Sorting Out Your Accounts

Common Mistakes That May Lead to a Bigger Tax Bill for Your Business

by Lydia Washington

A mistake here, a mistake there, and your business may be forced to pay more in taxes, and worse, in penalties. You also run the risk of having your business audited by the tax authority. The good news is that with expert tax accountants, you don't have to worry about such mistakes and their consequences.

Here are some of the common mistakes that may cost your business big and how you can avoid them going forward.

Late Filing and Payments

Paying your taxes late will attract a penalty. Lodging your tax returns is generally easy and straightforward, especially if you do so in good time and avoid the overwhelming last-minute rush, trying to beat the tax return deadline.

The good news is that you will be eligible for an extension on the tax return deadline if you use tax accountants to lodge your returns. How long this extension will be depends on circumstances, which your accountant will be aware of and can, therefore, leverage on this deadline.

Mixing Personal and Business Finances

Combining your personal and business finances, even when your business is still in its infancy, is never a good idea. It complicates matters of tax, since, over time, and as your business grows, it can become increasingly difficult to differentiate and verify which transactions are for your business and which ones are personal. If you fail to make this differentiation, and you may end up paying more taxes if your accounts reveal a higher income, which may comprise of earnings from personal ventures unrelated to your business.

Tax accountants will strongly advise you to have accounts dedicated to just your business. You will have an easier time keeping track of your expenses and income.

Failing to Claim Deductions

As a business, you may be eligible for any number of deductions. These deductions will reduce the amount of money you need to pay in taxes, and tax accountants will explore all the deductions for which you are eligible.

To be able to claim these deductions, you will need to provide the relevant documentation. If, for lack of proper records, or any other reason, you are unable to claim your deductions, then you will have to contend with paying more in taxes.

Stay on top of tax return deadlines, keep your business and personal finances separate and maximise your deductions. If you do this, and with the help of professional tax accountants, you can avoid paying more in taxes than you should.

If you have additional questions, reach out to a local tax accounting service.