According to Trading Economics’ global macro models and analyst forecasts, the corporate tax rate in the United States is expected to reach 21% by the end of 2022.

Successful professionals run successful businesses. If you want to protect your business finances and maximize your profit, you need to be sure and know about business tax filing errors. It carries implications, many of which can be avoided through attentiveness and precision.

Let filing your taxes go right. It’s wise to do your taxes right and rub them on time.

But, it is easy to make mistakes when preparing your taxes, especially if you are working with uncommon sources of income. Filing taxes incorrectly can result in penalties, but there are ways to avoid them.

Be mindful of these seven tax filing errors to avoid when filing your business taxes. These errors can give you a headache next tax season.

1. Ignoring Deductions

Ignoring deductions is a standard business tax filing error that can be very costly. When filing taxes, it is essential to remember to take all potential deductions into account. It includes business expenses, overhead costs, and employee benefits.

Failing to remember any of them can result in missing savings, leaving money on the table. To avoid this error, business owners should keep meticulous records of all expenses throughout the year. Additionally, enlisting help can ensure that all relevant deductions are correctly accounted for.

2. Inadequate Recordkeeping

Businesses should maintain records of all income and expenses to ensure accurate filing. With records, companies could avoid penalties from the IRS in their operations.

To avoid this error, organizations should attempt to keep track of detailed tax records as soon as an activity starts. All activities should include purchases, sales, wages, and expenses. Use appropriate software and communication systems to keep their records up-to-date.

Records should also be according to tax rules and regulations. It will make it easy to access relevant information for filing. Detailed recordkeeping and employment will help businesses avoid costly tax filing errors.

3. Misreporting Income

Misreporting income as a business tax filing error can lead to a hefty fine and possible jail time. This type of fraud occurs when a company intentionally misrepresents its income on its tax return to decrease its taxable income.

To help avoid these costly mistakes, business owners must ensure all income on their tax forms. Companies should understand all payment conditions, such as capital gains and rental income. Keeping good records throughout the year will help to provide a more accurate report.

4. Misunderstanding Federal and State Tax Laws

Many businesses need to comprehend the complexities of the different types of taxes. Thus, errors in filing these tax preparation services can result in massive penalties and business disruption.

Businesses must understand sales, payroll, and other taxes that apply to their operations. Furthermore, understand how state and federal laws interact. Sales tax, for example, is governed by both.

Businesses should appoint a tax specialist to manage tax obligations. It will keep their filing up-to-date and ensure accuracy.

Also, cross-check and review the filing process. All business tax documents submitted to the state tax office should reflect the business’s filings in real-time.

5. Combining Personal and Business Finances

When you begin your business, it can be a temptation to combine personal and business finances to make accounting easier. But, this often leads to business tax filing errors which can be costly to you and your business. When doing so, there are significant risks, especially when filing taxes.

Firstly, you are likely to enter inaccurate numbers when not separating your personal and business bank accounts. Business-related deductions, such as expenses and depreciation, may be lost. Furthermore, failure to track and manage business can result in fines and penalties.

Secondly, when filing taxes, your taxes will affect your business and generate more income than what can be an expense. Your payment might end up at a higher tax rate. Therefore, it’s essential to keep track of all your business expenses.

Additionally, you should open a separate bank account for your business and never mix business and personal funds. In the long run, ensuring you do the proper planning will go a long way in avoiding costly mistakes come tax season.

6. No Tax Planning

Just like any other legal document, taking the necessary precautions when filing your business taxes is essential. It is too easy to make an error, resulting in an audit and awful fees.

One of the most common mistakes businesses make is not focusing on tax planning. It is a proactive approach that looks at how your business will ensure the lowest possible tax burden.

With proper planning, businesses may avoid paying taxes or missing out on deductions that can result in significant savings. Additionally, it will give you time to review your filing before it is due and avoid miscalculations from rushed filing.

7. Choosing the Wrong Retirement Plan

Retirement plans are essential when filing taxes for a business, as choosing the proper method could be costly. The incorrect program can lead to penalties from the IRS, along with lost benefits. Research different retirement plan options for businesses to avoid making the wrong plan.

Also, consult with a financial planner or tax professional to ensure the chosen plan meets the taxation goals. Lastly, read over all documents to ensure each detail is clearly understood before committing.

Know About Business Tax Filing Errors

In conclusion, business tax filing errors may be costly and time-consuming, but having the right processes in place can help you avoid making mistakes. Take the time to review your taxes, double-check the documents, and consult with a professional to ensure your business tax filing is accurate. To minimize errors, contact a trusted tax advisor right away.

For more information, take some time to browse our blog for posts focusing on personal finance, small business, and ways to increase your income.