Running your own business is exciting — but when tax season rolls around, even the most passionate entrepreneur can find themselves overwhelmed. At Your Bookkeeper On Call, we’ve worked with hundreds of small businesses and self-starters, and we’ve seen it all — from missing deductions to misclassifying workers.
Here are some of the most common tax mistakes small businesses make — and how you can avoid them to stay compliant, stress-free, and financially healthy.
- Mixing Personal and Business Finances
This is one of the most frequent (and costly) tax mistakes. Many entrepreneurs use their personal credit cards or bank accounts for business expenses, which makes bookkeeping messy and creates red flags for auditors.
Tip: Open separate business banking and credit card accounts as early as possible. Not only does this simplify tax prep, but it also builds your business credit. - Failing to Track Expenses Properly
Too often, business owners wait until tax time to sort receipts or reconstruct records — and by then, it’s too late. Missed expenses mean missed deductions, which can increase your tax liability.
Tip: Use cloud-based bookkeeping software (or work with a professional bookkeeper like us) to record transactions throughout the year. Don’t rely on memory — good records = good deductions. - Misclassifying Employees and Contractors
Misclassifying workers is a major IRS red flag. If you treat a contractor like an employee (or vice versa), you could face back taxes, penalties, and legal trouble.
Tip: Review IRS guidelines on classification, or consult a bookkeeping and payroll expert. Remember: control over how, when, and where the work is done often determines the classification. - Missing Important Deadlines
Late filings can lead to penalties and interest charges. Entrepreneurs often juggle multiple responsibilities, and it’s easy to overlook key dates.
Tip: Mark your calendar with quarterly estimated tax deadlines, annual filing dates, and payroll reporting deadlines. Better yet, partner with a bookkeeper who keeps your calendar for you. - Overlooking Estimated Tax Payments
If you’re self-employed or run a profitable business, you may need to make quarterly estimated tax payments. Skipping these can lead to big surprises at year-end, plus penalties.
Tip: Estimate your income and set aside a portion (usually around 25-30%) each month for taxes. A bookkeeper can help calculate what you owe and when to pay. - Forgetting About Sales Tax Requirements
If you sell goods or certain services, you may be required to collect and remit sales tax — and those rules vary by state and locality.
Tip: Research your state’s requirements, and consider using a sales tax management tool. We help our clients stay compliant with state and local tax rules across the board. - Ignoring Deductible Business Expenses
Many small business owners don’t realize how many expenses are deductible — from home office use to business mileage, software subscriptions, marketing costs, and more.
Tip: Keep detailed records and consult a tax professional who can help you uncover every eligible deduction — without pushing into risky territory. - Going It Alone Without Professional Help
DIY taxes might save money upfront, but they often cost more in the long run. One wrong move can trigger audits, penalties, or missed savings.
Tip: Investing in a knowledgeable bookkeeper or tax professional pays off. We can help you avoid pitfalls, stay organized year-round, and file with confidence.
Need Help Getting It Right?
At Your Bookkeeper On Call, we specialize in supporting entrepreneurs and small businesses with personalized, year-round bookkeeping and tax prep services. Whether you’re just starting out or scaling fast, we’ll help you avoid these common mistakes — and set your business up for success.
📞 Contact us today to schedule your free consultation..
