25 Feb Avoid These 3 Costly Errors On Your Tax Return: Businesses
The scope of the tax code is noteworthy. Despite this fact, filing an accurate, complete income tax return saves you time and money. In a desire to reach the above goal, note the following three tidbits of tax law you must know:
- Your filing status is key to determining your income tax. You and your accountant should discuss this life scenario each year and whether your filing status has changed or remained the same on 12/31. An error is when a married person claims the head of household filing status when their filing status should be married filing jointly or married filing separately. Be mindful that the choices of filing status for a taxpayer that has lived with their spouse within the last six months of the year are either married filing jointly or married filing separately. (See also Determining your filing status with the Interactive Tax Assistant www.irs.gov).
- Income is an impactful resource. Do gross receipts, self-employment, wages, salaries, bartering, unemployment compensation, passive and interest income sound familiar? Be careful not to misclassify self-employment income as other income. As the gig economy gains momentum and various life events affect your tax household, discuss your revenue sources with your accountant to identify the appropriate line item on your income tax return to report income.
- A digital wallet (electronic wallet) is a financial transaction application that allows the owner to send and receive money. The United States Department of the Treasury expects businesses to report all income. Form 1099-K, Payment Card and Third Party Network Transaction, is for all reportable payment transactions. Do not intermix your personal and business monies. Implement a workflow that manages (complete, accurate) your business’s reportable payment transactions. (See also Understanding your Form 1099-K www.irs.gov).
Being knowledgeable about tax law is helpful to your goal of paying only the tax you owe. Contact Pierce, CPA & Advisors to discuss ways to continue your high level of voluntary tax compliance and mitigate errors on your income tax return.
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Contact Pierce, CPA & Advisors at (205) 370-4508 and/or welisten@AuthenticCPA.com.