[View Article List]
Tax Tips are not a substitute for legal, accounting, tax, investment or other professional advice. Always consult with your trusted accounting advisor before acting upon any Tax Tip.
Tax Tips are not a substitute for legal, accounting, tax, investment or other professional advice. Always consult with your trusted accounting advisor before acting upon any Tax Tip.
Top 5 Tax
Return Errors
Though they may be unintentional, tax return
errors can cost your business a great deal of time and money. Below are some of
the most common errors made by small businesses at tax time.
1. Filing late.
With so many other obligations, small business owners often fail to submit their tax returns on time. Unfortunately, the IRS may impose a penalty on late filers of up to 5 percent of the balance due for each month that the return is late, up to a maximum of 25 percent of the outstanding balance.
2. Failure to keep accurate records.
When a small business attempts to keep track of all of its financial records on its own, it may lose important documents. However, the IRS requires business owners to present valid documentation when they claim certain deductions, such as charitable donations or business expenses. If you can't produce these records, the IRS won't accept the deduction, and you must exclude it from the return.
3. Inaccuracies.
Tax returns are complicated, and it's easy to make a mistake. However, inaccuracies on a tax return may lead to an audit or additional tax penalties. For example, if you miscalculate your income and pay less tax than you owe, you may owe a penalty on the amount you failed to pay. Likewise, if you claim a deduction for which you don't actually qualify, the IRS may require you to amend your return and remove it, which results in more tax owed.
4. Failing to send 1099s.
If you make payments in excess of $600 to any non-employee during the year, you must issue a 1099, both to the non-employee and to the IRS. Failing to do so in a timely fashion results in a penalty.
5. Mixing personal and business expenses.
You cannot deduct personal expenses from your business income. Unfortunately, many small business owners use their personal bank accounts for business purposes, which can make it difficult to determine which payments were deductible. When business owners get confused, they may deduct expenses that weren't incurred for business purposes.
To avoid unnecessary penalties, you must pay close attention to your business's tax situation. If you aren't sure of the laws or you simply don't have time to handle taxes on your own, consider hiring a professional.
1. Filing late.
With so many other obligations, small business owners often fail to submit their tax returns on time. Unfortunately, the IRS may impose a penalty on late filers of up to 5 percent of the balance due for each month that the return is late, up to a maximum of 25 percent of the outstanding balance.
2. Failure to keep accurate records.
When a small business attempts to keep track of all of its financial records on its own, it may lose important documents. However, the IRS requires business owners to present valid documentation when they claim certain deductions, such as charitable donations or business expenses. If you can't produce these records, the IRS won't accept the deduction, and you must exclude it from the return.
3. Inaccuracies.
Tax returns are complicated, and it's easy to make a mistake. However, inaccuracies on a tax return may lead to an audit or additional tax penalties. For example, if you miscalculate your income and pay less tax than you owe, you may owe a penalty on the amount you failed to pay. Likewise, if you claim a deduction for which you don't actually qualify, the IRS may require you to amend your return and remove it, which results in more tax owed.
4. Failing to send 1099s.
If you make payments in excess of $600 to any non-employee during the year, you must issue a 1099, both to the non-employee and to the IRS. Failing to do so in a timely fashion results in a penalty.
5. Mixing personal and business expenses.
You cannot deduct personal expenses from your business income. Unfortunately, many small business owners use their personal bank accounts for business purposes, which can make it difficult to determine which payments were deductible. When business owners get confused, they may deduct expenses that weren't incurred for business purposes.
To avoid unnecessary penalties, you must pay close attention to your business's tax situation. If you aren't sure of the laws or you simply don't have time to handle taxes on your own, consider hiring a professional.
No comments:
Post a Comment