Common Small Business Tax Myths

Common Small Business Tax MythsOwners of small businesses should be sure that they have the right information concerning business tax issues, even if they utilize tax services. Basing an important business decision on one of the many tax misconceptions that exist can result in financial headaches. Take note of a few of the more common small business tax myths of which you should be aware. 

All Workers Require the Same Tax Treatment

When it comes to your tax responsibilities for the people that work for you, it is important to know their correct worker classification. If you do not complete the correct paperwork or pay the right taxes, both your business and your worker may have significant tax issues to resolve.

A worker will be either an employee or an independent contractor. If you have employees, you are required to report, withhold and pay employment taxes on their behalf. Employees should also receive a W-2 by the end of January of each year. If a self-employed person, or independent contractor, is paid more than $600 a year, you are required to provide them with a 1099 form that details their total yearly income. However, you are not responsible for withholding or reporting any taxes on their behalf. If you are unsure of which classification to use, check IRS guidelines or consult with your accountant or payroll service.

A Home Office Deduction Will Get You Audited

Tax returns that claim a deduction for a home office are not automatically flagged for an audit, although certain behavior may garner a second look. This includes claiming an excessive deduction amount that is calculated using a substantial amount of square footage of the home, such as an entire floor. However, as long as you are truthful about the information you provide, there is no need for a concern.

Your Accountant is Responsible for the Condition of Your Tax Situation

Regardless of how many aspects of your business requires your attention, make sure that taxes is one of them. No matter who you hire to manage your taxes, a CPA or bookkeeper, it is your signature that has to go on the tax documents. Maintain good recordkeeping practices so that tax preparation can be easier. Don’t be hesitant to ask for clarification from your tax preparer if you have a question about a business tax issue. It definitely helps to have an efficient tax professional, so when you are wondering whether there is “quality tax preparation near me” or “professional tax services near me“ during your tax preparation services search, be sure to vet well and become engaged in your tax matters.

You Will Always Have a High Tax Bill

A high tax bill is not a given just because you own a business. There are steps you and your tax accountant or bookkeeping professional can take that can lower your tax bill, such as:

  • Monitoring the expenses and income generated by your business
  • Learning about the tax deductions and credits for which your business qualifies
  • Reducing taxable income by allocating a portion in a retirement plan
  • Remaining current on laws, tax-related or otherwise, that pertain to your business

Taking care of taxes matters can be burdensome, but it can be a particular hurdle for small business owners. Make sure you are getting the right accounting advice so that you stay on top of all of your small business tax obligations.