What to Do if Your Business Taxes Are Incorrect
Here are several steps small business owners can take to deal with incorrect business taxes, according to our Your Part Time Accountant experts.
The complexity of preparing an income tax return for small-business owners might raise the likelihood of an error. Here are six steps we would recommend you take to deal with the nerve-wracking experience of finding a mistake after filing. As well as how to get things repaired promptly so you can go back to running your business.
1. Verify Your Work Twice
Make sure there is a mistake before taking any further action. Especially if you suddenly believe the business taxes you already filed contains an error. Our expert advises that you should also make sure you provided the preparer with proper information.
2. Remain Composed
The IRS’s automatic algorithms may identify a small math error you made, correct it, and send you a letter letting you know. The IRS will also inform you if the math error resulted in an underpayment or overpayment. Because the IRS offers payment plans that allow for installment payments, if you now aren’t able to pay an additional tax debt, you still may have time.
3. Determine Who Will Correct the Error
Determine who will make the corrections if your tax return does contain an error, and it’s not just that you forgot to carry the one. Your contract with your tax preparer may specify who is responsible for handling the assignment.
If someone else has prepared your tax return for you, you really shouldn’t incur a cost.
4. Modify Your Tax Return
Depending on your business structure, amending your tax return necessitates completing either an IRS Form 1040-X or a 1120-X. Don’t attempt to DIY it!
The process of creating a legitimate amended return necessitates numerous illogical procedures. Showing where and how your tax return changed, supplying proof of your justification for the amendment, and remembering to actually modify your state tax return by completing the new separate paperwork, if applicable, are some of those stages.
5. Prepare to Pay
The IRS may impose interest and penalties in addition to the taxes you unintentionally underpaid if the error led to your underpayment of taxes. The IRS may, however, waive some of the fines.
If you can persuade the preparer to accuse himself and declare, “You know what? If you say, “This is my mistake, not the client’s mistake,” you have two things: First, you have reasons for a penalty reduction; second, you have grounds for a malpractice claim. Because of this they don’t do it very often.
6. Adjust Your Filing Procedures
Work to prevent a repeat for the upcoming year once you’ve addressed the problem on your tax return. Prior to file your return, first think about allotting more time to review it. Even if someone else prepared your tax return, you are still individually liable for everything on it in the eyes of the IRS.
It’s common for preparers to make mistakes, but you had a responsibility to catch them before filing.
Second, you might want to evaluate how you and your tax preparer are related. Some tax preparers may use tax advantages or deductions that you might deem questionable.