Are you making expensive financial planning mistakes during tax season?
Small business owners lose thousands of dollars every year by making silly tax filing mistakes. Mistakes that could have been prevented.
Here’s the kicker…
The majority of these mistakes are COMPLETELY avoidable.
Tax season is busy. Between worrying about daily operations, keeping payroll afloat, and trying to stay on top of changing tax laws… financial planning takes a backseat.
And that’s when costly mistakes happen.
Let’s fix that. Here’s what you need to know:
- Why Proper Tax Season Planning Is Critical For Small Businesses
- The 5 Biggest Financial Planning Mistakes Made By Small Businesses
- How To Avoid Penalties And Keep More Money In Your Pocket
Why Proper Tax Season Planning Is Important For Small Businesses
Tax season shouldn’t be viewed as something you “just have to do” every year.
It’s the most important financial planning period of the year for small business owners.
Make a mistake and it could come out of your pocket.
Business owners that lack a tax strategy in place typically find themselves writing Uncle Sam a big “thank you” gift every year. A recent NSBA survey even found that 90% of small businesses said that federal taxes have a daily impact on their operations. Yikes!
On average, small business owners spend over 20 hours per year on federal tax compliance. Hours that could be spent serving customers, bringing in revenue, or building your business.
Thankfully there are steps you can take to prevent these disasters.
Doing your homework and using tax software like AMS E-File Software for small business tax e-filing makes tax season easier. Automating your payroll and filing electronically minimizes the chance for human error and keeps everything organized.
The problem is most small business owners wait until it’s too late.
Below are the biggest mistakes you absolutely need to avoid…
The 5 Biggest Financial Planning Mistakes All Small Businesses Make During Tax Season
Running a business is hard enough. But when it comes time to file your taxes, avoid these five costly financial planning mistakes.
They’re the most common mistakes small business owners make (and cost them money) year after year.
Don’t be that person…
1. Not E-Filing Your Tax Returns
This should go without saying…
Small business tax e-filing is quick, accurate, and gets your tax returns processed much faster than paper filings.
In fact, the 2024 IRS Data Book reports that approximately 94% of S corps already e-file their tax returns.
So what gives? Why are people still filing tax returns on paper?
Filing paper tax returns invites all sorts of problems. It takes longer to get your refund. It increases the chance of silly math mistakes. And it leaves more room for manual errors.
E-filing catches common mistakes prior to hitting that “submit” button.
Electronic tax returns are processed much quicker than paper returns. That equals faster refunds and less waiting around for business owners that issue W-2s, 1099s, and payroll tax forms.
Solution: Use a reputable tax software solution and e-file your tax returns.
2. Missing Your Estimated Tax Deadlines
Here’s a sneaky one that trips up many unsuspecting business owners…
If you expect to owe $1,000+ when you file your taxes, you’re required to make quarterly tax payments.
Miss one of these deadlines and you’ll be charged penalty fees and interest by the IRS.
These are the quarterly deadlines for estimated taxes:
- January 15
- April 15
- June 15
- September 15
Many small business owners only think about taxes once a year. During tax season. While it is incredibly important to have a tax plan for filing your yearly taxes, it’s just as important to stay on top of these quarterly deadlines.
Set calendar reminders or better yet… automate estimated tax payments so they’re never missed.
3. Mixing Business With Personal Finances
Seriously guys. This is such a rookie mistake and it can come back to bite you.
When you start a business, you should open a business bank account.
You should also get a business credit card. And keep meticulous records of business expenses.
Mixing personal and business finances makes it difficult to accurately account for deductions. If you get audited by the IRS, not being able to prove where every dollar came from could cost you.. a lot.
Business owners should always:
- Have a separate business bank account
- Get a business credit card
- Track all business expenses
Your personal finances and business expenses should never be intermingled.
4. Forgetting About Deductions
Did you know that missed deductions are costing small businesses thousands of dollars each year?
Many small business owners simply aren’t aware of what deductions they qualify for. Take a look at some of the most common deductions that small businesses forget about every year:
- Home office expenses
- Vehicle and mileage expenses
- Software expenses
- Professional development
- Business insurance
The best way to remember deductions is by keeping excellent financial records all year long. Documenting expenses as they happen will allow you to capture every deduction you’re owed.
Keep in mind… You can claim deductions as itemized personal expenses on your tax return. But doing so will cost you money!
Business deductions lower your self-employment tax as well as your income tax. Claiming them as personal deductions only lowers your income tax. Always file deductions as a business expense.
5. Waiting Until The Last Minute
I can’t stress this enough…
Tax season mistakes are almost always caused by procrastination.
When business owners wait until the last minute to tackle their taxes, they:
- Rush through and make careless mistakes
- Forget about deductions
- File tax returns with incorrect information
- Accidentally forget to report income
The more time you allow yourself to prepare your small business taxes, the better. Waiting until the night before taxes are due to get everything in order is a recipe for disaster.
Preparing for tax season should be an ongoing process. By keeping your books up-to-date month over month, and evaluating your financials quarterly you’ll reduce your chance of making a costly mistake.
Ready to get out of tax season hell?
Recap: How To Avoid Financial Planning Mistakes This Tax Season
Tax season mistakes can cost small business owners dearly. From losing out on deductions to paying late penalties.
But the good news is…
Avoiding these dumb mistakes is SIMPLE. Here’s what you need to remember:
- File taxes electronically
- Stay on top of quarterly estimated tax deadlines
- Keep personal and business finances separate
- Keep track of deductions year-round
- Don’t wait until the last minute
Stay organized, stay on top of your finances, and use dedicated small business tax e-filing software to make tax season a breeze.
Take action now and you’ll thank yourself later.