Four common tax errors that cost business owners

It’s a new year and the perfect time to get your financial house in order. Business owners have so much on their plates, that staying organized throughout the year is the best way to make sure nothing important falls through the cracks when it comes time to pay taxes.

Accidentally failing to comply with tax laws, violating tax codes, or filling out forms incorrectly can leave taxpayers and their businesses open to possible penalties.

Below are four of the most common tax errors business owners make:

1. Underpaying estimated quarterly taxes: Business owners should make quarterly estimated tax payments if they expect they will owe $1,000 or more in taxes. Not paying enough through withholding and estimated tax payments can result in stiff penalties. The dates to make quarterly estimated taxes this year are:

  • April 15
  • June 15
  • September 15
  • January 15, 2021

2. Depositing employment taxes: Business owners must deposit through electronic fund transfers taxes they withhold from employees’ paychecks, along with the employer’s share of those taxes. If these taxes are not deposited correctly and on time, the business owner could face penalties.

3. Filing late: Businesses have tax filing deadlines just as individuals do. Below are some key dates in 2020:

  • January 31 – Deadline to send Forms W-2 to employees and file the documents with the IRS.
  • February 29 – Deadline for businesses to file information returns with the IRS to report on Forms 1099 issued for 2019.
  • April 1 – Deadline to file Forms 1099 electronically.
  • March 15 – Tax return deadline for S-Corporations and partnerships.
  • April 15 – Due date for corporate tax returns.

4. Co-mingling business and personal expenses. This is dangerous trap to fall into, so we strongly advise to keep business and personal expenses separate. Otherwise, it is difficult to distinguish legitimate business expenses from personal ones. This can cause errors when claiming deductions and cause many sleepless nights if ever audited.

We are here to be your trusted adviser and to guide you and your business. Please let us know how we can help you in 2020.