While some errors may occur when filing business tax returns – especially if you don’t work with an accounting professional – they are always best avoided to prevent repercussions from the IRS. However, the majority of mistakes made can usually be rectified with minimal fuss and repercussions.
If you’re worried about making errors when filing your business tax returns, here are some best practices to avoid this:
What should you do if you discover you’ve made a mistake?
Sometimes business owners spot the mistake that they’ve made once their tax return has been filed, and if this has happened to you, it’s wise to seek help from a tax professional or lawyer. While some errors may be amended on the return itself, others may not, but knowing which ones can and which ones can’t be amended, is typically beyond the knowledge of the average business person.
If your tax return was completed by an accountant or other such tax expert, they may be able to communicate with the IRS on your behalf and get minor mistakes such as a math error fixed. If the original return needs to be amended, they can help you with this, too.
If you were the person who completed the tax return, a conversation with a tax professional or lawyer may help you determine the best course of action to take.
What happens if an amended tax return means you must pay extra taxes?
If you’ve amended your original tax return and it’s resulted in you owing more taxes, these can usually be paid either in a lump sum, or over a fixed amount of time. Once the tax return that was amended has been returned, you may be issued a penalty or interest from the IRS, or if you’ve paid too much in taxes, you may receive a check.
If you’ve amended your tax return and it comes back with penalties, you can always inquire as to whether they can be reduced or removed, which the IRS may agree to.
Should the mistake in your tax return have been reflected in your state return, amending them both can prove helpful.
Are there steps you can take to minimize the risk of mistakes when preparing your taxes?
All small business owners are able to avoid making mistakes on their tax return, provided they plan well and adhere to the following:
- Always keep up-to-date and accurate income and expenses records
- Schedule tax deadlines a good time ahead of the date they’re actually due
- Work with an experienced tax professional
Try to keep track of all of your businesses income and expenses as the year goes on, rather than waiting until your tax return is due, and have separate accounts for your income and expenses to minimize the risk of confusion between your business and personal finances.
Ultimately, your tax return is only ever going to be accurate, if your bookkeeping is accurate, and the best way of ensuring this is the case, is to work with a tax expert.
Are there any legal ramifications of making business tax mistakes?
While the IRS do possess the authority to actively pursue both civil and criminal charges if you knowingly (or unwittingly) commit any kind of tax fraud or evade your taxes in any way, most simple business tax errors rarely make it to the criminal courts.
Generally speaking, amended tax returns can be filed and while you might incur a penalty or interest, you’re not likely to be branded a criminal.
Why not make the risk of business tax errors a thing you never have to worry about, by working with a tax professional. Whether in-house, outsourced or remote, a tax pro can give you the freedom to focus on your business when it needs you the most, and keep the IRS from your door.