If you have heard that once you become an S-Corporation or LLC, you can save a boatload on taxes, you are not alone. The idea of paying lower tax bills have unfortunately catapulted S-corporations. What is important to understand is that S-Corporations liability is different from a standard corporation. One of the most significant mistakes that businesses often make is that they always wait until the last second to complete the tax returns.
Before you jump into the errors, let’s clear one more thing. Both LLCs and S-Corporations are pass-through entities. This means that the profits get passed through directly to the owners from their business as personal income.
If you are in a hurry to file S-Corporation and LLC tax returns, here are some of the common tax errors that you should be careful about. Read them carefully, and avoid making the same mistakes to save yourself from paying hefty fines.
You are not filing income text returns by the due date
IRS levy penalties when you don’t file your income tax returns within time. Late filing can cost you a lot of money. This is one of the most common mistakes that S-Corporations and LLC make. The best thing to avoid such fines is to get in touch with a good CPA and hire them for your S-Corporation and LLC to make sure that you are filing your taxes on time without any fail.
The company’s tax return date will largely depend on the type of your business. For example, if you are a sole proprietorship, 15th April will usually be the tax return date. However, if you are in a partnership firm, you will be asked to file your income tax return by 15th March. Readers may keep in mind that every year, tax dates do change, which can become quite challenging to track. That’s why hiring a CPA makes sense.
You are underpaying your estimated taxes
If you are a self-employed business owner, you will have to pay your quarterly estimated taxes on your business income and self-employment taxes. As per IRS guidelines, you will have to pay the estimated taxes without any fail. Let’s say you own around $1000 and more in taxes when you file the tax return; you need to pay it. If you fail to pay that, or you are paying less than the estimated taxes, you will have to pay the penalties.
You are not reporting your business income
If you receive a 1099-MISC form for your business, then you need to report your income. This needs to be done because IRS ensures to compare payees 1099s report and 1000s filed by the payers.
Incorrect taxpayer ID numbers added
Always ensures that you add your taxpayer ID numbers correctly. If you are a single-member LLC, you will need to use the EIN for your business to schedule C filing.
These are the common mistakes that most of the S-Corporation and LLC makes. Hopefully, this guide will make the errors clearer to you, and you will avoid making them.