Avoid Tax Filing Mistakes

Avoid These Filing Mistakes on Your Tax Paperwork

Taxes are an avoidable part of owning a business, and tax season often adds stress and anxiety to many business owners. If you are dreading tax preparation, then you should consider the benefits of hiring an accountant to help with your filing. There is no reason for you to spend time on the paperwork when you could be focusing on other important responsibilities instead!

Problems with DIY Tax Filing

The biggest problem with doing your taxes without an accountant is that mistakes can be made that could result in big problems in the future. Even something that seems like a minor error could cost you quite a bit of money in fees and a big tax bill. At the same time, it is possible that you could be paying too much in taxes because you missed important deductions that could have been included.

If you don’t have formal accounting training and you are filing your taxes without the help of a professional, then it is likely that you are making a few errors along the way. These mistakes might not show up for a few years but could result in higher taxes or even an audit in the future. The best way to avoid these DIY tax problems is by hiring an accountant to help.

Prevention is always more effective than trying to clean up a big mess. So, work with a trusted accountant or bookkeeper to review your tax filing before it is sent to the IRS.

Avoidable Tax Mistakes

There is no doubt that an experienced accountant can help you avoid a lot of tax problems. Your accountant will check the numbers and make sure that everything is included in the filing. At the same time, a good accountant can also offer advice and services for payroll, estimated tax payments, cash flow, and more.

Here are a few common mistakes that you can avoid when you have a great accounting team working on your taxes and business financials:

  • Matching Taxpayer IDs and Names: Even though it seems like a simple thing, there are often problems where taxpayer IDs don’t match the names on the accounts. Whether the filing is for an individual or a company, it is essential to be sure that everything lines up to match the records that are on file. The IRS and Social Security have databases that connect taxpayer IDs with names, and audits are done to ensure that the filings match the database. If the name doesn’t match, then it could start a chain reaction of problems that need to be fixed.
  • Wrong Bank Account Number: It is easy to see why direct deposit is often the top choice for a tax refund. These deposits will land right in your bank account, helping you avoid the need to wait for a check to show up in the mail. But, be careful to ensure that the right direct deposit information is used. If you setup the direct deposit and one of the numbers is off in the account details, then it could be put into the wrong account. Or, the refund might be returned to the IRS. In this situation, you might not receive the refund because the IRS doesn’t have a policy to replace lost funds that are transferred
  • Incorrect Tax Rates: Whether you are figuring tax costs for payroll or self-employment, there are various percentages and calculations that need to be used to get it done right. These tax rates often stay consistent from one year to the next, although there are times when the laws change the rates that need to be paid. Make sure that you stay ahead of the changes in the accounting industry to ensure that you are using the correct rates when calculating tax payments.
  • Missed Estimated Payments: When you are just entering the world of self-employment, there are a few financial details that you might not understand without talking to an experienced accountant. For example, most employees pay taxes through deductions from their paychecks, then the annual tax filing is a time to ensure that the taxes were paid in full. With self-employment, you might not have regular paychecks with these deductions. So, you will need to make quarterly tax payments to the IRS. Missing these payments or sending the wrong amount could result in penalties and fees. So, make sure that you talk to an accountant to learn how much needs to be sent on your estimated payments.
  • Too Many Deductions: One of the benefits of self-employment is that you can take advantage of deductions. If you spend money on equipment or services for your business, then that money can be factored into your tax filing. But, there are times when small business owners try to take advantage of the situation by claiming too many deductions. Don’t put yourself at risk by deducting too many expenses! Instead, make sure that you understand the laws and only deduct items that fall within the guidelines.
  • Overlooking Deductions: On the other hand, there are times when small business owners are paying too many taxes because they overlook potential deductions. Whenever you spend money for your business, make sure that you hold onto the receipt and track the transaction. These details can ensure that you maximize your deductions as much as possible to minimize your tax burden.

As you can see, it could be easy to make a mistake on your tax filing. But, it is just as easy to take the necessary steps to check and re-check your taxes so that you can avoid these problems.

Do-It-Yourself or Professional Tax Services

How do you decide if you should spend the money for an accountant to take care of your tax filing? Business owners who attempt a DIY approach are often motivated to save money on the costs that they would have spent on the services of an accountant. Even though they think that they are saving money, a DIY approach could potentially cost more money in the future.

Tax filing not only takes a lot of time, but it is important to ensure that you have experience with tax preparation so that you get it done right. Most small business owners don’t have a formal education in accounting, which means that they are forced to study tax law in an attempt to figure it out.

There is no reason for you to waste your valuable time trying to gain expertise in tax law! Instead, learn enough so that you understand the process, but let a professional accountant take care of the preparation and filing. You can use this extra time to focus on ways to increase business profitability and grow your company.

If you choose a DIY approach for tax filing, these are a few ways that you might end up spending more money in the future:

  • Fees, interest, and penalties if the taxes are filed incorrectly
  • Missed deductions, resulting in a higher tax bill
  • Cash flow errors that cause an accumulation of interest costs and other financial problems
  • Incorrect tax rates, causing you to pay more than necessary
  • Lost money if the refunds are deposited in the wrong accounts

Without experience in the industry, you won’t know what you are missing! It is worth the investment to spend a little money so that you can hire a team to guide your company in the right direction.

Ongoing Preparation for Tax Season

Most business owners don’t think about tax filing until it is time to complete the paperwork each year. But, there are several tasks that need to be addressed throughout the year if you want to be ready to file your taxes. Failing to stay ahead of the financials all year could increase your stress levels when it is time to file your taxes. Not only will you need to sort through the mess, but you could potentially miss transactions that should be considered for your overall financial picture.

Make sure that you are keeping accurate records for Accounts Payable and Accounts Receivable all year long. It is also a good idea to complete regular reconciliations to catch potential errors that have occurred.

If you are planning to claim a transaction as a deduction, then you need to have the paperwork to back up the claim. Without a receipt or some type of documentation, you could face problems if an audit occurs in the future.

With a little bit of planning and consistent work, you can get ahead of these problems and stay current with your tax preparation. Most business owners find that it is much easier to work on small things throughout the year, instead of trying to sort through an entire year of transactions at tax time.

Do you need help with your tax preparation? Then it is essential that you talk to the professionals here at Easier Accounting. We focus on accounting services for small businesses, and our team is here to help. Call us anytime if you have questions about your tax filing or business finances: (888) 620-0770

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