Many businesses might make mistakes when filing their tax
returns. These mistakes can waste time and cost money. Below are examples of
mistakes and tips on how to avoid the mistakes.
Common Mistakes
Multiple mistakes can affect your tax filing and sour your
relationship with the Internal Revenue Service (IRS). Below are some of these
mistakes.
Missing Deadlines
Missing tax-filing deadlines complicates your situation in
several ways. For one, you must request an extension to file the returns past
the deadline, which gives you more work. Secondly, you might incur a penalty
depending on how late you are. Lastly, you also incur interest on the taxes you
owe. The more you delay, the more these complications and penalties accrue.
Sending the Wrong Forms
Your business nature determines the forms to use when
filing your taxes. The industry, number of employees, ownership, and legal
structure determine the specific forms, with the legal structure being the
largest determinant. For example, limited liability companies (LLCs) and C
corporations use different forms. Filing with the wrong forms is a mistake you
must correct.
Making Erroneous Entries
The IRS expects you to fill all the forms with the correct
information. Mistakes that complicate your filing include:
- Using an incorrect
Social Security number
- Making a typo in your or
your business name
- Making calculation
errors
- Entering the wrong
address
- Entering incorrect bank
account numbers
In short, any mistake in any of the documents requires
correction.
Forgetting Backup Documents
The IRS expects you to provide supporting evidence or
documents for relevant submissions. For example, you must provide documentary
evidence such as:
- Receipts for expenses
- Bills
- Cancelled checks
- Invoices
Any claim you make without supporting evidence might
trigger complications.
Mixing Expenses
Many people experience taxation complications because they
mix business and personal lives or finances. A common mistake is submitting
personal expenses as business expenses. For example, you should not submit
personal travel expenses as business travel costs. Again, this risk underscores
the need for keeping impeccable records.
Making Incorrect Deductions
Incorrect deductions are wrong whether you make them
intentionally or unintentionally. The IRS expects you to deduct only the
ordinary and necessary expenses your business needs to run. Your business
determines which deductions are legitimate.
Making unnecessary deductions exposes you to the risk of a
tax audit, which wastes your time and exposes you to further tax risks. On the
other hand, leaving out necessary deductions costs you money.
Tips to Avoid the Mistakes
Take relevant measures to get things right the first time
and avoid complications. Below are tips that can help.
Use the Right Team
Ensure the right person or team in your business handles
the tax returns if you are not doing it alone. The person should understand the
business and its tax obligations. Experience with business tax returns is also
advisable.
Remember, you don't have to handle all your tax issues
outside. Outsource the services if you don't have the right in-house talent.
Outsourcing is beneficial because you get a professional with extensive
experience handling tax matters for similar businesses.
Don't Leave Things for the Last Minute
Your path to smooth and accurate tax filing does not begin
when the filing is due. Rather, it never ends because you need to keep
immaculate records daily in business. Do not wait until the last minute to start
scrambling for documents and records to use. Always maintain impeccable
bookkeeping (that you can also outsource) so you just plug in data at filing
time.
Contact
Williams & Associates Tax Services for all your tax and accounting
services, and stay focused on your core business services. We have an incredibly
professional team with over 50 years of experience.
