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.
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