Financial Mistakes New Business Owners Make During Tax Season

Don’t want to leave money on the table or get hit with unexpected penalties?

Every tax season, new business owners miss deadlines, miscalculate returns and fall victim to confusing rules. The scariest part? Most mistakes are completely avoidable.

Here’s the issue…

Tax season is hectic for everyone. But for new business owners, it’s a nightmare. With tax forms that make little sense and deadlines you can’t miss… It’s easy to fall into costly traps.

Fortunately, by knowing what to look out for you can save yourself a ton of stress, time and money.

Let’s dig in…

By the end of this guide, you’ll learn:

Common Money Mistakes That Hurt New Businesses
Why Electronic Filing Is Best for Every Business
Simple Solutions To Avoid Penalties & Save
Easy Fixes To Protect Your Business

Common Money Mistakes That Hurt New Businesses

New business owners make several mistakes year after year. And although they vary, most of them stem from one thing: not being prepared. According to the NSBA’s latest survey on small business taxation, 90% of small business owners say federal taxes impact their day-to-day business.

So if tax requirements are weighing on owners that heavily, it’s no surprise they end up making mistakes.

Here are the most costly ones…

Forgetting About Estimated Taxes

If you’ve made this mistake before, consider yourself lucky it only happened once.

Estimated taxes are a unique requirement of business owners who don’t have taxes withheld from their paycheck. Since no one is taking taxes out for you… It’s your responsibility to make quarterly payments and guess right.

Miss a payment and you’ll be charged a penalty on top of what you owe.

Here’s how to fix it: Mark estimated tax deadlines on your calendar. Set up auto reminders a few days before. And set aside 25-30% of revenue in a dedicated tax account.

Mixing Business with Personal Finances

Ah yes, the age-old problem of failing to establish boundaries.

When you’re a new business owner, it’s tempting to use “one account” to keep track of money. But when that account holds both personal and business expenses, tax season becomes a nightmare.

Why?

Because you’ll have no idea where your deductions are. Plus, it looks suspicious to the IRS.

Here’s what every new business owner should do:

Open a business checking account
Get a business credit card
Set up a simple bookkeeping system

If you do those 3 things, you’ll avoid countless headaches when tax season arrives.

Not Filing Taxes Electronically

Here’s a sneaky mistake that flies under the radar every tax season.

Most small businesses overlook the electronic tax filing benefits that could save them time and money. For those looking to streamline the process, low cost tax filing software can deliver accurate results without breaking the bank.

But why does e-filing help? For starters, it’s much less likely to contain mistakes. Forms are filled out for you and calculations are done automatically. Which means your chances of getting audited or penalized go way down.

Then there’s the speed. Electronic filings are returned much faster than paper returns. So if you’re owed a refund, you’ll get it quicker.

According to the GAO, 97% of individual taxpayers used e-file in 2024. Business taxpayers? Only 81% filed their returns electronically.

Business owners are missing out on the benefits of electronic tax filing. And chances are, they’re doing themselves more harm than good.

Think about it:

Filing taxes electronically allows for quicker confirmation that your return was received. E-filing comes with error checks. And if you’re owed a refund, you’ll see it faster.

There’s really no good reason anyone should file taxes without e-file.

Forgetting To Claim Deductions

It’s natural for new business owners to feel overwhelmed with tax requirements. But failing to claim deductions you know you deserve isn’t the answer.

By playing it too safe, owners end up overpaying their taxes. Which could cost them hundreds, if not thousands of dollars.

Tax deductions often missed by new businesses include:

Home office expenses
Business mileage
Software subscriptions
Training and courses
Equipment
Insurance premiums

Granted, you don’t want to risk claiming fake deductions. But if you’ve kept good records all year, there’s no reason you shouldn’t claim what you deserve.

Going At It Alone

If you’ve made it this far thinking, “I got this,” here’s a reality check.

No one should walk into tax season alone. Tax codes constantly change, and there are always new rules to follow.

Tax professionals can:

Ensure you’re not overpaying on taxes
Identify every deduction you’re entitled to
Catch mistakes before they cost you money

Yes, tax advisors can cost a few hundred dollars. But most provide valuable services that save you more than you pay. Protect yourself by enlisting the help of a seasoned tax professional.

Why Electronic Tax Filing Benefits Every Business

Yes, electronic filing can prevent painful mistakes. But did you know there’s a bunch of other benefits too?

Benefits of electronic filing include:

Error Checks: E-filing software detects common mistakes. Whether it’s math errors or incomplete sections. By catching mistakes upfront, penalties are avoided.
Easy Digital Storage: Everything is stored digitally when you e-file. So you’ll never have to worry about paperwork or lost documents.
Quick Turnaround: Paper returns take weeks to process. Electronic filings? Usually a couple of days.

When you add in the mistake-preventing benefits of electronic filing… It’s almost a no-brainer.

How To Save Money and Avoid Penalties

None of the advice here requires a business degree. You just have to be prepared.

Take these steps to protect yourself:

Track expenses year-round. Use an accountant app or create a spreadsheet. Tracking your expenses ahead of tax season will save you in the long run.

Stay on top of estimated taxes. Remember how estimated taxes are due quarterly? Stay on top of them. Set calendar reminders and automate transfers when possible.

Take advantage of electronic tax filing. Don’t make the mistake of filing taxes on paper. Not only will it take much longer… but you’ll risk hitting a costly mistake.

Hire a professional before problems occur. Don’t wait until there’s an issue to hire someone. Recruit a pro today to learn what you could be doing wrong.

They all seem pretty simple when listed out. But they make all the difference for new businesses every tax season.

Wrapping Things Up

Tax season is rough, but it doesn’t have to be that bad.

The issues above are some of the most commonly reported by new businesses. But they’re also easy to prevent.

Taking advantage of electronic tax filing benefits can save you time and reduce errors. Keep good records and hire a professional to double check your work.

Once again, here are the takeaways:

Separate personal and business finances
Make estimated tax payments quarterly
Take advantage of electronic tax filing benefits
Keep track of deductions all year
Consult with a professional

Tax season is stressful enough as it is. Don’t pour gasoline on the fire by making the same mistakes every year. Start with the fundamentals, stay organized, and use tools like electronic tax filing to your advantage.