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Tax season stressing you out? Here's what to do about it.

Tax season is never fun — but more so if you’re a small business owner. The deadline isn’t going away anytime soon, and between preparing taxes, making sure your reports are up-to-date and running the day-to-day business operations, filing taxes can be a real headache. What’s more, that problem has turned into an absolute nightmare with the COVID-19 pandemic.

Common Tax Problems for Small Businesses

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The COVID-19 pandemic has affected small businesses the most. According to a JPMorgan & Chase report, revenues for small businesses in 2020 remained lower, even with cash balances rebounding due to pandemic-related relief-programs. And while tax deferrals have helped ease the liquidity constraints that small businesses face, the burden of settling their tax obligations is carried over to 2021.

Businesses also had to restructure their physical stores to be COVID-19-compliant, all while having fewer customers and significantly lower revenue. Thankfully, it looks like things will be slightly better this year.

If you’re a small business owner, you are likely one of many who gather information and calculate just how much tax you will be filing before April 2021. To make it easier for you, here are some possible problems you’ll need to avoid when filing your taxes:

  1. Failing to keep good records - If you run a small business, it can be tough to record every bill, paycheck or receipt that comes your way, especially if customers are waiting. But failure to do so can lead to discrepancies, as you wouldn’t have proof of the deductions that you deserve.
  2. Underestimating and underreporting - If you’re filing as a sole proprietor, you’re most likely required to make quarterly tax payments. And while the government knows that you probably can’t guess the exact amount, you are still supposed to get close — and not doing so can lead to a penalty.
  3. Mixing business and personal expenses - It’s easy to mix things up, especially if you’ve just started a new company. However, it’s essential to know that the IRS has stringent rules against fund co-mingling.
  4. Failing to send the proper forms - Depending on the type of business you are in, you’re required to file different forms to the IRS. Some have to be filed quarterly, while some are completed annually. Either way, failing to do so can lead to severe penalties and problems down the line.
  5. Thinking that tax avoidance and tax evasion are the same - While these two seem similar, they are very different. Tax avoidance is merely finding deductions you are not entitled to, leading to paying less tax. Whereas tax evasion, on the other hand, is straight-up avoiding paying taxes, which is a crime. Other mistakes like underreporting/overreporting of income, not having a mileage record, not utilizing retirement plans, fudging worker classification, not claiming the qualified business income deduction and lifestyle creeping are also common tax problems.

Thankfully, avoiding all of these problems is much easier by using tax services — the best of which is Block Advisors, H&R Block ’s small business service.

Block Advisors: Making Taxes Easy

If you're a small business owner, Block Advisors will provide you with a team of advisors that will help you prepare a tax plan while also assisting in maximizing profits and suggesting additional cashflows.

After helping small businesses with taxes for over 50 years, H&R Block saw the need to give advanced support to small business owners. Block Advisors is H&R Block’s team of experienced bookkeeping, payroll, and tax professionals dedicated to helping your small business thrive and empowering entrepreneurs to better manage the financial aspects of their businesses.

Block Advisors is making small business tax preparation easier, so you can save time and spend your energy on the parts of your business you love. Block Advisors’ small business certified tax pros do all the work for you. Plus, they’re available all year round. Some of Block Advisors’ standout features include:

  • Small business expertise - Every Block Advisors tax pro is small business certified and has 12 years of experience, on average. They have the expertise to handle the most complicated taxes.
  • Year-round support - Block Advisors’ tax pros are available to offer advice and keep you and your business on track all year round.
  • Personalized tax help - Block Advisors will connect you with a local small business tax pro who knows your situation.
  • Virtual options - Don’t have time to make it into an office? Block Advisors allows you to work with a tax pro fully virtually. You can connect via phone, video, or online chat.
  • Profit & loss statement creation - Get an accurate view of your business performance and financial standing through professional income statements.
  • Business entity structure analysis - See how your business might become more tax-efficient by analyzing possible changes to your entity structure.
  • Tax return storage - It provides you with an account with MyBlock, where you can securely store finished tax returns for up to six years.
  • 100% accuracy guarantee - In the case of an error, the company guarantees that it will reimburse you for penalties and add interest.

Small business owners have been hit especially hard during the pandemic. You can trust Block Advisors’ tax pros to handle your taxes and help make sense of the relief programs, ensuring you get every credit and deduction you deserve. As we all adapt to the pandemic, you will still need to manage your business and find new ways to grow. Block Advisors can help you understand the Economic Injury Disaster (EIDL) program, the Paycheck Protection Program (PPP) and other aid options. Block Advisors also uses data encryption to keep all of your information secure and requires multi-factor authentication every time you log in to help verify your identity. It also provides a flexible pricing structure that makes it a highly accessible platform for business owners.

Make an appointment with a local tax pro today.