The Cost of Unintentional Tax Filing Errors and How to Avoid Them
Whether you file your own business taxes, or have a professional take care of them for you, unintentional mistakes can easily be made, but when it comes to the IRS, there are simply no excuses.
Generally speaking, if you’ve hired a tax professional to file on your behalf, the chances of them making a mistake that could result in a stiff penalty from the IRS, are few and far between. Unintentional errors when filing small business taxes are typically made by individuals seeking to reduce their overheads by handling their own taxes, and the grim reality is that this cost saving venture, often turns out to be exactly the opposite.
Avoiding unintentional errors when filing your business taxes is made easier by hiring a tax professional, but if you choose to file yourself, here are some of the most common error inducing issues you’re likely to face:
● Late filing and underpaying
Carrying separate penalties, in a worst case scenario filing late and underpaying can amount to 47.5 % of the original tax owed.
● Under reported taxes
The IRS can fine you as much as 20% of any under reported taxes should you make a mistake when filing that results in a tax liability in your favor, and this can double if you make a faulty appraisal for items such as donated property.
● Writing bad checks
Whether a check or any other mode of payment to the IRS, if it’s declined, it will incur a 2% penalty.
● Failing to file a checklist
Before claiming certain credits, you must file a two-page ‘due diligence’ checklist; failure to do so may result in a fine of $245 per credit.
Tax filers may also slip up and incur penalties when failing to comply (unintentionally or otherwise) with foreign tax laws. Originally intended to put an end to drug dealers, terrorists and tax cheats, many regulations are still in force, and are applicable to an increasing number of U.S. taxpayers working, living or retired abroad. Below are some foreign tax compliance issues U.S. citizens may face penalties for:
● Passive foreign investments
You are required by the IRS to file Form 8621 if you own mutual fund shares incorporated overseas.
● Personal holding companies
Form 5471 must be filed for a corporation created to hold a foreign property.
● FBAR
The FBAR form must be filed electronically if you have $10,000 or more in any combination of international bank and brokerage accounts at any one time of the year.
● FACTA Disclosures
Designed to help in the fight against money laundering, FACTA disclosures cover all foreign financial assets, and include both insurance and retirement assets. If your threshold is higher, beginning at $50,000 in assets for single U.S. residents and up to $40,000 for couples living overseas and filing joint returns, there will be additional requirements to FBAR alone.
Claiming not to understand tax laws is no excuse in the eyes of the IRS, and stiff penalties will apply for anyone making errors when filing, unintentional or otherwise. Why not eliminate the risk of costly fines by outsourcing your tax requirements, and thanks to their expertise and insider knowledge, you may also end up paying less in taxes, too.
At Heyer Inc, we proactively assist our individual and small business clients in meeting their goals. Our key area of focus is ensuring that our clients remain compliant with federal and state tax laws by providing them with high quality accounting and tax services Miami. If you are looking for an individual accountant in Miami, heyer inc would be a right option.
