Mixing personal and business finances creates problems that compound at tax time. When business expenses run through personal accounts and personal purchases show up on business cards, separating what’s deductible becomes guesswork. Your bookkeeper has to spend hours untangling transactions that should have been separate from the start. This extra work costs money and increases the chance something deductible gets missed entirely.

Not tracking expenses throughout the year is probably the most expensive mistake. Most business owners remember the big purchases but forget the small ones that add up. The $40 here, $75 there, mileage to client meetings, supplies from the hardware store. By December, you’ve lost track of thousands in legitimate deductions because you have no records. Setting up basic expense tracking early in the year costs almost nothing. Reconstructing a year of missing records costs real money and still misses things.

Misclassifying workers as independent contractors when they should be employees triggers penalties, back taxes, and interest. The distinction matters for how you withhold and report taxes. Getting it wrong means you owe the taxes you should have withheld plus penalties on top. If you’re not sure whether someone is an employee or contractor, get guidance before you issue that first check.

Missing estimated tax payments catches a lot of business owners off guard. If you owe more than $1,000 at tax time, the IRS expects you to pay quarterly estimates. Skip them and you’ll pay underpayment penalties on top of the tax you already owe. This is especially common the first year or two in business when income is unpredictable and nobody explained the requirement.

Not keeping documentation is an audit waiting to happen. Deductions without receipts or records don’t hold up under scrutiny. A bank statement showing you paid something isn’t proof of what it was for. Keep receipts, note the business purpose, and store them somewhere you can actually find them later.

Waiting until April to think about taxes means you’ve already missed opportunities. Tax planning happens during the year, not after it ends. Equipment purchases, retirement contributions, and timing of income all affect your tax bill. Once December 31 passes, most of those options close. Tax preparation that actually saves you money requires planning before year end, not scrambling after.

Working with someone who understands your industry matters more than most business owners realize. A generic tax preparer might know the rules but miss deductions specific to what you do. Contractors have different write-offs than retailers. Healthcare practices have different considerations than auto shops.

The pattern behind most of these mistakes is the same. Business owners get busy running operations and put off the financial side until it becomes urgent. By then, the damage is done. Small business bookkeeping services exist specifically to handle the tracking and organization throughout the year so you don’t end up in April with incomplete records and missed deductions.