There are many accounting mistakes that could have negative consequences for your business. For a small business, these mistakes could have disastrous penalties – it could even get to the point where you have to close your doors. This is exactly why you want to learn what some of the mistakes are so that you can avoid them at all costs. Many businesses open and don’t even think about some of these missteps. When the IRS comes knocking or when sales take a major hit, the business owner is often blindsides and confused. Fortunately, steering clear of these missteps is easy if you remain aware and prudent. Here are some accounting mistakes that could harm your business.
- Not paying taxes on time. One of the biggest mistakes that a business can make is not paying taxes on time. This can create a situation where penalties can be incurred and other negative consequences can occur. It may be smart to have a calendar of all the tax due dates on a wall in your office – that is if you pay taxes on a quarterly basis. If you have local and state taxes, you want to have a calendar for those due dates as well.
- Not filing employees in the right tax bracket. When you hire employees, you want to make sure that you file them in the right tax bracket – or else you could get in trouble. For instance, full-time employees will be in a different bracket than part-time employees. Moreover, if you have contracted employees, you want to file them in the right bracket as well. When it comes down to it, there are different tax forms that employees must sign, so you may want to ask your accountant.
- Not writing off enough or writing off too much. Another reason why you may want to hire an accountant is for writing off business expenses. For instance, a professional accounting firm – like Benham, Miller and Harris, Inc. – will be able to quantify all your business expenses and determine what can be written off and what can’t be written off. The last thing you want is to write off too much or too little, because that could put your business in some hot water.
- Not reporting all income. Of course, if you don’t report all of your business’ earnings, this can also put you in some hot water. If the IRS becomes suspicious, you could have an audit on your hands. An audit is conducted by a representative of the IRS – he or she will go through your books to make sure there are no gloss overs. If there are and you are suspected of intentionally leaving out some earnings, your business could be slapped with a major fine or penalty.
- Not deducting employee taxes. Another big issue and mistake that you can make is not deducting employee taxes. Of course, not putting them in the right bracket can be an issue, but not deducting the right amount of taxes per paycheck can also be a big problem and you could be on the line for back employee taxes, which is the last place you want your business to be.