7 Essential Tax Mistakes Small Business Owners Must Avoid

7 Essential Tax Mistakes Small Business Owners Must Avoid

Is your small business missing out on thousands of dollars of tax savings? Learn how to prevent costly tax mistakes that could impact your business's finances.

1. Not separating your business and personal finances

• Separate business and personal income and expenses to track tax-deductible expenses accurately.
• Avoid intermingling funds to ensure accurate tax reporting.

2. Not tracking your business expenses

• Utilize accounting software to monitor deductible expenses and business performance.
• Regular bookkeeping enhances financial visibility.

3. Not forming an LLC (or other business entity)

• Establish a legal entity like an LLC for business legitimacy and potential tax benefits.
• LLC formation aids in obtaining an EIN and building business credit.

4. Not filing taxes as an S Corporation

• Consider S Corporation status for favorable tax treatment on business income.
• An S Corp structure offers tax advantages and flexibility in income allocation.

5. Not hiring professional tax help

• Seek guidance from tax professionals for accurate tax filing and personalized advice.
• Professional help ensures compliance and tax optimization.

6. Not getting a health savings account

• Take advantage of HSAs for tax-advantaged healthcare savings.
• Maximize tax deductions and save on healthcare costs.

7. Not using a small business retirement plan

• Explore tax-advantaged retirement options like SEP IRA for increased savings potential.
• Retirement plans offer tax benefits and financial security for small business owners.

Implementing these strategies can help small business owners save on taxes and strengthen their financial foundations.