5 Common Problems Businesses Face When Filing Taxes
5 Common Problems Businesses Face When Filing Taxes

5 Common Problems Businesses Face When Filing Taxes

One of the biggest problems small businesses face in today's economy is the inability to remain in compliance with tax laws. The following are a few of the most common tax-filing issues small businesses may face:

1. Failing to Deduct Expenses

For a small business, every dollar saved can make a difference. But when deductible expenses are not adequately recorded and organized, you’re essentially throwing away money. Everything from office supplies to lunches with clients can be deducted, so make a point of deducting these expenses. The savings are worth it.

2. Failing to Document Deducted Expenses

As bad as failing to deduct business expenses can be, there's another mistake that can spell far worse problems for your company: not documenting the deductions you have taken. Small businesses can be audited by the IRS just the same as individuals. If you don't have receipts available to prove you made those purchases, you could wind up paying costly fines. You can reduce your risk by putting a reliable organizational system in place.

3. Recording Invalid Deductions

Make sure each deduction has a valid business reason. While it’s important to have receipts to prove a transaction happened, you should also be able to prove that it is directly related to your business.

4. Incurring Payroll Penalties

Every year, thousands of small businesses fail to withhold sufficient payroll taxes from their employees' paychecks. This represents a big red flag with the IRS and could result in harsh penalties. Businesses failing to withhold payroll taxes are usually subject to paying 100 percent of the taxes owed.

5. Ignorance of Tax Policies

All of the tax problems listed above could strike your business if you fail to stay up to date with the current tax code. For areas in which you lack expertise, don't be afraid to consult a payroll expert. Many entrepreneurs feel that they can get on just fine without the help of an accountant or payroll expert. They might not even think about it until tax time rolls around.

The penalties resulting from a failure to uphold tax laws could be enough to put your business under. It pays to implement a reliable payroll system and seek help from the experts when necessary. With a proactive approach, you can avoid the tax problems that plague so many other small businesses.

Paycor’s payroll solutions are backed by the expertise of payroll professionals who keep you compliant with federal, state and local taxes. Find out how we keep our clients covered: contact us today.

More to Discover

What are Supplemental Unemployment Benefits?

What are Supplemental Unemployment Benefits?

Reductions in force are unavoidable in economic downturns, but are traditional severance packages the way to go? They can be a big hit to your company’s cash flow and are subject to payroll taxes. The tax-friendlier option, Supplement Unemployment Benefits plans (SUBS), can spread out costs and deliver the same value for the employee, too. How Do Supplemental Unemployment Benefits Plans Work? SUBs got popular in the ‘50s as a way to help workers in industries with cyclical employment patterns get a more steady income. SUBs were often fought for in collective bargaining agreements. They’re growing in popularity again across industries. Under a SUB plan, in the event of a Reduction in Force (RIF) or temporary unemployment due to training,...

Take Our HR Benchmarking Quizzes

Take Our HR Benchmarking Quizzes

Paycor's research shows that 75% of high-functioning HR teams spend their time on mastering key pillars of HR excellence. Want to know how your team stacks up against others? Take our benchmarking quizzes to find out and get customized action plans based on your results. Recruiting Benchmark Quiz Benefits Benchmark Quiz Labor Costs Benchmark Quiz People Management Benchmark Quiz Compliance Benchmark Quiz

Remote Work Policy - Information Security Template

Remote Work Policy - Information Security Template

To make remote work successful, HR needs to think through risk mitigation policies, especially if it’s new to your organization. One of the biggest issues to consider is information security. It’s important that your remote workers know what to do in case of a security breach or data loss. Download Remote Work Information Security Policy Template Why Information Security is Important for a Virtual Workforce Protecting your company’s data (and the data of your clients) is hard enough when everyone’s working in the same office. It gets more difficult in a distributed, virtual environment. When an employee is offered the opportunity to work remotely, you may want them to sign an initial work from home agreement covering the general...

COVID-19 ADA Requirements

COVID-19 ADA Requirements

UPDATE JUNE 22: Updated EEOC guidance states that “requiring antibody testing before allowing employees to re-enter the workplace is not allowed under the ADA”. What is the ADA? The Americans with Disabilities Act (ADA) is a federal law that provides protection to disabled workers. The ADA prohibits employers from discriminating against employees on the basis of a physical or mental disability. This legislation applies to any business with at least 15 employees and prohibits discrimination against those with disabilities in all aspects of employment. How does the Coronavirus pandemic impact ADA compliance? Short answer, we don’t know yet. The Americans with Disabilities Act (ADA): The Basics The ADA broadly prohibits discrimination in...