Starting a business is a significant ordeal requiring weeks, months, or even years of planning and preparation. In all of the excitement, it’s not uncommon for little details to go overlooked. Some minor missteps won’t cause major errors, but mismanaging tax preparation and filing can be a serious issue.
Many entrepreneurs find themselves too focused on attracting clients, building business connections, and making sales to pay much attention to back office tasks. Unfortunately a few incorrect journal entries today can mean a big mess for tomorrow, especially when tax time rolls around. Instead of letting the upcoming filing season stand in the way of success, below are some of the biggest new business tax mistakes, as well as what savvy startups can do to avoid them.
No Financial Foundation
Operating a successful company requires a proper foundation in basic financial principles. Too many businesses get started without implementing any form of bookkeeping or accounting, or providing no way to track the revenue coming in and expenses going out. These steps may not seem important in the beginning, but getting started without a solid financial approach can be similar to merging onto the highway without functional brakes.
Instead of opening for business without any form of accounting structure, take time to decide how to track sales, purchases, and other important metrics.
CPAs working with corporate returns understand the ins and outs of tax preparation, but most new business owners do not. For new startups, tracking appropriate transactions may not be second nature, but this step is extremely important. When lunch receipts end up in the trash and invoices get shredded rather than filed, entrepreneurs may find themselves struggling to account for everything necessary on a Form 1120 or 1065.
In order to properly prepare a business tax return, a basic comprehension of line items, deductions, write-offs, and credits is the key to success. Instead of wandering blindly into tax season, start early, focusing on proper organization of all relevant expenses.
For entrepreneurs used to filing personal taxes, the leap to a business tax return can be an alarming wake up call. The requirements, the timeline, the necessary support, and even the forms themselves can differ greatly from Form 1040, leading to hazardous headaches like improper filings, miscalculations of tax due, and even a failure to file at all.
If you’re not sure what you need to file, when you need to file, or how you need to file, a professional CPA can be an excellent investment. By partnering with a pro, you can identify weak spots, ensure every form is properly prepared, and take the maximum deductions possible, providing a perfect return this year and a strong plan for the future.
Managing business tax obligations for the first time can be overwhelming, but the right guidance can make all the difference. Klein Hall CPAs can help your business start out on the right foot, taking care of accounting, financial statement preparation, and tax filings so that you can put your energy where it matters most. Contact us today to learn what we can do to streamline tax season for your startup.