4 Tax Mistakes Small Business Owners Can't Afford to Make

These will definitely up your risk of an audit.

Tax season is almost upon us, and it can be daunting for small business owners. This is especially true for those who have founded their businesses this year and have never had to file taxes for their companies before.

Your tax liability will depend in part on your business's income and which tax breaks you qualify for. But if you want to pay as little as possible, you definitely want to avoid the following four costly mistakes.

1. Mixing business and personal expenses

Mixing business and personal expenses can be a big red flag for the IRS. It might think you're trying to cheat the government by claiming business deductions for items you bought for personal use. Even if this isn't what you're doing, the IRS may have a hard time deciding which deductions are legitimate and which aren't when everything is coming out of the same account. And that could get you audited.

You want to keep your business finances separate from your personal finances as much as possible. This means separate savings and checking accounts and separate credit accounts.

Doing this can also minimize the effect your business finances have on your personal credit score. If your business makes a late credit card payment, for example, this won't hurt you personally as much as it would if you'd charged everything to your personal credit card. And keeping your business finances separate can also help protect your personal funds if you get sued.

2. Keeping poor records

You aren't required to submit receipts or other proof of your tax deductions with your tax return, but you are required to have documentation on hand. If the government audits you and you can't provide proof that your deductions were legitimate, the IRS will disallow them and your tax bill will rise significantly.

Get in the habit of keeping receipts and copies of your bank and credit card statements. Try to keep them accessible and organized, even if that just means putting them in a folder where you can return to them at tax time.

3. Filing the wrong tax forms

Different types of businesses need to file different types of tax forms to keep the government happy. A C corporation, for example, needs a different form than an S corporation. And if you have employees, you'll have to fill out additional forms documenting what you've paid them throughout the year. It's important to make sure you know exactly what forms you need to fill out before you file.

A tax advisor can help you sort this out, but many tax prep software also offer small business versions that can help you identify what forms you must fill out with a few simple questions. Keep in mind, these software packages are usually more expensive than packages for individuals filing their personal taxes.

4. Skipping or underestimating your estimated tax payments

Traditional employees have some taxes withheld from each paycheck, but that's not the case for business owners. That's why the government generally requires you to make quarterly estimated tax payments. How much you owe depends on your income.

You typically have to pay these on the 15th of April, June, September, and January of the following year. If any of these days fall on a weekend or holiday, the date moves to the next business day. You're free to make payments more frequently -- for example, monthly -- if you choose. The above deadlines just mark your last chance to make your estimated tax payment for that quarter.

You may not have to make estimated tax payments for this year if you were a U.S. citizen who had no tax liability last year. But for most business owners, it's best to set reminders for yourself so you don't forget to make your payments. If you fail to do so or your payments fall far short of your actual tax liability for the year, the government might charge you penalties which will increase your tax liability.

Filing personal taxes can be confusing enough and business taxes can be even more complex. But unless you want to spend even more time going through your returns with the help of an auditor, it's important to take the time to make sure you're filing them correctly. If you have any questions, don't guess. Reach out to a tax professional who can guide you in the right direction.