1. Mixing Business with Personal Finances
Law doesn’t require that you keep business and personal accounts separate, but it sure makes bookkeeping a whole lot easier. Separate accounts will ensure that your financials reflect all relevant activity. Income and expenses may be inaccurately reported or missed entirely when your accounts are commingled, and that could mean penalties and missed deductions for you. And if you are an LLC or corporation, commingling of your personal and business activity could put you in jeopardy of losing the liability protections these types of organizations provide.
2. Misclassifying Labor
Are you reporting labor correctly? If you’ve reported an employee as an independent contractor, you may owe penalties and interest on the employer share of employment taxes. Ensure your employees are classified correctly with these guidelines from a previous post.
3. Missing Out On Deductions
Good books will ensure that you have everything you need to validate deductions come tax season. I’ve put together some helpful tips for smart spending and tracking expenses (mileage deductions, equipment purchases and strategic spending, but you may want to consult with a tax professional for additional deduction strategies.
Avoid a Tax Fiasco
The mistakes listed above really boil down to one thing—poor preparation. An organized bookkeeping system will be your best friend come tax season. A little research and consistent practices will take you a long way! And if you are struggling to find time or the proper system to get your books in order, it may be time to call in a professional. Email David@DEKEbookeeping.com to learn more.