What Are the Most Common Business Tax Return Errors?
As you rush to complete your business and personal tax returns on time, it is easy to make mistakes. Before you send in a return, read through this list to avoid common tax return mistakes.
#1 Mistake - Not Filing By the Due Date
Missing the due date for your business tax return will prove can be costly because the IRS has penalties for late filing.
Your business tax return due date depends on your business type:
- Sole proprietor and single-member LLC returns on Schedule C are due on the same day as the personal tax return due date, April 15.
- Partnership and multiple-member LLC tax returns are due on March 15.
- Corporate tax returns are due the 15th day of the fourth month after the end of the corporation's fiscal year.
Tax due dates may change each year. If the due date is a weekend or a holiday, the date is the next business day. This article has the actual business tax due dates for the current tax year.
More Key Business Tax Errors
The IRS sees these errors most often on tax returns including business tax returns:
Incorrect or missing taxpayer ID numbers: Make sure the number is correct and that it is the right number for your business type. For Schedule C filing (line D), you must use the Employer Identification Number (EIN) for your business. If you are a single-member LLC, enter the EIN for the LLC. if you don't have an EIN, leave line D blank.
Underpaying estimated taxes. If you are a self-employed business owner, you'll need to pay quarterly estimated taxes on your business income and for self-employment tax (Social Security/Medicare). The IRS guideline says you should make estimated tax payments if you expect to owe $1,000 or more in taxes when you file your return. Failing to pay estimated taxes can mean penalties for underpayment.
Failing to separate business and personal expenses on your tax return won't get your return sent back, but it will be an issue at a tax audit. Be sure you can prove that all your business tax deductions are actually for business purposes.
Failing to report all your business income. If you receive a 1099-MISC form for business payments you received, you must report your income on your business tax return. The IRS compares 1099 forms it receives from payers with 1099s reported by payees.
Other Common Business Tax Return Errors
A misspelled name: Make sure the name on your tax return is the same as on your social security card or taxpayer ID number.
Math errors that cause problems with tax amounts.
Failing to sign and date the return: Make sure you and your spouse both sign if it is a joint return.
Illegible or missing name or address.
Failing to put brackets (parentheses) to show negative amounts.
Failing to figure the tax correctly from the tax tables.
Failing to attach all necessary schedules (including Schedule C) in order of sequence.
Failing to send the return to the correct IRS location.
Forgetting to put a postage stamp on the envelope.
Forgetting to make a check payable to "United States Treasury" and to include name, address, taxpayer ID, daytime phone, tax form, and tax year on the payment.
Forgetting to include a financial institution routing and account number for a refund direct deposit.
How to Fix Those Common Tax Return Errors
If the errors are simple, such as a small calculation error, you can wait for the IRS to fix them. However, if the errors are more substantial, you will need to file an amended business tax return. The form you use for this return depends on your business type.
- For errors on Schedule C, you'll need to file Form 1040X to make the change in your personal tax return for the year.
- For a corporation, file Form 1120X
- For an S corporation, file an amended Form 1120-S and put a checkmark in box H(4) on page 1. Attach a statement that identifies the line number of each amended item, the corrected amount, and an explanation.
- For a partnership tax return, use Form 1065X.
You can't e-file an amended Form 1040 for Schedule C changes. If your corporation or S corporation return was filed electronically, you can use the IRS MeF system for the amended return.
You have three years from the time you filed the original return to file the amended return, but if your mistake results in your owing money to the IRS, you should file as soon as possible.
Filing an amended return for a business is a complex process. Get help from your tax professional or business tax preparation software program.
IRS. "Four common tax errors that can be costly for small businesses." Accessed Feb. 27, 2020.
IRS. "Tax Calendar for Businesses and Self-Employed." Accessed Feb. 27, 2020.
IRS. "2019 Instructions for Schedule C." Accessed Feb. 27, 2020.
IRS. "I received a Form 1099-MISC...How do I report this income?" Accessed Feb. 27, 2020.
IRS. "Instructions for Form 1120-S." Amended Return. Page 6. Accessed Feb. 27, 2020.
IRS. "Instructions for Form 1040X." Accessed Feb. 27, 2020.