Don't Get Tricked by Popular Tax Myths

As the crisp autumn air brings trick-or-treaters to our doorsteps, it also serves as a reminder that another frightful season is looming on the horizon: tax season. For many business owners, the fear of receiving misleading tax advice can be equally daunting. It's all too easy to get "tricked" by tax myths that could lead you to financial pitfalls. But don’t worry—we’re here to help you navigate through the confusion!

Myth: I’m too small to get audited.

Reality: Despite the belief that only large businesses come under the IRS's microscope, any business can be audited. If your deductions seem unusually high or if there are inconsistent transactions, your audit risk increases. It's important to maintain accurate and complete records to show that your expenses are legitimate and well-documented.

Myth: Paying someone as an independent contractor means I don't have to worry about payroll taxes.

Reality: Be cautious here. Worker classification depends on the amount of control you have over the individual's work and the nature of your relationship. Misclassifying employees as independent contractors can result in hefty fines and back taxes. Make sure to understand the specifics before deciding how to classify your workers.

Myth: I can write off anything if I say it’s a business expense.

Reality: Not all expenses qualify just because you attach the word “business” to them. Deductible expenses must be ordinary and necessary for your business operations. Personal expenses, like vacation bills or a new suit, are generally not deductible. It's crucial to distinguish between the two to avoid issues with the IRS.

Myth: Bank statements are enough to prove business expenses.

Reality: While bank or credit card statements provide a high-level view of your spending, they don't show the specific items purchased or the business relevance. Detailed receipts are necessary to demonstrate the legitimacy of expenses, particularly for travel, meals, and items used for both business and personal purposes.

Myth: If I file an extension, I get more time to pay my taxes.

Reality: Filing an extension gives you extra time to file, not to pay. You're still expected to pay any taxes owed by the usual April 15 deadline. Missing this payment deadline triggers interest and penalties, so planning ahead is vital.

Untangling yourself from the web of tax myths is important for keeping your finances on firm ground. Make it a priority to question any tax advice that sounds too good to be true, and never hesitate to seek professional guidance if you're uncertain. If you want a quick tax check-in or have any burning questions, reach out to us. We're just a call away and ready to assist you in steering clear of costly mistakes. Remember, we're your trusted resource in helping you avoid getting “tricked” by tax myths.