Even a single mistake made on your tax return can cost you money. You might end up missing on a bigger refund than you claimed, owe more taxes, or invite an IRS audit. A mistake will hold up your refund until things get straightened out. But, this can be a problem if you go greedy with your tax deductions and credits. If you want to avoid making common tax preparation or filing mistakes, it is best to let San Antonio tax preparation experts do the job for you. Here the mistakes you can avoid when you hire tax professionals:
Not Deducting Startup Costs Correctly
Some businesses that try to do their taxes deduct the wrong costs, particularly startup costs. It is a common misconception that you can deduct all startup expenses from the first year of your business’ income. In general, the costs of launching your business are deducted over the first fifteen years of running your company. But, the IRS allows for a $5,000 deduction in startup costs and $5, 000 in organizational costs during your first year of business. However, this is only possible if your business expenses amount to less than $50, 000.
Not Separating Business and Personal Finances
If you mix personal and business expenses, you may get the attention of the IRS. Make sure you don’t deduct any expenses that are not considered business expenses. For example, items such as client dinners and your commute are not deductibles. You need to deduct only actual business expenses. Also, separating business and personal finances will make it easier to manage your tax bills and navigate an IRS audit. In fact, you might miss out on deductions when you file your business taxes. Your CPA can help you determine any deductions that you may not be considering.
Not Classifying your Employees Correctly
A lot of business owners prefer to hire independent contractors to help them with certain projects. However, they may mix up contractors and employees and incorrectly label them when tax season comes.
If you have an employee-employer relationship with independent contractors, you may qualify them as standard contractors. You need to ensure this reflects on your taxes. Also, you must not misclassify regular employees as independent contractors because this could cause them to miss out on significant benefits.
Moreover, there is a significant difference between employees and independent contractors for tax purposes. Your company should not withhold taxes for legitimate independent contractors as the latter must fulfill their own taxes. However, your company must withhold employee tax and income for your employees.
Not Filing or Paying on Time
As you focus on many aspects of your business, you may lose track of dates and miss your tax deadlines. This makes it important to hire a professional accountant to help you handle your taxes. Penalties apply when you fail to file your taxes or fail to pay. You must file your tax returns if they are due and your CPA can ensure you don’t experience a delay in filings.