The 10 Most Common Tax Mistakes Business Owners Make (and How to Avoid Them)
With S corporation tax returns due March 15 and personal returns due April 15, this time of year can sneak up on even the most organized business owners. And while most of us aren’t trying to outsmart the IRS, you’d be surprised how many smart people make the same avoidable mistakes year after year.
Here are 10 of the most common tax mistakes I’ve seen—and how to steer clear of them.
1. Mixing personal and business expenses
The mistake: Charging personal expenses to a business card or vice versa.
The fix: Keep clean books and use separate accounts. It’s a red flag for auditors and a mess for your CPA.
2. Missing S-corp deadlines
The mistake: Forgetting the March 15 S-corp filing date and assuming it’s the same as the personal return deadline.
The fix: Set calendar reminders in January and work with your accountant to prep early. If needed, file an extension—but don’t wait until the last minute.
3. Not paying yourself a “reasonable salary” as an S-corp owner
The mistake: Taking distributions only, without running payroll.
The fix: The IRS expects S-corp owners to pay themselves a fair wage before taking profits. It reduces your audit risk and keeps things compliant.
4. Overlooking estimated tax payments
The mistake: Failing to make quarterly payments—especially common for new business owners.
The fix: Ask your accountant to calculate your estimated payments and automate them if possible. The penalties for underpayment are annoying and avoidable.
5. Missing deductions
The mistake: Forgetting to deduct things like home office space, mileage, or business travel.
The fix: Track expenses all year (apps help), and ask your CPA what’s commonly missed. Don’t leave money on the table.
6. Taking too many deductions
The mistake: Getting overly aggressive—writing off your dog as a “security system” or claiming 100% of your vehicle use as business.
The fix: Be reasonable. If it feels like a stretch, it probably is. The IRS has a good nose for this.
7. Failing to issue 1099s
The mistake: Not sending 1099s to contractors by the January 31 deadline.
The fix: Keep track of vendors throughout the year. If you pay someone $600+ who’s not on payroll, chances are you owe them a 1099.
8. Not saving for the tax bill
The mistake: Spending everything you earn and then panicking in April.
The fix: Treat taxes like a recurring bill. Set aside a percentage of income each month so you’re not scrambling when the IRS knocks.
9. Relying on software instead of strategy
The mistake: Letting TurboTax do your thinking.
The fix: Tax software is great for simple returns. But as a business owner, strategy matters more. A good CPA pays for themselves by helping you plan—not just file.
10. Not asking questions
The mistake: Assuming your accountant has it all covered without any dialogue.
The fix: Don’t be afraid to ask. A 10-minute conversation can prevent a costly mistake. It’s your money—and your responsibility.
Final thought:
Most tax mistakes come down to one thing: waiting too long to think about taxes. A little planning and communication—now, not next month—can save you stress, penalties, and money.