Avoid These 10 Common Bookkeeping Mistakes

As humans, we are all prone to making mistakes. But when it comes to handling finances for a business, there is no room for error. A small mistake, if not checked and corrected, can lead to wrong projections that will affect your business decisions. Using an automated software that helps check your calculations and keep you updated with the latest guidelines is a huge bonus. QuickBooks, the accounting software by Intuit has proven itself to be the top choice of CPAs and professionals. Cloud Hosting for QuickBooks software is a service that provides ample amount of benefits at a comparatively lesser price.

Below is a list of common payroll and bookkeeping mistakes that small to medium-sized businesses tend to make.

1. Working alone

Small business owners try to handle everything themselves. There are many legalities and processes that you might not understand very well, and it is okay to ask for help rather than making a mistake on something as crucial as your accounts. Bookkeeping without proper knowledge can cause more stress and make costly errors.

2. Excluding Reimbursements

The exclusion of reimbursements wholly depends on the accountable plan where expenses will be refunded. This is only if a business connection is involved. All other reimbursements must be mentioned as they include taxable incomes.

3. Excluding Travel Expenses

Note that in most cases travel expenses are not counted as taxable income for an employee. There can be a few unique cases, like when assignments stretch for a longer duration, they can be subjected to income tax.  

4. Form 1099

It is important to keep in mind that Form 1099 should only be issued to independent contractors. It can also be issued for those vendors who supply more than $600 worth of services in your business. Failing to do so will result in penalties.

5. Classification Mistakes

If the finances in your business associate with only independent contractors and employees, it is crucial to choose the right classification. It involves different forms, 1099 and W-2, mixing them up can be a hassle. Some workers may even be held accountable for tax withholding.

6. Timely Deposits

If you fail to deposit the withheld taxes in a timely manner, it can lead to late fees and heavy penalties. These taxes must be deposited semi-weekly or monthly, with a required deposit on the next business day. Neglecting this can lead to more charges and 2 to 15 % interest on the amount.

7. Vendor Payments

Before making a payment to your vendor, make sure you have obtained Form W-9 requesting for the Identification Number and Certification of the taxpayer. If a payment is made before that, your business could be charged with 28 percent in payment for backup withholding.

8. Executive Income

Only certain oversights are eligible when it comes to executive income or compensation. It is not included in a non-qualified deferred compensation. It is a subject for an excise tax which should not be neglected.

9. Fringe Benefit Value

The list of taxable fringe benefits can include company cars, country club payments, traveling spouse, and also housing benefits. It can get tricky to calculate fringe benefit values, but they should be listed properly.

10. Not Including Employee Awards

If your employees are getting prizes as an award, those must be included in taxable fringe benefits. Gift cards are considered cash and should be listed under taxable wages.

Avoid unnecessary stress and penalties from the IRS. Keep in mind important points and stay wary of making mistakes that can cost. Use a reliable accounting software like QuickBooks to help maintain records and files.