Mistake 1: Mixing Personal and Business Money
If you've ever paid a business expense with your personal debit card, or pulled cash from the business account for something personal, you've commingled funds. It's one of the most common habits among new business owners, and it creates two problems at tax time.
First, it makes your books inaccurate. Every personal purchase that shows up in your business account has to be found, flagged, and pulled out before your numbers mean anything. Second, if you're an LLC or corporation, commingling weakens the legal separation between you and the business, which matters if you're ever audited or sued.
The fix is simple even if it takes discipline: one business bank account, one business card, and every business expense runs through it. If you already have a mess of mixed transactions, don't try to remember what was what from memory. Go through statements line by line, or have a bookkeeper do it, because guessing at tax time is how deductions get missed or overclaimed.
Mistake 2: Assuming the Old 1099 Rules Still Apply
For years, the rule was easy to remember: if you paid a contractor $600 or more in a year, you sent them a 1099-NEC. That's changing. Starting with tax year 2026, the reporting threshold for 1099-NEC and 1099-MISC jumps to $2,000, the first change to that number since 1954, under the One Big Beautiful Bill Act. Starting in 2027, it will adjust for inflation automatically.
There's a second piece that trips people up: 1099-K forms from payment platforms like PayPal, Venmo, or Stripe. That threshold was scheduled to phase down toward $600, but it has reverted back to $20,000 in payments and more than 200 transactions, applied retroactively to 2022.
Here's the mistake: business owners either keep issuing 1099s under the old $600 habit, creating paperwork they no longer need to send, or they assume they're off the hook for reporting income that didn't generate a 1099. Neither is right. All income is still taxable whether or not you receive a 1099 for it. Track contractor payments as they happen instead of trying to reconstruct them in January, and check the current threshold before assuming last year's rule still applies.
Mistake 3: Letting Transactions Pile Up Instead of Reconciling Monthly
Reconciling means checking that every transaction in your books matches what actually happened in your bank and credit card accounts. Do it monthly, and a duplicate charge, a missed deposit, or a bank fee gets caught within weeks. Save it for tax season, and you're untangling twelve months of transactions at once, usually while your CPA is waiting on numbers.
The cost here isn't just time. Errors that go unnoticed for months are more likely to end up baked into your tax return, which makes them harder and more expensive to fix later.
Mistake 4: No Backup for Your Deductions
The IRS doesn't just take your word for a deduction. If a meal, a mileage log, or an equipment purchase gets questioned, you need a record showing what it was, what it cost, and that it was for business. The IRS recommends keeping these records for at least three years from when you filed, longer in some situations, like underreported income or a bad debt deduction.
The mistake usually isn't forgetting to spend the money. It's not keeping proof afterward, whether that's a shoebox of faded receipts or a bank statement line that just shows a merchant name with no way to tell if it was business or personal. QuickBooks Online's receipt capture feature, which lets you photograph a receipt and attach it directly to the transaction, solves this in seconds if you use it consistently. The habit matters more than the tool.
Mistake 5: Misclassifying Expenses
Not every expense belongs in the same bucket, and where something lands affects both your tax return and how accurate your financial picture is day to day. A few examples that come up often:
- Vehicle expenses. If you use the standard mileage rate, it changes periodically. Effective July 1, 2026, it's 76 cents per mile. Using an outdated rate, or not keeping a mileage log at all, either shorts your deduction or leaves it unsupported if it's ever questioned.
- Loan payments booked as expenses. Only the interest portion of a loan payment is deductible. The principal is a balance sheet item, not an expense, and booking the whole payment as one overstates your costs and understates your profit.
- Cost of goods sold vs. operating expenses. If you sell a physical product, materials and direct labor belong in cost of goods sold, not general expenses. Mixing them up distorts your gross margin, which matters if you're pricing your work or if a lender is looking at your numbers.
None of these are complicated once you know the rule. They're just easy to get wrong without someone checking the categorization regularly.
The Real Fix Is Consistency, Not a Better January
Every mistake on this list gets worse the longer it sits, and easier to prevent with a monthly habit instead of a once-a-year scramble. That's the difference between bookkeeping done as you go and bookkeeping reconstructed under deadline pressure.
Kostic Bookkeeping LLC handles monthly bookkeeping in QuickBooks Online, including transaction categorization and reconciliation, invoicing and accounts receivable, and attaching receipts to transactions as they happen, so nothing is missing when tax season arrives. If your books need a second look before your next filing, schedule a free consultation to talk through where things stand.
IRS and other figures in this article are current as of September 17, 2026. Rates and thresholds change, so please confirm the current numbers before relying on them.