Mixing personal and business expenses is probably the most common mistake. When you run personal purchases through your business account or business purchases through your personal card, you create a mess that’s hard to sort out later. Your bookkeeper has to guess what’s deductible. Your tax preparer has to make assumptions. And if the IRS audits you, you’ll have trouble proving which expenses were legitimate business costs.

Missing quarterly estimated tax payments catches a lot of business owners off guard. Unlike W-2 employees who have taxes withheld from every paycheck, business owners are responsible for paying their own taxes throughout the year. If you wait until April to pay everything you owe, you’ll face penalties and interest even if you file on time. The safe harbor rules exist, but you have to actually make the payments.

Misclassifying workers as independent contractors when they should be employees is expensive when it catches up to you. The IRS looks at control, financial arrangement, and relationship type. Get it wrong and you owe back payroll taxes, penalties, and interest. This is especially common in industries like construction and home services where subcontractors are normal but the line between contractor and employee gets blurry.

Not tracking deductible expenses properly means you either miss deductions or can’t prove them if asked. Bank statements aren’t enough for expenses over $75. Mileage logs need to be contemporaneous. The IRS expects documentation, and “I know I spent it” isn’t documentation.

Waiting until tax season to organize your books leads to rushed work and missed opportunities. Tax planning happens throughout the year. A Queen Creek area bookkeeper who sees your books in March for the first time can’t recommend strategies that needed to happen months ago. Year-round attention to your numbers is how you find opportunities before they expire.

Underestimating what you’ll owe catches new business owners especially hard. That first profitable year can result in a tax bill you weren’t expecting. Set aside 25-30% of profit for taxes as you go so there’s no surprise in April.

Ignoring IRS notices doesn’t make them go away. The penalties and interest keep adding up while you avoid opening the envelope. Most notices are fixable if you respond quickly. Wait too long and your options narrow significantly.

The common thread in most of these mistakes is not having someone watching the numbers throughout the year. Businesses that invest in tax preparation and regular bookkeeping tend to avoid these problems because someone catches issues before they become expensive. Fixing a mistake in March costs a lot more than preventing it in October.