If you are afraid of incurring additional expenses, you will surely allow bookkeeping to take a backseat and carry every responsibility for your business just to save money. However, skimping on bookkeeping, would mean that your business is not immune to mistakes and it can certainly affect your business during tax time. There are many mistakes that small business owners often commit but these three are the most common.
Some business owners make a payment when they file their tax returns but this is a common mistake many businesses commit. Owners are supposed to make quarterly estimated tax payments and should be mindful of the due date. When payments are not made in a timely manner, you can trigger an audit from the ATO and this will result in paying tax penalties and interest charges once you file your tax return.
Determining whether an individual should be considered a contractor or an employee is not as complicated as some small business owners may think. You will need to take a few points into consideration because misidentifying a person can lead to interest for non-payment and penalties in terms of employment taxes.
Poor Record keeping
Although you might be tempted to make a mental note of every transaction for the belief that you can retrieve information instantaneously, this habit can do more harm than good. There are instances when businesses mix personal with business expenses and this can really spell trouble. When you rely on bookkeeping in a shoebox, it can have a serious effect on your business as there is no way to find out whether the numbers on your report are accurate. The numbers can either be lower or higher than the expenses you have incurred.
These mistakes can still be corrected by ensuring that you keep tabs on entertaining and travel expenses. So long as business was discussed, you can deduct the cost but you need to write notes on the receipt and indicate the people you were meeting with and the business that was discussed. When it comes to filing, you can also ask for an extension if you need more time. However, extra time to file will also mean extra time to pay. You need to set your expectations because you will surely owe money and you need to estimate the money you owe for the extension. It is quite challenging to keep track of your business but you cannot afford to make these mistakes as they can impact your taxes.