Offering a great product, developing a detailed business plan, and designing clever marketing strategies are the fun part of starting a business. However, don’t overlook the importance of how you manage your accounting as a vital component to your long-term business success. Consider these common accounting mistakes made by small businesses and how hiring a professional accountant will help you to avoid them.
Choosing the Wrong Business Structure
From the onset, choosing your business structure involves crucial accounting decisions that will affect how you pay taxes. Hiring a professional accountant who is versed in IRS business tax categories will inform you of conditions you qualify for and risks associated with each model. Choosing the best tax category for your company can save you thousands in taxes and will affect your bottom line.
Missing Out on Tax Deductions
Think you know the tax system well? Since 2001, the tax code has changed more than 3,250 times. In one year alone, the tax code had over 500 changes. Though many small business owners have basic understanding of the tax system, they may be unaware of some of more subtle nuances of the tax code. Unfamiliarity with code changes can result in missing out on important deductions or lead to penalties. Hire an accountant whose entire job depends on staying up-to-date on tax code so you don’t overlook these money saving deductions.
Spending Hours Doing Taxes Instead of Focusing on Your Business
They say time is money and the same holds true in business tax preparation. Companies filing their own taxes can spend countless hours trying to navigate and correctly complete their tax forms. About 7.6 billion hours are spent every year on filing. It’s no wonder almost 75% of unincorporated businesses hire professionals to do their taxes. A well-trained accountant will know the proper forms for your business structure and will clearly outline what information they need from you before filing.
Only Considering Taxes When They Are Due
For many small businesses, the IRS expects estimated tax payments. Instead of paying a one-time tax in the Spring, these payments are required quarterly. A professional accountant will know whether your company is expected to file four times a year and help you complete the 1040-ES form used to calculate each payment. Your accountant will also help you determine how much extra money to set aside in case your yearly taxable income is higher than initially estimated.
Getting Tax Help From Someone Without Experience
Maybe you’ve already decided that it is best to hire someone to help you with your taxes. Before you trust anyone who says they are a professional tax preparer, get the details of their experience level and qualifications. Verify that the accountant has obtained a preparer tax identification number (PTIN) from the IRS. Choosing a proficient accounting professional can help you avoid these small business mistakes, saving you time, money, and headaches when managing your finances.