There are several things a small business owner may be enthusiastic about but it is likely that preparing tax returns is not one of them. Whether it is preparing necessary documentation, meeting the various requirements, or filing tax returns by the due date, a small business owner may struggle with this particular task.
While a small business can consider outsourcing tax consultancy and other accounting services to a reputed firm, if a small business prefers preparing their tax returns themselves, it is advisable that they watch out for these 10 errors.
- Missing The Due Date
The Government announces a date by which tax returns must be filed but while managing the business, a small business owner may forget the due date. Failure to file tax returns on time can result in penalties and fines, which may add an additional strain to the business.
It is thus recommended that you make a note of the due date and start preparing your documents early so that you do not need to rush to meet the deadline. If you are unable to file your tax returns by the given date, you can inquire from the relevant bodies if an extension can be granted.
- Being Disorganised
Filing your tax returns is a process you will be required to do annually and some organisational skills are required to minimise the chances of making mistakes. By maintaining a tax diary or organiser, you can make sure you do not miss any records or documents that should be submitted.
- Not Keeping Records
You may not have the time or resources to maintain a tax diary but this should not interfere with the maintenance of accurate and thorough records of your income and expenses. It is vital that a small business keeps a good record of its transactions during the given period and there are several tools and software to record your expenses and income.
- Submitting The Wrong Forms
Filing taxes is a complicated affair and there are different forms, requirements, and due dates for different types of organisations. The process to be followed may differ depending on your business and how it has been registered.
A common mistake made by small business owners is submitting the wrong forms or records. This can be avoided by outsourcing your accounting services to a reputed firm in the area.
- Misclassifications
Despite the fact that small businesses usually operate with small teams, there is still room for error when classifying company personnel, especially if you work with independent contractors. When filing your tax returns, make sure the information you enter about employees is accurate.
- Mistakes With Names And Numbers
Even minor mistakes with names and numbers can cost a small business and act as a setback. Getting your calculations rights and going over the spelling of names and addresses is vital when filing your tax returns.
It is also important to use legible handwriting when maintaining hand-written records.
- Personal Expenses
A small business owner may not make clear distinctions between personal expenses and business expenses. This can not only interfere with record keeping but may also cause inaccuracies in the tax returns you file for your business. It is thus important to keep your personal expenses separate from your business expenses.
- Not Knowing What Is Deductible
As highlighted several times, filing tax returns can be complicated and time-consuming. Knowing what forms and records you must submit may require help from a tax consultancy. Knowing what deductions apply to your business is also something accounting services can clarify for you and not doing so is a mistake you may want to avoid.
- Doing It Yourself
Several small businesses do file their tax returns themselves and make none of the above mistakes, but it can be a challenge and burden that adds an unnecessary strain to the business. Small businesses operate with small and, often, over-worked teams, which means that the additional responsibility of filing tax returns can have a negative impact on the overall management of the business.
This mistake can be avoided by considering corporate tax management outsourcing, through which you are guaranteed compliance and accuracy.
- The Wrong Tax Professional
As much as it may be a mistake to prepare your tax returns all by yourself, it may be a bigger mistake to go to the wrong tax professional. When choosing corporate tax management services, make sure you go to a reputed firm known for providing an excellent service and complying with regulations.
