Avoid These 5 Most Common Small Business Filing Mistakes.

Keiona Wright, MBA

Filing taxes for your small business can be stressful and confusing. You need to file correctly so you don’t get in trouble with the IRS, but there are a lot of rules and processes to remember.  

It’s time to simplify your taxes! Let’s go through the most common filing mistakes small business owners make, so you can avoid them this tax season (and in the future).  

FREE Ultimate Small Business Tax Checklist

Get our Ultimate Small Business Tax Checklist with step-by-step instructions sent right to your inbox. 


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.

4. Not separating business and personal

Small business owners often pay out of pocket for a lot of business expenses. Blurring this line can actually create a problem when tax time comes around. It can be harder to prove business deductions, and you may misclassify certain expenses as business when they are actually personal expenses.  

To avoid this, you should separate expenses by using separate bank and credit accounts, tracking and storing receipts separately, and paying yourself a salary rather than using business accounts to pay for personal expenses. There are free bookkeeping softwares to help you do so, I recommend using waveapps.com.  

5. Not working with a professional

A lot of small business owners want to cut the expense of taxes by using tax software to do it themselves. This may work for smaller businesses, however even as a smaller business owner you could still miss credits or deductions that a professional would catch. In most cases, working with a professional will actually save you a lot of time, money, and errors. Turns out it's actually cheaper to pay a professional to do your taxes correctly than paying the IRS in the event of an audit.

The tax process can be complicated and painful, so don’t do it alone. Start by downloading our Ultimate Small Business Tax Checklist to get started. The checklist walks you through step-by-step to organize your business taxes all-year long, so you can better avoid errors and streamline the filing process. Download the checklist here. 

About the Author

Keiona Wright is a founder of Wright Way. When she’s not serving her clients, she loves to read, cook, enjoys traveling abroad and spending time with her family dancing and playing card games. She calls Chicago, Illinois home.