There are several technicalities and inaccuracies through which you can make errors when filing taxes. These errors can be costly for both businesses and individuals, depending on the taxes owed.
To make sure you don’t make these errors, you should hire a tax filing service for businesses or individuals. A business like NexGen Taxes has CPAs and tax professionals onboard to help you.
Here are 10 costly tax errors which can cost businesses and individuals dearly according to the IRS.
4 Costly Tax Errors for Businesses
These 4 tax errors can result in heavy penalties for business, big and small.
1. Underpayment of Estimated Taxes
Business owners usually make an estimation of what taxes they have to pay if they are paying over $1,000. However, if they don’t pay enough of it through withholding and estimated tax payments, there is a penalty charge.
These penalties start from 5% of the underpaid amount. However, they can rise to 25% of that amount as well. Depending on how much you’ve underpaid, the penalty can get larger and larger.
2. Depositing Employment Taxes
Business owners have to deposit withholding tax if they have employees. These taxes also include the employer’s share of those taxes. This is done through electronic transfers. However, if not deposited correctly, or before the deadline, those taxes can result in penalties.
3. Late Filing
This is a no-brainer. Filing your taxes late will result in a late fee. Whether you’re a business owner or an individual, you have to meet deadlines. These deadlines can vary depending on your status as a filer and the year in question. The tax filing deadline in the US is the 15th day of the 4th month. However, if that date falls on a Saturday, Sunday or legal holiday, it’s pushed to the next business day.
4. Not Separating Personal Expenses
It may be easier to use a single credit card for all expenses if your business is a sole proprietorship. However, this can blur the lines between legitimate business expenses and personal expenses. This could cause errors when you claim deductions. It could also be a problem when an audit comes up.
6 Costly Tax Errors for Individuals
Filing your own taxes as an individual can seem very easy. However, a lot of little details can slip by depending on your due diligence. Here are 6 tax filing errors for individuals.
5. Missing/Incorrect Details
A lot of missing or incorrect details go unnoticed when people file their tax reforms. In fact, people often forget to file entire forms depending on their tax bracket, their various assets, and their investments. The various details inaccurately or entirely left out of tax forms include:
• Missing or Inaccurate Social Security Numbers: Every social security number should match the one on your Social Security Card.
• Misspelled Names: Your name should be filled out exactly as it appears on your Social Security Card.
6. Incorrect Filing Status
Certain taxpayers choose the wrong filing status for their documents. This is one of the major problems that a tax filing service for individuals can help you solve. At times, more than one filing status applies to you. Figuring this out can be extremely tricky for the layman.
7. Mathematical Errors
The most common errors are often mathematical mistakes which can range from addition and subtraction to more complex operations. Taxpayers often double check their math, but it’s better to have software do it automatically.
8. Unsigned Forms
Unsigned tax returns are invalid. In several cases, spouses have to sign a joint tax return, so both their signatures are required. Some exceptions do exist, like for members of the armed forces, and those taxpayers who have valid power of attorney. The best solution is to file returns electronically and use a digital signature.
9. Figuring Credits or Deductions
Did you know that one of the most common mistakes in tax filing is to figure things like credits or deductions? This can really be a pain if you’re owed some deductions and want to collect. The mistakes can include things like tax credits, child and dependent card credits, rebate credits, etc.
Having a streamlined tax filing service for individuals can really cut down on such errors.
10. Using an Expired Individual Tax Identification Number
Finally, it’s quite common for tax returns to be filed using an invalid or expired tax identification number (ITIN). This can work if you just have to file taxes. However, if you’re expecting exemptions or credits from that tax return, it won’t happen.
The IRS has clear rules to not allow claims to be filed using an expired ITIN. Taxpayers can renew their number and refile a return to get back the claimed credits and exemptions.
These are just a few of the errors that you can commit when filing individual and business taxes. However, if you’re working with a tax filing service, you can significantly minimize your chances of filing taxes incorrectly.
If you’re looking for a tax filing service for individuals or businesses, look no further than NexGen Taxes. We provide not only a streamlined process for filing your taxes, but a network of experienced professionals to guide you.
So, what are you waiting for? Whether you’re a business or a regular citizen, contact NexGen Taxes for tax filing in the 21st century!