5 Mistakes Medium-Sized Businesses Make When Doing Their Taxes
The United States recently reduced the corporate tax rate to 21%, putting it more in line with international standards. In the best case scenario, a mistake on your taxes means that you spent more than you had to. The worst case scenario is an IRS audit, which can lead to headaches, fines, and even jail time.
At Tax Reduction Concierge, we offer tax solutions so that your medium-sized business can grow and prosper. We are experienced professionals who have seen businesses of all sorts come through our doors. We have also witnessed many people make simple mistakes that cost them in the long run. As part of our service to you, we want to help you understand what you may be doing wrong.
1. Not Paying Your Taxes on Time
This one seems fairly obvious, but if you are running a business, you have a lot to take care of. You adjust your marketing budget, you look at some sales numbers, and you try to iron out a kink in your supply chain–before you know it, April 15th is in the rearview mirror and you have a huge issue that you need to take care of.
According to the IRS, the penalty for failure-to-file is 5% of the unpaid taxes for each month, but does not exceed 25% of all unpaid taxes. The failure-to-pay penalty generally falls between .5% to 1% of all unpaid taxes. Both of these penalties can be easily avoided.
2. Mixing Your Business and Personal Life
One of the best ways to conduct a sales pitch is with a glass of fine wine and a good meal in front of you. Most business owners know that, and they also know that they can deduct up to 50% of travel, entertainment, and car expenses.
You should keep in mind that this is a business expense. If you are discussing your company’s value proposition with a potential client, that can be written off. When you are talking about your child’s blossoming soccer career with Sharon from accounting over lunch and try to write that off, the IRS will have more than a few questions.
3. Choosing the Wrong Business Structure
The structure of your business has a massive impact on how your taxes work. Many people feel the temptation to classify their business as a C-corp. This might mean that they are effectively taxed twice. The structure of your company will influence how much you have to fork over to Uncle Sam.
4. Applying the Wrong Business Deductions, or Not Applying Deductions at All
Many companies do not know what they can deduct, and what they cannot deduct. There is a risk/reward element to this. Some deductions can save you money, but when you deduct the wrong item you may get a visit from an IRS agent. If you do not deduct anything, you are wasting money.
In these cases, you may need to seek the advice of a helping hand. Someone with a track record of success when it comes to tax reduction should be able to help.
5. Losing Track of Records
Many business owners are buried under a mountain of paperwork. From payroll to health insurance and beyond, conducting a business creates a lot of files from top to bottom. Keeping track of all of these files can be an absolute nightmare.
However, having the right documents could save you a significant amount of money on your tax bill. A receipt here and a travel log there might mean a reduction on your bill. Managing your books every month seems like a daunting task, especially if your business is doing very well. Yet, you will thank yourself when you see how much you owe the government.
If you have any questions about taxes, Tax Reduction Concierge can be your experts. We offer a wide range of solutions, and we will help you plan your taxes. Your medium-sized business could be the next success story. Contact us today to find out what we can do for you.
January 5, 2018 1:25 pm
Categories: Business Taxes