I know from speaking to other small business owners that virtually all of them are concerned about taxes. But the real issue is typically about all of the filing requirements, the things you have to do to keep in compliance with the revenue collection practices of various governmental entities.
There are so many tax related activities required for small business that the IRS publishes a small business tax calendar every year. It’s a really useful tool that is normally released during the fourth quarter of the year. If you want to make sure you don’t miss any deadlines, you can subscribe to the tax calendar in your Outlook calendar.
So here are some of the key tax related obstacles facing small business owners, where they go wrong, and what they should do about it.
Key Obstacles for Small Business
The biggest obstacles for small business owners are knowledge and understanding, because tax law is constantly changing. Most small business owners have no time or desire to keep up with these changes.
The variety of taxes a small business faces often is a shock to start-ups. In addition to the well-known federal income tax, businesses also face various types of state and local taxes, including income, franchise and/or sales taxes. If you have employees, you must deal with payroll taxes, including not just payments but information filings to the government and your employees. Many businesses also face specific excise taxes. And even the type of business entity you’ve chosen, such as sole proprietor, partnership, LLC, or corporation, affects your taxes. Too often a small business overlooks or misfiles some of these tax responsibilities.
That’s why so many small business owners take the wrong steps when it comes to taxes.
Common Tax Mistakes Small Business Owners Make
The most common mistakes are not keeping good records, not planning for the payment of taxes, and not setting aside the funds to pay the taxes owed.
They also need to be conscious about classifying workers properly. Classifying workers as independent contractors when they should be employees could get you in serious trouble. Make sure you follow the IRS guidelines fully to save potential fines and penalties.
Do-It-Yourself or Hire a Professional?
There are plenty of software packages that will help walk you through the steps, so it’s very tempting to be a “do it yourselfer” when it comes to filing taxes. However, you would serve your business better by focusing on what you do best and hiring a professional who specializes in small business to have them do what they do best, prepare your taxes.
A professional knows the ins and outs of applying allowable deductions and can help you not only file properly, but will make sure you get the deductions you deserve along with identifying things you can do to reduce your taxes for the following year.
And remember, small business taxes aren’t just a do it once, set it and forget it activity. A tax professional can help you manage all the changes in tax compliance, and to meet the ever-present deadlines.
