(301) 609-7515
Washington, D.C. is the heartbeat of the nation's capital. As such, it's also a thriving hub for small businesses. While being an entrepreneur and running your own business is exciting, it also comes with serious tax obligations to be aware of. It's easy to fall into pitfalls that could impact your bottom line and your company as a whole.
That's why we're here to shed light on five common tax mistakes made by small businesses in Washington, D.C., and offer tips on how to avoid them!
Mistake #1: Misclassifying Workers
Employees? Independent contractors? Full-time? Part-time? With so much happening in your day-to-day operations and potentially multiple people to manage, misclassifying workers can be easy. However, doing so can result in:
- Legal complications
- Penalties
- Tax liabilities
Well before your small business taxes are due, familiarize yourself with the IRS' guidelines for determining worker classifications. Accurately identifying your workforce will save you stress down the road.
Mistake #2: Not Paying Estimated Taxes
Are you operating as a:
- Sole proprietor?
- S corporation shareholder?
- Business partner?
Then you may be required to pay estimated quarterly tax payments to help cover your income tax liabilities. Neglecting to make these payments can not only lead to underpayment penalties but also interest charges. That can quickly add up, so mark your calendars with estimated tax due dates and send your payments on time!
Mistake #3: Incomplete or Lost Records
If maintaining meticulous records takes a backseat for you because you're busy with daily operations, you're not alone. This is a common issue that arises time and again. Unfortunately, incomplete or misplaced records can be detrimental, as they could lead to inaccurate financial reporting and even an IRS audit.
You can avoid this stress altogether by taking the time to implement a robust record-keeping system or consider outsourcing your accounting and bookkeeping needs.
Mistake #4: Missing Out on Deductions & Credits
Washington, D.C. is a small business paradise thanks to all the available tax deductions and credits. These incentives not only help support small businesses but work to stimulate economic growth. Unfortunately, many business owners aren't even aware of all the deductions and credits they qualify for!
If researching the incentives in your area and for your particular industry sounds daunting, but you'd still like to reduce your tax burden, team up with a CPA firm like DeBlanc, Murphy & Murphy. We're well-versed in the entire D.C. metro area and offer business tax preparation services that help you take advantage of all available deductions and credits.
Mistake #5: Incomplete Filings
Once you see the light at the end of the filing funnel, it's tempting to rush through the paperwork and submit it as quickly as possible. While we love tax filing, we understand that not everyone else does. That desire to file and move on can lead to incomplete or inaccurate information.
Avoid this pitfall by working through paperwork methodically, noting areas you need to circle back to so you don't forget. Finally, take the time to double-check everything. Doing so can save you an enormous amount of time and hassle down the road.
Avoid These Mistakes By Working With DeBlanc, Murphy & Murphy
With help from our accountants and advisors, you can successfully navigate Washington, D.C.'s tax maze and work toward lowering your tax liability. Talk to a DeBlanc, Murphy & Murphy advisor today!
