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The tax code is anything but static and tax payers of all classifications must pay close attention to the changes that arrive each year. Despite close attention paid to tax updates, it’s not uncommon for businesses and their corporate accountants to make the same mistakes year after year. Whether intended or not, mistakes on a tax form may result in fees and penalties that could make paying a tax bill rather difficult. Tax mistakes occur to veteran businesses and startups alike, and no entity is immune from the following potential tax mistakes.
Math Errors
In an age of electronic filing, accounting software, and calculators, the threat of a simple math error is the most common way that a business might end up paying the wrong amount on a tax form. Corporations and businesses routinely file an incredible number of different forms and every one of those forms is covered with numbers and calculations. Even the smartest accountant, however, can make a mistake, and a forgotten zero or a misplaced digit may lead to a very inaccurate tax return. Fixing old tax mistakes is a huge time investment and waste of money.
2. Relying Upon Old Data
For individuals who don’t have too many changes each year on a tax return, copying over old information into a new tax form may reduce the time required to complete the tax forms. A business with no changes year after year is exceedingly rare, so using old numbers and data is usually a dangerous way to fill out a tax form. In addition to changed circumstances regarding income or expenses, changes to the tax code could invalidate old numbers. Although it takes longer, the best way to fill out business taxes is to fill in completely new data. Examining recent numbers may also make it easier to spot new deductions or tax advantages that a company might not have been eligible for in the past.
3. Using Out-Dated Tax Code
Changes to the tax code often happen without a lot of fanfare, and it’s not uncommon for tiny changes in the code to require a business files extra forms. Sometimes the monetary threshold for certain deductions is increased or decreased, and this modification may change a company’s eligibility. Even if the threshold is changed by just a few hundred dollars, it’s essential that companies are aware of such changes. Early study of new tax code changes helps make it simple to avoid these surprises during filing.
Allowing accountants to handle a company’s taxes is generally the best way to ensure that all the deductions possible are taken by the business for the year; however, it’s vital to work with experienced accountants. Seeing profits recede due to tax penalties and interest isn’t the best way to greet the next quarter. Remaining knowledgeable about changes and updates to the tax code ensures an accurate filing and no unexpected fees or charges.