Running a small business means wearing a lot of hats. “Bookkeeper” is usually the one that fits the worst. As a result, you end up making expense mistakes that cost you money in missed deductions, audit risk, and hours of catch-up work.

Fortunately, most of them are easy to fix once you know what to look for. Here are the nine business expense mistakes we see most often.

1. Thinking Everything Is Deductible

According to IRS rules, a business expense must be both ordinary (common in your industry) and necessary (helpful and appropriate for your work) to qualify. That includes many common expenses, but not everything.

Here are some costs that business owners frequently try to write off, but can’t:

• Entertainment. Things like concert tickets, sporting events, and golf outings aren’t deductible.
• Meals. Business meals are only 50% deductible, and only with proper documentation (more on that below).
• Commuting costs. The drive from home to your regular place of business is a personal expense, not business miles.
• Fines and penalties. Traffic tickets, late fees to government agencies, and IRS penalties aren’t deductible.
• Political contributions and lobbying expenses. They’re not deductible whether you donate to a candidate, a party or a political action committee (PAC).
• Owner draws or distributions. When you pay yourself from your business, that’s generally not a deductible business expense. It reduces your owner equity balance.
• Gifts over $25 per recipient per year. You can deduct business gifts, but only up to $25 per person annually.

2. Tracking Expenses in a Spreadsheet (or Not at All)

Spreadsheets are very useful, but they’re no replacement for accounting software. If you’re manually entering expenses one by one, you may be working harder than you need to and increasing the chances of something slipping through the cracks.

Modern accounting software like QuickBooks, FreshBooks, Xero, or Wave connects directly to your accounts, imports transactions automatically, and lets you easily categorize expenses. Once you set it up, you can spend a few minutes a week reviewing transactions. Isn’t that better than spending days trying to reconstruct a year’s worth of transactions in March?

3. Skipping Receipts Because You Have a Bank Statement

Your bank or credit card statement shows that you spent $87 at Office Depot. It doesn’t show what you bought and whether it was a legitimate business expense or supplies for your kid’s science fair project.

If you ever get audited, a bank statement alone isn’t enough to substantiate a deduction. The IRS wants to know what you purchased and why it was a business expense. An itemized receipt or invoice provides that proof. A statement just shows the money left your account.

The easiest fix is to snap a photo of every receipt as soon as you get it. Most accounting apps have a built-in receipt scanner. Paper receipts end up at the bottom of your bag; the digital copy lives in the cloud forever.

4. Mixing Business and Personal Finances

Using your personal checking account for business transactions might feel fine in the moment, but it turns into a nightmare later. When everything runs through the same account, separating business expenses from personal ones is like trying to un-mix a smoothie.

Open a dedicated business checking account. Get a business credit card. Run all business income and expenses through those accounts only. This one habit makes your bookkeeping dramatically easier, your tax return more accurate, and your life considerably less stressful.

5. Forgetting to Track Business Mileage

If you or your employees use a personal vehicle for business, like driving to client meetings, making bank runs, or picking up supplies, that mileage is deductible. The IRS standard mileage rate for 2026 is 72.5 cents per mile for business mileage. Those miles add up fast, and many small business owners leave this deduction on the table simply because no one wrote anything down.

To claim the deduction, you need a mileage log that records the date, destination, business purpose, and miles driven for each trip. You can reconstruct a log from your calendar and other documentation after the fact, but it’s easier (and more audit-proof) to keep records in real time.

You can record your mileage in a written log (like a notebook in the glove compartment) or on a spreadsheet. But a mileage tracking app is usually the best option. In fact, your accounting software might even have a mobile app that uses GPS to automatically log trips.

6. Deducting Business Meals Without Proper Records

The IRS knows the business meals category is prone to abuse, so they require more documentation for meals than for almost any other expense. This is one area where “close enough” won’t cut it.

To deduct a business meal, you need to document all five of the following:

• Amount, including tax and tip
• Date the meal took place
• Place (the name and location of the restaurant)
• Business purpose
• Business relationship (who was there and their relationship to your business)

Get in the habit of jotting these details on the receipt after every business meal, then snap a photo of it. Thirty seconds of effort provides a lot of audit protection.

7. Deducting 100% of Partially Personal Expenses

Your home office, cell phone, and internet bill might all be legitimate business deductions. But if you use them for both business and personal purposes, you can only deduct the business-use portion.

To qualify for the home office deduction, you have to use the space regularly and exclusively for business.

The deduction is calculated based on the percentage of your home’s square footage used for the office. You don’t have to have a dedicated room in the house, but you can’t write off your kitchen counter or dining room table as a home office.

For your cell phone, a reasonable estimate of your business-use percentage is fine. If you use it 60% for business, deduct 60% of the cost. Just be able to explain how you arrived at that number.

Claiming 100% of expenses that are clearly partly personal is a red flag. If audited, it can result in those deductions being partially or fully disallowed.

8. Waiting Until Tax Season to Deal with Any of This

Doing your bookkeeping once a year is like doing your laundry once a year. By the time you get to it, the pile is overwhelming.

Expenses are easiest to track when they’re fresh. Categorizing a week’s worth of transactions takes five minutes. Categorizing twelve months of transactions takes an entire painful weekend, assuming you can even remember what half of them were for.

Get in the habit of blocking fifteen to thirty minutes each week to review your transactions, categorize anything new, and file receipts. If you have accounting software doing the heavy lifting, this really is just a quick review.

9. Trying to Figure Out Taxes on Your Own

Every mistake on this list is far more likely to happen when you’re managing your own books without professional support.

Hiring an accountant can feel like an expense you can put off until you’re bigger or more profitable. But the math usually doesn’t work out the way people think it does. The missed deductions, penalties, and hours you spend doing something you weren’t trained for cost you money.

A good accountant can pay for themselves by finding tax deductions you didn’t know you had, keeping you out of trouble with the IRS, and giving you back time you could spend on revenue-generating work. They can also offer proactive advice to help you make better decisions that affect your tax bill for years to come.

At NewWay Accounting, we work with small business owners who are done guessing and ready to get their finances working for them. Whether you need bookkeeping clean-up, a second opinion on your tax strategy, or a long-term partner who actually understands your business, that’s what we’re here for.

Reach out today and let’s talk about where you are, what you’re missing, and what’s possible.