Top Mistakes New Business Owners Make With Taxes (and How to Avoid Them)
Starting a business is exciting, but taxes can quickly turn into a source of confusion (and surprise bills). Here are the top mistakes new business owners make with taxes, and how you can avoid them.
Mistake #1: Mixing Business and Personal Finances
Combining funds is a bookkeeping nightmare and a red flag in an audit. It also makes it hard to track what your business is actually earning.
Avoid it by:
Opening a business checking account
Using a business debit or credit card
Keeping personal purchases out of your business books
Mistake #2: Not Saving for Taxes
If you don’t set aside money for taxes, it’s easy to spend what isn’t truly yours. Then tax season hits—and you’re scrambling.
Avoid it by:
Saving 25–30% of your profit in a tax savings account
Treating tax savings like a fixed expense
Using tools like QuickBooks or a spreadsheet to track profits
Mistake #3: Missing Quarterly Tax Payments
If you’re self-employed and expect to owe $1,000+ in taxes, the IRS wants you to pay quarterly. Missing payments = penalties.
Avoid it by:
Marking payment deadlines: April 15, June 17, Sept 16, Jan 15
Using IRS Direct Pay: https://www.irs.gov/payments
Working with a tax pro to calculate how much to pay each quarter
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Mistake #4: Misunderstanding What’s Deductible
Many new business owners miss out on valuable deductions—or claim ones they shouldn’t.
Avoid it by:
Keeping all receipts
Using tax categories or tags for expenses
Working with a pro who understands your industry
Mistake #5: Filing Late (or Not at All)
Missing your tax filing deadline can lead to interest, penalties, and letters from the IRS.
Avoid it by:
Filing by April 15 (or requesting an extension on time)
Staying organized year-round
Hiring help if you're overwhelmed
Bonus: Doing It All Alone
Trying to DIY your taxes can work, for a while. But as your business grows, the tax rules get more complex.
Avoid it by:
Consulting a tax preparer or accountant early
Asking questions when you’re unsure
Investing in expert help before problems arise
Mistakes are part of the learning curve, but they don’t have to be expensive. Knowing what to avoid helps you stay confident, prepared, and profitable.
