As a bookkeeper, I work with a lot of service providers, freelancers, self-employed individuals, and side hustlers—people who juggle W-2 jobs and their own businesses. Whether you’re running a full-time business or a side gig, I’ve seen certain tax season mistakes trip up business owners year after year. Here are the top five mistakes I see—and how you can avoid them.
1. Mixing Personal and Business Finances
One of the biggest mistakes is blending personal and business expenses. When you don’t keep things separate, it becomes a nightmare to sort out what’s deductible for your business come tax time. The solution is simple: open a separate bank account for your business. This small step will save you from unnecessary headaches and make tax preparation so much easier.
2. Missing Out on Valuable Tax Deductions
Many self-employed individuals and side hustlers miss out on deductions they qualify for, like home office expenses, mileage for business use, and even certain travel costs. I’ve seen clients pay more taxes than necessary just because they weren’t aware of these deductions. The key is understanding what you can claim or working with a professional to make sure you don’t leave money on the table.
3. Disorganized Financial Records
One of the biggest stressors I see during tax season is disorganized books. Whether you’re running a side gig or a full-time business, rushing to gather all your financial records at the last minute almost guarantees missed deductions and mistakes. Keep your books updated throughout the year, and tax time will feel much less overwhelming. It also ensures you’ll get all the deductions you’re entitled to.
4. Forgetting About Quarterly Estimated Taxes
This is a huge one for self-employed business owners and side hustlers alike. Since you don’t have taxes automatically withheld like W-2 employees, you’re responsible for paying estimated taxes quarterly. Some businesses get hit with large tax bills and penalties because they didn’t realize they needed to make these payments. Stay on top of your quarterly payments by setting up reminders or working with a bookkeeper to avoid surprises.
5. Procrastinating on Tax Prep
I get it—taxes aren’t fun, but waiting until the last minute to get your records together is a recipe for stress. And here’s something a lot of people don’t realize: accountants are in high demand – short supply, especially during tax season. The profession is shrinking, and finding help when you need it is getting harder each year, especially when you’re in a pinch. Getting a head start means you’ll have a better chance of finding the right pro to help you file on time and correctly.
Whether you’re running a business full-time or juggling a side hustle, staying organized and planning ahead will make tax season much smoother. Avoid these common mistakes, and you’ll save yourself time, money, and a lot of unnecessary stress.
