All taxes are the lifeblood of the government but serve as a stressful burden to businesses. They lessen your profits and, in other cases, require you to pay more when there are errors and mistakes on your tax return.
The IRS needed you to submit for a tax report annually. So, if you made some errors on your tax return, most likely, they will charge you for a fine and interest for every month a mistake goes uncorrected.
Generally, the IRS begins with analyzing and identifying your business revenues and check whether or not the data is entered correctly on your tax returns. If the IRS locate errors, they will send you a bill that indicates the appropriate taxable amount and will indicate the corresponding penalties from it.
Errors and simple mistakes like these can be avoided, of course, with the help of tax preparation outsourcing services. You can save yourself away from the stress, trouble of being fined, and worse – IRS audits.
Knowing the common mistakes that could be possibly present on your tax return will help you to avoid them. You will also be in better standing with the IRS if you file your business tax returns without errors.
Top Tax Return Mistakes
Here are the following common tax mistakes that every business should avoid to commit:
A Miscalculation on Tax Return Form 1099 and W-2
This is the most common errors on every business tax return. These mistakes happened when they see that the income came from other sources that do not match the data on your tax return. When IRS considers the errors, they will recalculate the amount due to that section. Upon figuring out the actual value, they will send a letter bill that indicates the corrected tax, plus the penalties and interest.
Also, you should review and read the bill upon receipt. Usually, the IRS creates mistakes in determining your business’ taxable amount. Once you have done with the review, you should be able to amend your tax return and submit it back again accordingly.
If the IRS confirms that the error is on their end, they will send a letter that will indicate whether or not they have cleared out your amendments or not.
One of the most common mistakes a business can probably create is the failure to file the tax return on time, with the thinking that you were already done with your tax obligations. If you earn revenues in operating a small business, the IRS will need you to submit for an estimated tax return quarterly instead of annually.
This can be identified by subtracting your withholding credits and taxes to the total amount of the estimated tax due. Although some of these can be a burden, it helps to maximize your tax obligations when you file your business tax return. Besides, paying a small amount of quarterly is better than paying them all at once.
Incomplete Business Records
Small businesses are needed to submit a complete book of accounts. It includes all the reports in medical expenses, income yield, and the depreciating of equipment and your company’s vehicles.
If your business is run as a partnership, you are needed to submit the Form 1065. If your records are not complete, you will be charged an additional $195 monthly for each partner.
Fortunately, the IRS will offer you a chance to review your business records and information if they notice an error before the penalty is assessed.