There is not a company anywhere that wants to pay more tax than they legally have to. That is why it is so important to make sure that bookkeeping mistakes are not resulting in overpaid taxes.
Income taxes, sales taxes, payroll taxes and any other state or local tax that relies on your financial information can be overpaid if the data is not correct. This can total up to a great deal of money.
The one deterrent to overpaid taxes is to have a highly trained bookkeeper.
The 3 Most Common End of Year Tax Mistakes for Businesses
#1 Mistakes in Payroll Reporting
Payroll reporting can be a problem if the bookkeeper does not understand how to enter the data correctly. The gross wages need to be on the income statement not the net paid out.
Often this is missed when a non-trained person handles the books.
Fixed assets need to be properly recorded. Depreciation is only correct if the asset has not been expensed in error.
#2 Improper Reconciliation
Balance sheet accounts need to be reconciled monthly. By year end it takes a lot of work to go back through twelve months to find out a double posting was made or that the cash account has not been reconciled. Duplicate entries will throw tax calculations off.
#3 Hiring Untrained Bookkeepers
Untrained bookkeepers often do not understand how an entry can cause so much time and trouble.
Trained bookkeepers know that a prior year adjustment is not something to consider lightly. These kinds of changes can cause major tax problems and are not easy to find and fix.
Small business can sometimes have a bookkeeper that is not fully trained. There are a number of reasons this happens.
When small businesses first get started they may not think they need bookkeeping help.
This means that the owner or the office manager may well be doing the accounting along with their other jobs. This puts additional work on someone who already has a full time job.
Bookkeeping mistakes can really bring on the penalties and interest when dealing with sales tax.
Knowing who to collect sales tax from and who to pay it to is what a trained bookkeeper can do without generating fines and interest.
One of the best things a business can do to keep their taxes correct is to have a trained bookkeeper or a bookkeeping service.