Don’t miss Top 10 Tax Mistakes Part 1, here.
6. You’re misclassifying your employees, including your spouse
Your tax liability will be different depending on if you use independent contractors, employees, or a mixture of both. Employees must be paid at least minimum wage, and you have to pay them overtime. However, independent contractors don’t have those rules. This isn’t just a matter of whether or not you want to pay them as an employee or a contractor, there are specific guidelines that determine whether or not your staff are considered employees or contractors. This includes your spouse if they’re being paid by the company. If you file incorrectly, the IRS could hit you will big penalties.
7. You’re forgetting to carry forward figures from last year
The first place to start when you do your taxes this year should be your taxes from last year. Look for any items that need to be carried forward, things like capital losses, charitable donations and even some businesses deductions can be applied to multiple years if they exceed the deduction amount. Miss these deductions and you could be missing out on a lower tax bill.
8. You haven’t kept track of all your startup costs, and you don’t know what you can deduct
Did you know you can’t deduct your startup costs for your business until you have your first sale? Before you open your doors you’ve likely incurred a lot of expenses, things like office space, inventory, and even your new business laptop. But you can’t claim those until you have income to claim them against. Make sure you keep track of everything to get those costs back. For many businesses, you can claim $5,000 in your first year for startup costs, and even another $5,000 for operational costs.
9. You don’t properly report your side income
In addition to running your business, did you collect income from anywhere else? Maybe you worked a few hours for Uber or Lyft? Or you earned money from an investment account. If so, you’ll be getting a 1099 detailing that income. And so will the IRS. They know all about your extra income, so be sure and include it in your tax return. Not only will you owe taxes on those earnings, you could owe penalties and fines for not reporting it.
10. You missed the deadline
This is the easiest one to avoid. Missing your tax deadline can cost you money in the form of penalties and fines and put you behind before you’ve even filed. If you’re going to prepare your taxes yourself, be sure to start with enough time to get everything done. If you’re using a tax professional, be early in the door, this way they have time to devote to your taxes and you have time for a conversation around anything you don’t understand. The tax deadline this year is April 18, but don’t count on those extra few days. If you still can’t get your taxes done by then, look to file an extension.
Not even sure where to start? Call us at 844-629-8797 or click below to request your free consultation. We’ll handle the books, you handle the rest.