The prospect of starting a business can be exhilarating—but there’s a lot more that goes on behind the scenes.
Behind the flexible hours and days spent on doing what you love, starting and running a business demands precise attention to detail. As a young business, you’ll need to scrutinize each operation heavily, but business taxes will need your undivided attention.
You’ll be dealing with employees eventually, and various startup and budgeting expenses. Regardless of the financial concern, however, taxes are the most crucial factor in determining your eventual business success. It’s a non-negotiable pain point, especially since the laws surrounding tax can be incredibly difficult to grasp. Any wrong move can affect your business negatively, perhaps even jeopardizing its overall foundation.
With that being said, avoiding tax and bookkeeping mistakes is crucial for business owners. Here are the most common mistakes you need to avoid.
Mistake #1: Overlooking startup costs
Starting a business requires capital investment. How much it will cost will depend on the nature of your business, but you’ll likely need to shell out more than you initially anticipated. Fortunately, deductions exist to help new business owners get their companies off the ground. With that being said, never overlook your startup costs.
Each action you make to establish your business, including client meetings, marketing, and even research, is entirely deductible. Remember that you’ll only be eligible for deductions in the first year, so keep your receipts, keep a careful log of your expenditures, and watch as part of your money comes back!
Mistakes #2: Failing to track expenses properly
Some expenses—such as travel and entertainment costs—only require proof of costs and receipts, along with a record of reason, for the deduction. The IRS will not be requiring receipts under $75, but it’s a good idea to hang on to those receipts anyway for your own records.
As a startup company, you’ll likely be using personal credit cards for business transactions, so make sure that your expense reports are as accurate and detailed as possible. Look for software that helps you track your expenses, but make sure to have hard copies of them. As a startup business, proper documentation will be your biggest asset.
Mistake #3: Doing everything yourself
You may be the owner, and while most of the business operations fall entirely on your shoulders, know that taxes for entrepreneurs are matters best dealt with by the professionals. They’re complicated enough as it is without the added pressure of running a business.
To ensure that you file your taxes correctly, avoid breaching laws, and get proper refunds, work with a financial expert. While you may be hesitant to hire one, understand that this is the best (and perhaps only foolproof) way to avoid tax mistakes.
Mistake #4: Failing to realize the importance of an efficient accounting system
The role of management in startups is undeniable—it serves as the blueprint for success, which entails planning, collection, coordinating, budgeting, and above all organizing business operations. Part of effective management is an efficient accounting system.
Remember that accounting is a continuous process, a system of which that regularly analyzes and records, which is essentially the lifeline of your business finances. Without proper processes, that lifeline will eventually wane and wither.
Avoid Tax Mistakes—Work With Professionals
Running a business can be nerve-wracking, to say the least, but it’s an undeniably exhilarating venture. Becoming an entrepreneur will have you working day and night to keep up with demands and operations, and with taxes to worry about, everything will begin to feel overwhelming. Now that you’re equipped with the proper knowledge of the common tax mistakes, the question now stands: what’s your next move?
With that being said, if you’re on the hunt for remote bookkeeping and tax services in Boston, A4E has you covered. With over 50 years of combined experience, we’ll help your business with bookkeeping, taxes, and growing your profits.
Allow us to help you succeed by helping you focus on what you do best. Reach out today to learn more here.