Top Five Business Tax Mistakes Small Business Owners Make In New York

Discover the top business tax mistakes small business owners make in New York. Learn how to avoid penalties, reduce tax liability, and stay compliant with help from a qualified CPA.

Running a business in New York means managing one of the most complex tax environments in the country. Between federal requirements, New York State guidelines, and even New York City–specific rules, small mistakes can turn into expensive problems. Below are the five most common tax mistakes — and how to prevent them.

1. Mixing Personal and Business Finances

Many NY business owners use the same bank account for personal and business expenses. This leads to inaccurate bookkeeping and raises red flags during audits.

How to avoid it:

• Create separate business bank and credit card accounts

• Use bookkeeping software

• Log expenses immediately, not at year-end

2. Missing Out on Available Tax Deductions

Small New York businesses frequently miss deductions for:

• Advertising and marketing

• Equipment purchases

• Software

• Home office use

• Business insurance

• Professional services

• Travel and mileage

Missing deductions means paying more in taxes than necessary.

How to avoid it:

Track every expense throughout the year and categorize consistently.

3. Missing Quarterly Estimated Tax Payments

If you expect to owe $1,000 or more in taxes, the IRS and New York State require quarterly estimated payments.

Missing payments can lead to:

• Penalties

• Interest charges

• Cash-flow issues

4. Overlooking State and Local Filings

New York has multiple tax layers. Depending on your location and business type, you may owe:

• New York State Income Tax

• New York State Sales Tax

• Franchise Tax (for corporations)

• NYC Unincorporated Business Tax (UBT)

• Metropolitan Commuter Transportation Mobility Tax (MCTMT)

How to avoid it:

Know every file required of your entity. NYC-based businesses have additional rules.

5. Worker Misclassification

New York has strict worker classification rules. Mislabeling an employee as a contractor can result in severe penalties.

Avoid this by:

• Using proper contract agreements

• Reviewing NYS’s guidelines

• Seeking professional input when hiring

Taxes in New York can be overwhelming without guidance. A CPA can help you minimize your tax bill, avoid penalties, and stay compliant all year. If you’re unsure about deductions, quarterly payments, or worker classifications, now is the right time to consult a professional by reaching out to us here.