Filing your taxes is not exactly an enjoyable task. And if you are running a small business in the e-commerce industry, you’re already slammed with significant work. You need to focus on succeeding in the highly competitive domain.
However, bookkeeping for e-commerce and filing taxes are important and unavoidable. Any mistakes down the line can have a significant impact on your business.
Here’s a sneak peek at the grave consequences of tax errors: $7 billion in fines! That’s how much U.S. companies have coughed up in penalties to the IRS because of taxation errors.
You definitely don’t want your business to join the list! So, to makes things easier, we’ve enlisted five major mistakes you should avoid this tax season.
1. Doing Manual Accounting and Bookkeeping For E-commerce
In 2024, you need to let go of your manual practices for accounting and bookkeeping for e-commerce.
Manual accounting can complicate everything, and it’s time-consuming as well. There are high chances of humour errors. Consequently, you can’t trust the accuracy of financial reports.
Guess what Bloomberg found in their recent survey?
- Many times business owners and employees save important tags files on their personal devices.and when it gets corrupted all the data is lost. This single problem accounts for 18% of tax data errors.
- Another 13% tax occurs when data is wrongly copy pasted manually from one location to another.
You can avoid all these mistakes and introduce automation by implementing cloud-based accounting software. An accounting services provider can help you figure out the best software for your business.
2. Ignoring the importance of bookkeeping for e-commerce
As a small business owner sometimes you might feel you don’t need to register a small expense. That’s the second biggest mistake you are making. You always need to keep accurate and complete records.
Without proper Bookkeeping for E-commerce you won’t be able to prepare your taxes correctly. You might even loose out on some big opportunities for tags reduction.
So, what best practices should you follow?
- Save all the receipts. This can be purchase orders, sales invoices or expense records.
- Segment and organize them properly. This will help you avoid confusion during tax calculation.
- Consider a cloud-based storage to make sure everything is securely backed up.
Apart from these, professional accounting services for small business also recommend separating your personal and business finances. This practice makes financial record keeping much simpler and leaves less room for mistakes.
3. Remaining unaware of your tax obligations as a small business owner
As an E-Commerce business owner, you must know and acknowledge your tax obligations.
A lack of understanding in this domain can be extremely risky. You want to just lose out on tax savings. But you might even become a victim of tax fraud.
And that’s a serious problem for your business. Bookkeeping for e-commerce can be handled by professionals. But that doesn’t mean you can completely go blind with financial management and taxation.
As a business owner it’s good to outsource administrative and repeatitive tasks. But you need to have control on important business matters like final decision on tax deductions.
Here’s how you can do that:
- Invest some time in taking a crash course on e-commerce taxation.
- Read online materials or guidebooks on the subject.
This will help you gain a fundamental understanding of your tax obligation as a business owner.
Additionally, you can meet with your accounting services provider quarterly, half-yearly or annually to stay up to date on the latest laws. This will empower you to gauge any future tax obligations.
4. Not outsourcing your tax and accounting tasks to a professional
Always remember that you are a small business owner. And you should be focusing on core business competencies. Even you are well educated in business finance you can’t burden yourself with tax calculation, e-commerce bookkeeping or creating balance sheets.
You can hire and outsource these task to reputed Accounting Services for Small Business. They don’y just manage your book but also offer tax consultations.
Here are a few things to consider when hiring a tax and accounting professional:
- Avoid hiring a tax professional who gives illegal or misleading tax advice. These may include hiding your actual income or climbing tax reductions that your business doesn’t qualify for. Such shady practices can land you in trouble.
- Prepare a few interview questions to understand the expertise of the tax professional. Having an understanding of bookkeeping for eCommerce is just basic. They should know about current and upcoming tax laws, accounting regulations, strategic business finance and more.
- Don’t just settle after talking to one accounting professional. Take quotes from a few of them to ensure you hire the correct taxation partner for your business.
5. Filing employee incomes incorrectly
When you are small business close to eventually need to higher employees to manage it properly. Then, you also have to follow a new set of tax rules.
Your Professional Bookkeeping Service provider should start tracking the salaries you pay to your employees. Additionally, if you are paying any incentive, record it as well. You can’t afford to miss out on any numbers when it comes to reporting your employee salaries and benefits.
This is because you get tax returns on them.
Depending on your requirement the employment type can vary. You might hire freelancers, outsource your tasks to professionals, onboard in-house employees or employ independent contractors.
So, during tax filing, it’s essential that you disclose your type of employment. Accounting services for small business can help you understand what forms you have on file for each type of employment.
Professional Bookkeeping Services Can Save you from Taxation Mistakes
Bookkeeping is the backbone for filing accurate taxes. Without proper records and numbers, it is impossible for any business owner to file their taxes or claim any deductions. Incorrect tax filing doesn’t just lead to financial losses. It can also sabotage your reputation in the market. So hire a bookkeeping and taxation expert today to enjoy a worry-free tax season. Focus on what’s important-growing your online business.
