Check, double-check, and triple-check your tax documents before submitting them to the IRS. If you don’t approach your taxes with attentiveness and precision, there is a good possibility that it could end up costing you in the future. When filing your returns, it’s important to keep in mind the types of mistakes that could catch the attention of the IRS. Here are some of the most common tax mistakes that professionals have observed over the years and how to avoid them:
Failure To Separate Your Personal Finances From Your Business Finances
According to 45% of accountants, this is actually the most common mistake that small businesses make when filing their taxes. It’s tempting to want to combine everything, but if the IRS gets wind that you are attempting to lump in any personal information with your business’ tax return, it is going to elicit unwanted attention. Avoiding this is simple. Set up two separate accounts and always keep them separated. If you do end up using your business credit card for a personal expense, make sure to record it and remind yourself not to claim it on your taxes.
Doing Your Taxes Yourself
You may have some general understanding of how to do taxes, but that does not make you a tax professional. Corporate taxes are extremely intricate and perplexing to navigate if it’s not something you are an expertise in. This is why it’s important to hire a professional. You may be able to cover the basics independently, but hiring someone to help you with your finances will not only help eliminate the possibility of any major errors on your taxes, it can also help save you money on credits and deductions you may not have even known about.
Inaccuracies Caused By Negligence
If the IRS can prove that you were unreasonably careless when doing your taxes, then you risk being fined a 20% penalty. One example of this penalty is when businesses fail to verify a deduction they claimed as a part of an audit.
Failure To File On Time
This should be an obvious mistake to avoid, but you would be surprised at the amount of individual and corporate filers who fail to file their taxes by the deadline. If there is any balance due, you can expect a 5% penalty tacked on for every month after the deadline (with a 25% maximum).
Use this list as a guideline as you start preparing your taxes for this upcoming season. Be mindful that this list hardly scrapes the surface of potential mistakes you could make on your taxes that could have dire consequences.