Taxes are the backbone of any government, but are seen as a financial burden by businesses because they leave a dent in their profits. The IRS states that you need to submit a tax report each year and any mistakes in your returns files can result in a penalty. These penalties can end being substantial, which no business wants.
The IRS analyzes your tax returns for the year and if there are any discrepancies, you’ll receive a notice for verification. New businesses tend to face difficulties filing their returns for the first year, often leading to them not lasting beyond a year.
Here are some tax mistakes you need to avoid so your business doesn’t get in trouble with the IRS:
Even if you file your tax returns in time, mistakes in the report can delay the procedure, particularly if you’ve paid a lesser amount than you should have. The IRS will impose a penalty on the unpaid amount.
The penalty rate for unpaid tax returns is 0.5% per month which can go up to 25% in certain cases if the IRS suspects negligence or fraud.
Miscalculating the W-2 and form 1099
This is by far the most common mistake made in tax returns. This becomes an issue when the IRS sees income from sources that don’t match the tax return. They recalculate the actual amount due and inform you via a notice which will include your penalty. Amend your tax returns accordingly.
Failure to file the tax form
Sole proprietors are meant to fill the Schedule C form if they are earning a profit. Failing to do so results in hefty fines. Businesses making over $400 on their income should submit the Schedule C form as well as the Form 1040. These forms indicate your profit or loss for the year.
Small businesses are required by law to submit their book of accounts which include depreciation methods and amounts, medical expenses, etc. A partnership is required to fill and submit the Form 1065. Incomplete records are fined $195 on each partner. Businesses still have the chance to review their documents so that any mistakes can be remedied.
Did you know that even getting your name wrong on the documents can result in a fine? The IRS uses the first four letters of your last name to check your social security number. Writing the wrong name restricts them from viewing your social security information. You’ll be require to resubmit your documents with the correct information in this case.
Have your business taxes done by professionals at A&B Accounting and Business Solutions. The company provides tax services online in Palm Beach County as well as payroll services for small business and other accounting solutions. Contact them at 1(954) 596-9966.