It feels like the tax code changes weekly sometimes. And in any business process, we know that errors are costly. So, let’s talk about what to do when you encounter business tax errors.
Determine Which Business Tax Errors Need to be Corrected
Math is a tricky subject – and tax code math is some of the trickiest math to do since every business decision and its financial outcome can affect your calculations. But before you start worrying about every single decimal point, a great first step once you realize you have business tax errors is to assess whether the error even needs to be corrected.
“A broken clock is right twice a day.” “You used the wrong equation and got the right answer,” – these phrases are perfect for describing business tax errors versus your reportable tax liability.
Big tax errors are going to affect your tax liability and – ultimately – your business. But not all errors need to be corrected. If you have math errors that don’t result in higher tax liability when corrected, you don’t need to correct them. But if your error ends up creating more tax liability for your business – those need to be corrected as soon as possible.
And if there are many different business tax errors, you may have to file an amended business return to ensure that you and the IRS are on the same page when it comes to reporting your tax liability.
Double-Check and Amend Your Tax Return
Depending on your business structure, amending your tax return to account for business tax errors means filling out either a Form 1040-X (for sole proprietors and single-owner LLCs), Form 1120-X (for C corporations), or Form 1120-S (for S corporations).
Amended tax returns can’t be sent electronically, they have to be completed on paper and then mailed out.
Make sure you double-check your returns, even if you paid a professional service or CPA to prepare your business taxes for you. You can amend any of your tax returns up to three years after the original return was processed. For each year that has errors, you will need to fill out a separate amended return.
Prep for Penalties
If you don’t file your taxes correctly and time has passed since your filing, you and your business may be responsible for paying penalties and interest on the amounts you should’ve already paid.
Even if you didn’t personally prepare your business taxes, you (or the business) are still liable for the errors, unless your tax preparer admits the error was their fault. This doesn’t happen often, but if it does, you may be able to get the extra amounts waived via penalty abatement.
Rethink Your Tax Prep Strategies
Mistakes happen, but for the sake and success of your business, repeatedly encountering business tax errors means there is a fundamental issue with the way you are carrying out your tax prep practices.
The best way to avoid most errors is to give yourself more time. Submit your tax documents to your preparer sooner rather than later and make time in your schedule to go over the final filings and return documentation – you can catch a lot of potentially harmful errors before they ever get to the IRS.
Clean Up Business Tax Errors Quickly with Correction Filing
Everyone makes mistakes, and eFile360 is ready to help you remedy business tax errors without breaking the bank. With our Correction Filing services, you can get your information returns corrected for not only the current tax year, but also the previous three years, and the cost of filing a correction is the same as it is for filing the original form.
The longer errors go unnoticed, the harder they are to correct and recover from. Let us help keep things in order so you don’t have to slow your business’s progress by unintentionally triggering an IRS audit.
Keeping your information return forms organized can help reduce business tax errors. Sign up for a free eFile360 account today.