Taxes are one area that can get small business owners into a lot of trouble. Before you know it, you may be behind by thousands of dollars in unpaid taxes or you may have missed out on thousands of dollars worth of deductions. In other words, online businesses can make a lot of mistakes, but with a bit of diligence you can stay on top of things.
Failing to Make Estimated Payments
Estimated payments are essential for any self-run business. When running an online business, it can be hard to pay your everyday expenses, let alone taxes. However, getting just one payment behind can be the downfall of your business. Fees and interest will build up, putting you thousands of dollars into debt.
Waiting Until the Last Minute to Gather Receipts
You may purchase a lot of supplies for your business. Many of these purchases may be from other online businesses. Each time you make a purchase, take the time to print and file the receipt accordingly. This will save a lot of time when you file your taxes.
Not Taking Advantage of Deductions
Are you taking advantage of all the possible deductions? Many online business owners are unsure of which deductions they can take advantage of. If you’re unsure, speak with an accountant that understands your line of business.
Choosing the Wrong Business Type
There are many business types and choosing the wrong one can hurt your business. It may even cause you to lose personal possessions should you have to file bankruptcy. Again, an accountant can help you choose the right business type.
Trying to Do Your Taxes on Your Own
If you have a simple, straightforward business, you may not need an accountant. For example, if you’re a freelance writer and receive one 1099-Misc, things are fairly simple. On the other hand, if you receive multiple payments from several businesses and individual clients, things can become complicated.
Using One Bank Account or Credit Card for Business and Pleasure
You never want to mix business and pleasure. Take the time to open a separate business checking account and credit cards. This will make it much easier to file your taxes and deduct expenses.
Inaccurately Claiming a Home Office
If you run an online business from home, you can deduct the costs of a home office. However, there are many rules you must follow. Not following these rules could cause a large problem should you ever be audited.
Taxes aren’t as straightforward when you own your own business. Take the time to accurately handle your tax and accounting records so that you don’t make mistakes. Use free services to find more information, like those offered by Turbotax, or contact an accountant for additional help.