Top 7 Causes of Tax Penalties & How to Avoid Them
1. Filing Taxes Late Cause: Missing IRS, state, or local filing deadlines. Avoid It: Mark all due dates on your calendar and file early (or file for an extension if needed).
2. Underpayment of Taxes Cause: Failing to pay the full amount owed due to incorrect records or missed quarterly estimates. Avoid It: Review your financials quarterly and work with a bookkeeper to calculate accurate estimated payments.
3. Inaccurate Financial Records Cause: Misclassified expenses, missing receipts, or unreported income. Avoid It: Keep detailed, organized books year-round. Use accounting software like QuickBooks Online for accuracy.
4. Missed Payroll Tax Deposits Cause: Not withholding or submitting employee payroll taxes on time. Avoid It: Use a payroll service or software to automate payroll tax filing and deposits.
5. Late or Incorrect Tax Payments Cause: Paying after the deadline or submitting the wrong amount. Avoid It: Set reminders and confirm payment details in advance. Schedule payments electronically to avoid delays.
6. Missing Required Forms (W-2s, 1099s) Cause: Not providing employees or contractors with the proper tax forms by the deadline. Avoid It: Track all contractors and employees year-round and file these forms in January.
7. Misreported Sales or State Taxes Cause: Failing to collect or remit the correct amount of state or local taxes. Avoid It: Know your state's sales tax rules and file all returns on time.
Your Best Defense? Accurate Books All Year.
By keeping clean, up-to-date financial records, you'll reduce errors, avoid last-minute stress, and stay compliant with all tax requirements.
Need Help Avoiding Tax Penalties?
Let Cuthbertson Bookkeeping handle your books so you can focus on running your business.
Email: cuthbertsonbookkeeping@gmail.com
Website: cuthbertsonbookkeeping.com
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