1. Missing or incorrect information

One of the simplest mistakes is forgetting to fill out part of your tax form or entering information incorrectly or in the wrong areas. One error could flag an audit or require you to amend your tax return, which may put you are risk for being assessed filing penalties.  

The most common mistakes on tax returns include: 

• Incorrect or missing SSN or employer ID numbers (EIN)
• Misspelled names 
• Incorrect filing status (claiming Head of Household when you may not qualify)*
• Computation errors for taxable income, withholding, and deductions
• Withholding or incorrect estimated tax payments 
• Missing or failing to report all taxable income on tax return (understating income)
• Miscalculated tax credits
• Overstating expenses on business tax return for failure to have adequate bookkeeping
• Failing to report of calculate the basis in property (S-Corp, Partnerships, and C-Corp tax returns)
• Failing to sign/date return  

2. Not filing or paying on time

If you miss the filing deadline for taxes, your business could face a 5% penalty per month or half month for up to a maximum penalty 25%. This fee will increase each month until you file the return. If you neglect to pay your taxes, the IRS will charge approximately 6% interest and a late payment penalty of about .5% each month or half month after in which the tax liability remains unpaid.  

If you need extra time to pay for your taxes, you should file for an extension. Don’t miss deadlines, or you’ll end up with even more owed money on your plate!  Extension afford you additional time to gather your documents and file your taxes. If you forsee that you will owe, file and pay right away or enter into a payment arrangement.

An extension to file is NOT an extension to pay.

3. Incorrect expense tracking

The most important way to prepare your taxes is thorough record keeping throughout the year. Failing to properly track your expenses can be one of the costliest parts of your taxes (and the biggest headache).  

If you don’t track and categorize expenses, you could miss out on deductions that could save your business a lot of money. There are a lot of deductions you may qualify for like furniture, supplies, advertising, equipment, licenses, mileage, home office deductions, depreciation expense and more.  

Worse yet, inaccurate tracking could land you in hot water if the IRS audits you and you can’t substantiate expenses. Remember according to the IRS, expenses must be reasonable and ordinary for the industry in which you operate a business.  

Make sure you keep all receipts for expenses, payroll, sales, and other costs. This makes potential audits easier and ensures you’re receiving any applicable tax breaks. The best way to do so is having a bookkeeping system, accounting system in place that will help you track, manage, and organize your expenses and assets.