Small Errors That Can Create a Bigger Tax Bill

When you own a small business, it’s easy to tell yourself, “I’ll clean that up later.” A missing receipt here, an uncategorized transaction there…it doesn’t seem like a big deal at the time.

But those little bookkeeping and tax mistakes can add up—and sometimes lead to a bigger tax bill than you expected.

As we head into the final part of the year, here are a few things worth checking now.

1. Missing or unreported income

Income can come from several different places—cash, checks, credit cards, payment apps, online platforms and more.

Your records should clearly show where your business income came from. Leaving income off a tax return can result in additional tax, and certain underpayments may also be subject to penalties.

Tip: Compare your bookkeeping records to your bank accounts and payment processors throughout the year instead of waiting until tax season.

2. Missing legitimate business expenses

Good recordkeeping isn’t only about reporting income—it can also help make sure you’re keeping track of legitimate deductible business expenses.

If you’re waiting until tax season to remember everything you purchased months ago, it’s much easier for something to get missed.

Keep your receipts, invoices and other supporting documents organized as you go.

3. Claiming deductions you can’t support

Just because something was paid from your business account doesn’t automatically make it a deductible business expense.

The IRS requires businesses to maintain records that support the income and expenses reported on their tax returns.

Before claiming an expense, make sure you know what it was for and have the documentation to back it up.

4. Falling behind on taxes

For many business owners, taxes aren’t automatically withheld from the money coming into the business.

Waiting until you file your return to think about your tax liability can lead to an unpleasant surprise. Depending on your situation, estimated tax payments may be required during the year.

This is one reason keeping your books current is so important—you need accurate numbers to understand how your business is actually doing.

5. Waiting until tax season to fix your books

January is not the ideal time to discover that months of transactions haven’t been categorized, accounts haven’t been reconciled or important documents are missing.

Cleaning things up now gives you time to find errors, locate documentation and ask questions before you’re facing a filing deadline.

The takeaway

You don’t have to have perfect books every single day, but you do need accurate records.

A little time spent reviewing your bookkeeping throughout the year can make tax season much smoother—and help prevent small mistakes from becoming expensive ones.

Need help getting your books organized before year-end? BasicLee Bookkeeping can help you get things cleaned up and ready for tax season.