Running a business is hard enough. Between serving customers, managing staff, and juggling invoices, your taxes can feel like an afterthought. But beware, small business owner: the IRS has seen it all, and a few “little” mistakes can cost you big.
Let’s have some fun (and learn a few lessons) with the 7 Deadly Tax Sins of small business owners and how to avoid them:
- Mixing Business and Personal Finances. Ah yes, the ol’ “it’s all my money anyway” mentality. Until your accountant starts weeping into their coffee… When you mix personal and business expenses, you risk losing deductions and raising red flags in an audit. Keep separate bank accounts, use a business credit card, and treat your company like its own person, because well… it is! Separation is key. Keep things clean, clear, and trackable on what is business and what is personal. There is no guessing with the IRS.
- Forgetting About Inventory. If you sell products, inventory isn’t just “stuff on shelves.” It affects your income, cost of goods sold, and taxable profit. Ignoring it can make your numbers look like a toddler’s finger painting… unclear, disoriented, and a questionable end result. Inventory affects much more than you think it does. Count it, track it, and adjust regularly, especially at year-end. This is pivotal.
- Overdoing the Deductions.Sure, we all love a good write-off or two. But if you’re claiming your Netflix subscription, your dog’s food, and your family vacation as “business research,” it’s time for a reality check. The IRS knows the difference between “work-related” and “wishful thinking.” You should always be ready to defend any deduction you take as a business expense. Can you prove your Netflix subscription is a business expense? And no, sitting on the couch thinking about work while relaxing doesn’t actually make it a qualified deduction… Be honest. Deduct what’s truly business-related and keep documentation on file.
- Procrastination Nation. Tax deadlines aren’t suggestions. Waiting until April 14 to start your return is like waiting until your car is on fire to buy insurance. When you plan ahead you have time to find deductions, make contributions, and fix mistakes before it’s too late. Scheduling an appointment for a tax projection or to discuss any concerns with us is as simple as one phone call. Let us help you, help us! Prepare early. Your future self will thank you, and so will we!
- Ignoring Estimated Tax Payments. If you’re self-employed or a business owner, you don’t have an employer withholding tax for you. That means you must send in the payments throughout the year. Skip them, and the IRS will hit you with penalties faster than you can say “quarterly.” Mark your calendar for each of these deadlines: April 15, June 15, September 15, January 15.
- DIYing the Complex Stuff. QuickBooks and Google are great, but they’re not substitutes for strategy. When your business grows, your taxes get more complicated — and mistakes get more expensive. And let’s face it, Chat GPT can help you a little bit…but even they have a disclaimer to you they make mistakes and to check important information. And who do you call then? Your wonderful CPAs of course! When you need strategy and understanding your tax numbers and return, we are here for you! A qualified accountant can help you maximize deductions, plan for growth, and stay compliant. Know when to call in a pro. We are an investment, not just an expense.
- Never Planning Ahead. Taxes shouldn’t be a once-a-year panic. Smart owners think ahead — setting aside funds, reviewing quarterly numbers, and meeting with their tax pro to make strategic moves before December 31. You’ll never know what’s ahead if you don’t plan for it, and we don’t have magic balls to see into the future. We just have good calculators, awesome knowledge and the ability to crunch them together to develop a strategic plan specifically for you and your own tax situation(s). Think of tax planning as your business’s cheat code for keeping more of what you earn.
Final Thoughts: Redemption Is Possible
Even if you’ve committed one (or all) of these tax sins, don’t despair, redemption is just a conversation away. A good accountant can help clean up your books, fix past mistakes, and build a plan that saves you money going forward. So go forth, small business owner. File with confidence, claim with integrity, and leave those tax sins behind. Give us a call today!
Senter, CPA is happy to help with your redemption and assure your success in the future!
