Tax season is never enjoyable. It usually involves a lot of time, something many small business owners do not have. Whether or not you have already completed your taxes, Entrepreneur has three mistakes you should pay close attention to.
1. Poor record keeping. Don’t rely on your memory alone. Sloppy record keeping is the most common problem among business owners, according to the Internal Revenue Service.
2. Misclassifying workers. It’s common for business owners to use independent contractors or virtual assistants to help with projects and jobs. Many erroneously classify these costs as labor or payroll costs. They are then deducted on their tax returns as salaries and wages. However, costs that are classified as wages are subject to payroll taxes, meaning a business owner can be taxed 10 percent more than they should be. Independent contractors should be classified as outside services on the tax return. In addition, if the amount you pay an independent contractor exceeds $600 per year, you will need to file the appropriate 1099 forms.
3. Late payments. Some business owners believe their tax payments are due when they file their tax returns April 15th. This is a common mistake. The due dates are April 15, June 15, Sept. 15 and Jan. 15.
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