Tax season is full of overwhelm, and especially so for entrepreneurs. There are so many piles of paperwork, receipts, and tax write-offs to review. It’s a lot for one person. So, if you’re filing taxes on your own, be aware of these three common tax filing mistakes so you can do your best to avoid an IRS audit.
Note: I am not a tax professional by any means. I’m a copywriter and words (not numbers) are my strong point. This list is not meant to be a be-all piece of tax advice. Instead, it’s just a quick rundown of common mistakes I’ve seen entrepreneurs make out there on their own.
If you are looking for some serious tax advice, I would suggest you download Quickbooks or Freshbooks or work alongside a tax professional with hours and hours of training who can give you personalized advice for your situation.
You’d be surprised by how many deductions you can write off. Common write-offs include advertising expenses, business insurance, client gifts up to $20, and contract labor like hiring business coaches or copywriters. But, did you know there are tons of overlooked deductions out there like health insurance premiums, Roth IRA contributions, and office and home deductions (including maid services and home repair)?
Curious to learn more about all the deductions you can file for while self-employed? Find a full list of deductions here.
For as many available deductions there are, people still get creative and add their own deductions regardless of what the IRS says. Let’s take food for example. If you have lunch with a client, you can write the meal off if you save the receipt and talk about business. However, you can’t deduct every piece of avocado toast you have while working alone in a coffee shop or your all organic grocery bill if you work from home.
Did you know you can write off up to $500 in non-cash charitable contributions without an explanation? It’s true, and it’s a great idea! However, if you receive a blank donation slip from Goodwill, don’t automatically fill in $500 if you know for a fact you didn’t donate that amount. Anything above $500 will require proper receipts and documentation and above $5000 you need a professional appraisal.
Hopefully, this list helps you avoid some of these common tax filing mistakes this season. Don’t be afraid to ask for help from a tax professional or tax app like Quickbooks to streamline the entire process.
Have any entrepreneurial tax filing mistakes of your own or heard any tax filing horror stories? Share them in the comments below.