7 Tax Mistakes That Will Cost Your Business a Lot of Money (and How to Avoid Them)

Did you know that the average tax return for 2020 taxes in the United States of America was almost $3,000? It is no secret that filing taxes is complicated and confusing, so the chances of making tax mistakes go up astronomically if you try to do yours without the help of a tax professional.

There isn’t much that you can do when you do discover that you’ve made a mistake on tax return, but there is something that you can do in order to avoid these mistakes altogether. Hiring an IRS tax professional will help you navigate your way towards filing your taxes in a stress-free way.

The good news is that you’re about to learn all about the seven biggest mistakes that you might make when filing your taxes that will cost you money. Keep reading this article to learn more.

  1. Failing to File a Tax Return

One of the most common tax mistakes that both people and businesses make in the United States is failing to file a tax return. There are some people that don’t need to file their taxes but that is because they don’t meet the minimum deductible cost. If you make more than $12,400 over the course of the tax year then you need to make sure that you’re filing your taxes.

If you earned more than $12,400 during the tax year and you don’t file your taxes then you’re going to attract the interest of the IRS. From there, the IRS will make you pay the taxes that you owe based on the income you made plus a penalty. That penalty could be up to 25 percent of what you owe on your taxes as a whole so don’t make this tax mistake.

  1. Paying Late

Paying late is quite similar to failing to file your taxes for the tax year. If at all possible you should avoid making this mistake. There are consequences for paying your taxes late but they’re not nearly as severe as not paying them at all.

You’ll owe an extra 0.5 percent of what you owed each month on your late taxes though this could climb all the way up to 25 percent if you continue to fail with paying your taxes. Hiring a professional tax service like taxfyle is a great way to ensure that you’re paying your taxes on time each year when tax season arrives.

  1. Hiding Your Income from the Government

It is never a good idea to attempt to hide your income from the government. The IRS is full of experts that will find out how much money you’re hiding and then bring the hammer down on your business. This is especially true if you have a side business that earns you some extra income.

This is true even if you never receive a 1099 tax form for the income that your side job or side company made. You will still owe taxes on the money that you made if it amounts to more than $600 over the course of the tax year. It is likely that the government knows that you earned that money on the side so you’re better off playing it safe and including it when you file your taxes.

  1. Taking Tax Deductions You’re Not Entitled To

An odd mistake that many people and businesses make is trying to list pets as dependents in order to get the tax deductions that come with having dependent children. This always fails because dependents need to be humans rather than animals or pets. Still, don’t make tax mistakes like trying to get tax deductions that you don’t deserve.

This is also important when you’re running or starting your own business because it gets tempting to claim different things as tax deductions like home office expenses. Some home office expenses will get accepted by the IRS but don’t go overboard or you’ll attract their attention and end up becoming the focus of an IRS audit.

You might think that doing this will get you a bigger tax refund, but ultimately it will show that you made a mistake on taxes that costs you and your business a ton of money in the long run.

  1. Not Taking the Tax Deductions You Qualify For

Another big mistake that pertains to tax deductions is failing to file for the deductions that you deserve. Hiring a tax professional or getting tax software is a great way to make sure that you’re filing for these deductions. If you fail to then you’re leaving a good amount of money on the table that should be in your bank account.

Many people choose not to go for tax deductions for fear that it will lead to an audit from the IRS. It is also a complex process that doesn’t always seem worth it. Get help from an IRS tax professional to make sure that you get the deductions that you deserve.

  1. Throwing Out Important Tax Documents

Always be aware of what you’re throwing out when it comes to documents that get sent via mail. The last thing you want to do is to throw out tax documents that you’ll need in order to file your taxes. This is a common tax mistake that people make when they assume that their tax documents are junk mail.

  1. Itemizing Deductions the Wrong Way

Another mistake that you should avoid when filing your taxes is making errors when itemizing your tax deductions. This is another thing that a professional tax service can help you out with. Doing this is a great decision if you think that the itemized deduction total is larger than your standard deduction.

It is a wise move to get help from a tax professional when going through with this process. It could cost you hundreds or thousands of dollars if you calculate your itemized deductions the wrong way.

Now You’re Ready to Avoid These Tax Mistakes for Tax Season 2021 and 2022

Tax mistakes are bad enough on their own, but making them could cause you to lose out on hundreds or thousands of dollars. Make sure that you’re not hiding income from the government and avoid taking deductions that you don’t deserve. You should also avoid paying your taxes late or not filing taxes at all.

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