Being your own boss comes with incredible freedom—but also big financial responsibilities. Taxes are one area where many entrepreneurs unknowingly leave thousands of dollars on the table. Here are five of the most common tax mistakes entrepreneurs make—and, more importantly, how to fix them.
1. Mixing Personal and Business Finances
The Mistake: Using the same bank account or credit card for both personal and business expenses creates confusion, complicates bookkeeping, and raises red flags with the IRS.
The Fix: Open a dedicated business bank account and credit card. This keeps your records clean and makes it easier to identify tax-deductible expenses. Plus, it helps protect your legal liability if you’re operating an LLC or corporation.
2. Not Paying Estimated Taxes
The Mistake: Unlike employees who have taxes withheld from each paycheck, entrepreneurs are responsible for making estimated tax payments quarterly. Missing these can result in penalties and interest.
The Fix: Work with a CPA to project your annual income and break it into quarterly payments. Set calendar reminders to stay on top of due dates and consider using accounting software to track your obligations.
3. Overlooking Valuable Deductions
The Mistake: Many entrepreneurs miss out on deductions like home office expenses, startup costs, health insurance premiums, and vehicle use.
The Fix: Keep detailed records and consult a tax professional to identify all potential write-offs. Even seemingly small deductions can add up to big savings over time.
4. Misclassifying Workers
The Mistake: Classifying an employee as an independent contractor (or vice versa) can lead to major tax penalties and back taxes if the IRS reclassifies them.
The Fix: Understand the legal differences and criteria. If in doubt, consult with an employment attorney or CPA. Getting it right from the start avoids future headaches.
5. DIY Tax Filing Without Expertise
The Mistake: Using generic software or winging it solo can lead to missed credits, incorrect filings, or worse—an audit.
The Fix: Partner with a CPA who understands your industry and can offer proactive tax planning throughout the year. A good accountant doesn’t just file your taxes—they help you grow your business.
Final Thoughts
Taxes don’t have to be a source of stress—or a financial black hole. By avoiding these five common mistakes and working with a knowledgeable tax advisor, you can protect your business, save money, and focus on what you do best: building your dream.
At CR Tax Advisors, we help entrepreneurs like you take control of your taxes and unlock powerful savings. Book a free discovery call with us today!