What are the Most Common Business Tax Return Errors?
As you rush to complete your business and personal tax returns and submit them on time, don't get in such a hurry that you make mistakes. The best way to avoid errors is to use one of the tax return preparation software services, but even that is no guarantee you won't make mistakes. Before you send in that return, run through this list of common tax return mistakes.
The Most Important Mistake to Avoid
Missing the due date for your business tax return is the most important mistake to avoid, because fines and penalties begin on this date.
Not all business tax returns are due on April 15. in fact there are several due dates for different types of business tax returns.
Sole proprietor and single-member LLC returns on Schedule C are due on the same day as the personal tax return due date - April 15.
Partnership and multiple-member LLC tax returns are due on March 15.
Corporate tax returns are due the 15th day of the 4th month after the end of the corporation's fiscal year.
7 Key Business Tax Return Errors
The IRS says they see these errors most often on tax returns, including business tax returns:
- Incorrect or missing social security numbers or employer ID numbers. Make sure the number is correct and that it's the right number for your business type.
- A misspelled name. Make sure the name(s) on your tax return are the same as on your social security card.
- Incorrect filing status (filing head of household instead of filing single is a common error).
- Computation errors in figuring the taxable income, withholding and estimated tax payments, and common credits and deductions.
- Withholding and estimated tax payments entered on the wrong line, and
- Math Errors, can cause problems with tax amounts.
- Failing to sign and date the return. Make sure you and your spouse both sign if it's a joint return.
Other Common Tax Return Filing Mistakes
- Illegible or missing name or address
- Checking more than one filing status or checking no filing status
- Incorrect or missing income, deductions and credits, or not putting that information on the correct line
- Failing to put brackets (parentheses, like this) to show negative amounts
- Failing to figure the tax correctly, from the tax tables
- Failing to attach any 1099-MISC forms you received for income, whether or not income tax was withheld
- Failing to attach all necessary schedules (including Schedule C) in sequence number order
- Failing to send the return to the correct IRS location
- Forgetting to put a postage stamp on the envelope
- Forgetting to enclose your check payable to "United States Treasury" and including your name, address, taxpayer ID, daytime phone, tax form and tax year on the payment
- Forgetting to include your financial institution routing and account numbers for your refund direct deposit
Finally, be sure to make a copy of your return and all schedules and put them in a safe place, along with copies of W-2s, 1099s and other tax documents from banks, investment companies, and others.
The IRS has a complete list of tax return errors and how to avoid them in Tax Topic 303, available online.
How to Fix Those Common Tax Return Errors
If the errors are simple, like a small calculation error, you can wait for the IRS to fix them. But if the errors are more substantial, you will need to file an amended tax return. The form you use for this return depends on your business type.
You have three years from the time you filed the return to file the amended return (you may not e-file amended returns), but if your mistake results in your owing money to the IRS, you should file as soon as possible. If you have questions about the error, or if it involves a missing tax payment or under-payment, contact the IRS directly and explain the problem.