Failing to keep up-to-date financial records and not preparing a budget for the upcoming year rank as the top tax-related mistakes small-business owners make, according to a new survey of accountants from firm Xero. Accountants also say small-business owners often don't understand their tax obligations and too frequently either lose out on deductions or seek deductions incorrectly. Part of the confusion, data shows, stems from changes in tax laws, including those recently passed by Congress.
"Nearly one in four accountants say government regulations and tax policy had the biggest impact on small businesses this year, and more than one in ten attribute this to uncertainty surrounding the fiscal cliff," Xero said.
Since the start of 2013, small-business owners have been especially anxious about the cost of health insurance as well as tax increases that affect them and their employees. "People were talking about it after they felt it," said Xero adviser Jody Padar. "They've been asking us what they can do to better address all these changes."
More than 72% of respondents said they "could provide better advice if given a real-time view into their client's finances," and nearly one-third would be willing to offer discounted fees to sit down to a reconciled ledger. To offer a better customer experience, 43% of those surveyed said they're planning to offer cloud-based services to clients this year, an 11% rise compared to 2012.
Through the survey, accountants also listed the most common mistakes that could trigger an audit of a company. They are: excessive deductions to income (43% listed); misidentifying employees versus contract workers (27%); improper home office deductions (11%).