If you are a small business owner, then filing tax returns is not something new to you. But more often than not, taxes and the process of filing them is something all business owners dread. Unless, of course, you are a super-duper taxation ninja.
Filing taxes is an essential part of a business, and the sooner you get comfortable with it, the better. Even simple mistakes during filing can cost you higher tax payments and lower deductions and refunds. Serious errors can also get you on the radar of the IRS and attract penalties.
However, this process need not be stressful if you are mindful of some common mistakes people make while filing returns.
Here are some tax-filing mistakes and tips to avoid them.
1. Not Meeting the Deadline:
Filing returns at the last moment is a common issue. It is quite possible to miss the due date if any complications arise while filling the forms or during submission.
Make sure you send all financial details to your CPA well in advance, so he/she has time to organize it. This way, you can avail the deductions and credits due to you.
Using software to maintain your accounts is a good idea so that all financial transactions are in one place.
2. Using the Wrong Tax Forms:
Awareness about the forms to fill is vital so that you don’t end up filling the wrong form or missing out on giving any crucial information.
Read about changes regarding taxation or consult a CPA to ensure correct filing.
Let’s admit it, even filling a schedule C might prove complex for business owners. Educate yourself and double-check so you do not miss out on critical.
3. Missing or Entering Incorrect Information:
A common mistake is entering incorrect information like your name, social security number, bank account and routing numbers, and so on. It is surprising how many business owners make this mistake.
The easiest way to avoid this to use your previous year’s tax return for reference. Spend some time filling out the forms correctly.
4. Keeping Business and Personal Expenses Separate:
Mixing up your personal and business expenses will put you in a tight spot. Calculation of deductions and taxes becomes complex, and you might end up paying more tax than is due.
So, maintain separate bank and credit card accounts for your personal and business expenses to ensure clarity
5. Wrong Calculations:
Computational errors easily occur and are common while filing taxes. You would not want to pay more than the required taxes to the IRS right.
So use tax calculation software to ensure that you are not making any errors. You can also use the services of a CPA to help you file your taxes.
Filing tax returns is mandatory for all small businesses, and there is no getting past this. So next time you are doing this process, try and avoid these common mistakes.
Don’t waste your hard-earned money by being negligent. If you need help with your taxes, contact us for a consultation.