5 Common Mistakes That Make Tax Season Stressful

As a busy entrepreneur, your days are filled with to-dos—so when tax season rolls around, it’s not always met with excitement! Having worked in finance for creative CEOs for many years now, I know a thing or two about business taxes for entrepreneurs. Today, I’m detailing five super common mistakes I see entrepreneurs make in preparation for tax season.

1 | They overlook tax breaks.

Let’s be honest—as an entrepreneur, every dollar matters, meaning taking advantage of every tax break is important! Many of the entrepreneurs I work with don’t know that they can write off MANY business expenses, such as laptops, internet service, office supplies, and even their phone bill (all contingent upon using each item for business purposes, of course.)

For support here, you can always reach out to your CPA for questions about what is or isn't deductible on your taxes. I also have a FREE Business Expenses & deductions guide for reference!

2 | They don’t keep track of their finances throughout the year.

Remember where you put that receipt from that lunch you bought at a work conference? Yeah, I didn’t think so. You can write things like this off when it comes tax time—but you need your receipts in order to do so. Keeping track of your finances diligently throughout the year is the best way to avoid panic-mode come tax time—and, psst—you don’t have to do it alone. Hiring a bookkeeper (like me!) is an excellent way to ensure all your ducks are in a row long before April.

If you're not ready to hire a bookkeeper, no problem. There are plenty of resources out there to help you keep track of your books. You can create or find a spreadsheet (I have one in our Marketplace) or use software like Xero or QuickBooks.

3 | They mix business and personal expenses.

That lunch you bought at your work conference? Yep, that can be tax deductible. But, the manicure you got while also on that trip? (Unfortunately,) it’s not. Many entrepreneurs fall into the trap of mixing up business and personal expenses throughout the year, meaning that, come tax time, they have to rifle through every expense to determine what is actually tax deductible. Remember that the things you use FOR your business operations (like a laptop or desk chair) or food/travel expenses from work events can be tax deductible, but other things you do in your free time (even while on a work trip) aren’t.

I really can't stress this enough, separating business and personal finances makes things so much simpler on your end to keep track of. That way come tax time, you're not questioning if a purchase was for business or personal. It's easier to have a clearer picture of your business finances. If you're not separating business and personal already, it's never too late to start.

4 | They underestimate the amount they spend on their business.

It’s EXPENSIVE to run a business—making it all the more important to correctly report your expenses for applicable tax breaks. If you sit down and do the math, you’d probably be surprised by how much you actually spend on your business every year. Even smaller expenses, like monthly website hosting costs, can add up—and be written off at tax time.

I always recommend to have weekly, monthly (whatever system works for you) money dates to look over your finances. Put it on your calendar. Take yourself out for coffee and check in on your finances. Subscriptions you're no longer using or need? How's your budget? Is there a particular offer doing really well you want to market more? 

5 | They don’t realize that they can write off not just business supplies, but services, too.

Did you hire an SEO specialist to audit your website? A photographer to take photos that align with your new branding? All of these things can be written off at tax time. And, yep—that means bookkeeping services like ours can be written off, too! (So seriously—if you’ve been looking for a sign to hire help getting your finances in line, this is it.) If you're ever unsure of what can be written off on your taxes, again check with your CPA or reference my free guide. You can always find me on Instagram too if you have any questions.

One quick note on services: depending on the type of service and how you pay, you may need to file a 1099. I go into depth on the topic in this blog post.

Thanks so much for reading! In order to learn more about us and how our team can help not just at tax time, but all year round, be sure to check out our services page here.