negatively. Also, be aware that if you incorrectly designate someone as an independent contractor, this could lead to steep penalties from the IRS.
3. Missing Out on Deductions
Did you know that personal services like tailoring or dry cleaning during a business trip or having a meal out with friends that involved talking business are deductible? Just be sure to document them in your tax diary (see step number one). Consult a bookkeeping service Atlanta respects to help you get all the deductions to which you’re entitled.
4. Borrowing Against Employee Withholding
When cash flow is at an ebb, some business owners may be tempted to use the monies set aside for Social Security and employee withholding. However, doing so is a major mistake that could incur large penalties.
5. Giving Yourself Too Many (Unsubstantiated) Raises
Corporation owners have to watch out for this costly mistake: a dramatic increase in what you pay yourself must be well substantiated, or some of this revenue could be disallowed as unreasonable compensation by the IRS. It can then be taxed and redistributed as a dividend for which you’ll then be taxed again.
6. Celebrating Refunds
Yes, on the surface, it feels better to receive money at tax time than to owe; however, the truth is you’ve let the government hold onto your money interest-free for months. Have your Atlanta accountant adjust your withholding so you’re closer to break-even.
7. Going it Alone
Some small business owners feel they can handle their taxes and bookkeeping and save money in the process. However, the truth is that as your business grows and becomes more complex, so do your accounting and tax considerations. In addition to potentially handling your taxes and accounting incorrectly and becoming a target for an audit, you might also miss some key deductions or credits that could make your tax bill lower. When in doubt, don’t go it alone; call on the help of a bookkeeping service Atlanta knows and trusts.
8. Hiring the Wrong Accountant
Hiring an inept or unscrupulous accountant can be as costly going it alone. Be sure to check certifications, track record, level of small business experience, knowledge of your industry, and what others are saying about them. Get a referral and/or check the company’s testimonials online to ensure that you are hiring a high quality Atlanta bookkeeping service.
Business accounting and tax time are full of potential pitfalls for the small business owner. Don’t fall victim to these common, costly small business accounting mistakes. Hire a bookkeeping service Atlanta knows and trusts to help you navigate the ins and outs of accounting and help ensure business success going forward.