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Shrewd business owners know that making mistakes when preparing to file business taxes should be avoided at all costs. After all, these errors can have hefty financial consequences with their associated penalties and interest charges. But executives know that keeping the company in good standing with government agencies can be difficult. It takes organization, time and knowledge of the ever-changing tax laws to stay out of trouble. Even if you are diligent with your documentation, you can still fall short. In fact, veteran business owner and first-time filers are equally prone to submitting inaccurate tax forms. Continue reading this post to learn about mistakes to avoid when preparing to file business taxes.
Waiting Until The Last Minute
When it comes to filing business taxes, waiting until the last minute to prepare your documents is not advisable for many reasons. If you are scrambling around at the eleventh hour looking for invoices and other important tax records, you are wasting time and energy. Additionally, business owners who wait for the deadline are more apt to forget about business tax deductible expenses. Breaking this habit requires implementing a system that will provide organization for these essential papers. Waiting until the last minute to prepare your forms only contributes to the stress of filing business taxes. Moreover, it is certainly a mistake that can be avoided with an orderly process.
Insufficient Records
Business owners who subscribe to “waiting until the last minute” to file taxes likely have insufficient records as well. After all, the two typically go hand-in-hand because the former influences the latter. When your record keeping is not up to par, it is easy to omit information. Very simply, you may not remember what you bought or how much money you actually spent. Likewise, hardworking business owners may incorrectly categorize expenses or revenues. Insufficient records impact the business taxes you file by potentially underestimating deductions or overestimating income. Business owners can correct these errors with regular journal entries or a professional bookkeeper.
Missing The Deadline
Even if you hire an accountant each year to file your business taxes, you are ultimately responsible for missing the deadline. Constantly check to ensure you have the right business tax payers deadline every year. After all, the person you contract with is unlikely to chase after you for tax documents. Neglecting to pay taxes on time leads to late fees and interest charges, which can add to a hefty amount. If you know that you will not be ready to file by the deadline, you can file a form to request an extension. Keep this in mind when you are preparing to file your company’s taxes to ensure that you do not miss the deadline.
Taking The DYI Approach
If you are thinking of taking the DYI approach to prepare your business taxes, understand that this is one of the major mistakes that business owners make. Of course, hiring someone to file your business taxes requires money in the budget. However, consider the fact that these professionals can offer you important information about tax credits and deductions. In all likelihood, the money they save you on your tax obligation will offset the cost of their services. This should make taking the DYI approach seem somewhat less enticing to business owners.
Filing The Wrong Forms
Technology has lessened the chances of filing the wrong forms. The convenience of tax software has made the process of preparing business taxes much less cumbersome. But it does not prevent you from filing the wrong forms. After all, the program is only as accurate as the information business owners supply. Erroneous data can cause the generation of unnecessary forms or the omission of required ones. In either case, you have created a reason for an audit of your business taxes. Whatever you do, you always need to beware of tax audits. The process can quickly become an extremely expensive and time consuming hassle for your organization. Anyone who has suffered through such scrutiny would agree that it is worth avoiding.
Organization is the key to circumventing mistakes when preparing to file business taxes. Waiting until the last minute to file only perpetuates insufficient record keeping. Worse yet, is when you miss the all-important tax deadline and subject your company to severe financial penalties. If you are brave enough to take the DIY approach, understand the consequences before you commit. This can lead to filing the wrong forms and enduring an audit. Prepare now and consider the mistakes to avoid when preparing to file business taxes.
