Taxes are one of the most important aspects of a business.
Tax authorities don’t differentiate between a small business in a neighborhood or a multi-national corporation in the city’s main business hub. Your business can make as much profit as it wants, and you may consider it successful. Still, it can all go down the drain if you don’t accurately reflect your business operations in financial reports and get caught not paying your taxes in an audit.
The Definition of Taxes is “a charge usually of money imposed by authority on persons or property for public purposes.” Taxation is the overriding source of a government’s revenue, is a cost that will never go away and as much as $6.19 trillion were collected by the US government in the first quarter of 2021 alone.
This makes it extremely important for you to consider tax planning and preparation and approach it with extreme care to avoid making any mistakes and to ensure that you legally reduce your liabilities and avoid penalties as much as possible.
Read on to find out some common mistakes when it comes to tax planning so you can protect yourself from legal action.
1. Not Actively Monitoring and Recording Expenses
Not actively tracking your business’ expenses throughout the year is a huge mistake.
You should always be extremely careful and utilize various analyses to measure and reduce your legal tax burden; professional accounting services will help you with this.
One of the best financial tools out there is budgeting and forecasting, yet so many small businesses do not have the means to prepare these analyses. The importance of having a good budgeting system and planning is unmatched and can certainly serve as a competitive advantage for your business. It can help you underscore where you underestimated the true cost of your operations and shed light on whether you have enough access to sufficient working capital at all the right time in order to take advantage of lucrative opportunities.
2. Inaccurate Tax Filing
Even a small error during the tax filing process can prove costly, as this is still a situation that requires intervention and correction and may even involve a negotiation with the tax authorities. You want to ensure that you present an accurate tax return and avoid the possibility of your tax filings being selected to audit based upon errors and irregularities.
3. Not Being Pro-Active with Tax Planning
Dedicating time toward tax planning and preparation when the tax year’s end is approaching is another mistake you’d want to avoid.
If you fail to plan, you may not be successful at controlling costs and might end up in a higher tax bracket costing you thousands of dollars.
4. Not Being Updated with New Tax Laws or Developments
Tax laws are constantly evolving, and you need to stay in the loop and keep up with all the changes. Small business owners should look out for several things regarding their taxes in 2021 and be well-versed with the ever changing mandates.
Get Professional Tax Filing Services
Taxes can sometimes be confusing.
However, with Ally Books and Taxes, it is the least of your worries!
Our services are geared toward small business tax management. We provide exceptional tax preparation and planning services as well as professional tax compliance services for your business.
Reach out to us to get started right away!