Common Small Business Financial and Tax Mistakes

What are the most common tax mistakes for small businesses? Four small business tax mistakes topped the list of a recent Xero survey of 500 accountants.

• Failure to separate business and personal expenses  Mixing business and personal expenses was the top mistake noted by 45% percent of those polled. Without professional help, you may trigger an IRS audit or be noted to have excessive income deductions.

• Forgetting to count the home office  A small business’ most commonly overlooked deduction is the home office, said 29% of the accountants. Some home expenses can be deducted and lower your taxable income, but you should check with a business tax preparation professional to make sure you are doing this correctly.

• Only thinking about finances periodically  Not having a clear, ongoing picture of business finances because they are only checked during tax time or at the end of the fiscal year is another mistake noted by 26% of those polled. Without daily checking of bank account balances or studying trends in income and costs, there is no way to plan for upcoming tax or other payments, seasonal drops in income, etc.

• Not meeting regularly with an accountant  Talking with an accountant only during tax time was a mistake that 18% noted. The survey had 47% of those polled recommending that small business should keep in contact with their accountants about once a month to make sure finances are in order and good standing.