When you first start your own business, it’s a steep learning curve. One of the things that people struggle with the most is the financial aspect of owning a business because there are so many rules and regulations that you need to get to grips with, especially where tax is concerned.
It’s up to you to file your business taxes every year and if you get it wrong, you might end up paying more than you need to. In some cases, you may not pay enough and that’s when you’ll find yourself in a really difficult situation. Big mistakes with your taxes could lead to big fines which a new business is going to have trouble paying for, so it’s essential that you get it right the first time. If you’re starting your own business, you need to make sure that you avoid these common tax mistakes.
Not claiming all expenses
All of your business expenses are tax deductible so you need to make sure that you’re claiming everything you’re entitled to because it’s the easiest way to save money on your tax bill. The problem is, a lot of people don’t always know what is and isn’t tax deductible. They get all of the obvious things like salaries, rent on the office, and manufacturing costs, but they forget about things like office supplies or travel costs. It’s important that you go through every single one of your expenses and claim back anything that is tax deductible, otherwise, you’ll be paying a lot more tax than you need to and that’s going to put a strain on your finances.
Not organizing paperwork properly
When it comes time to file your tax returns, you’ll need to bring together all of the relevant information and that’s hard without proper organization. If you just have a messy pile of receipts, you’ll spend days going through it all and trying to organize it, but you make things a lot easier for yourself if you keep track of paperwork as you go. The easiest way to do that is to use good online accounting software from the outset. It’ll make it easier to manage your finances in general and you can easily store all of your invoices and receipts so when it comes time to file a tax return, all of the information that you need is there for you already.
Not putting aside money for tax
This is a big one and it often happens because you don’t think about paying your tax bill until it arrives. The problem is, you’ve got to come up with that money at short notice and that usually leads to cash flow issues, especially for a new business that has limited capital. If your tax bill is higher than expected and you aren’t prepared for it, you could find yourself in a tricky situation. It’s best to start putting money aside each month so when that tax bill does arrive, you won’t get caught out.
As long as you can avoid these common tax mistakes, you should be able to get your head around your business taxes.