The Mistakes That Could Ruin Your 2022 Tax Return

Tax season is fast approaching, and that means knowing how to properly complete your 2022 tax return is crucial. The good news is you can discover the mistakes that could cause you serious problems with the IRS below, which can help you avoid them. 

Picking the wrong type of business entity 

There are a number of different ways of classifying businesses, and they all have an impact on your tax. In particular  business that are experiencing expansion nd growth often opt to register as a corporation. 

However, its worth noting that LLCs, SCorps, and CCorps all have different tax implications. What this means is its very important that at time of incorporation you choose the option that is going to be most beneficial to you company in terms of tax. This is a topic you can find out more about in this video. 

Not having the right information to hand 

Before  you can complete your tax return accurately you will need access to a variety of information. One of the most important pieces of data you will need is your business accounts. These must be accurate and upto date, so if you haven’t check them beforehand. 

Another vital piece of information you will need is your business FEIN number. Your FEIN or federal employer identity number will be used  by the IRS to identify your business’s tax account, and you cannot submit your return without it. Fortunately, you can now submit an online application for a tax id number, making it fast and easy to ensure you have what you need to do your return. Something that in turn, willhelp you ensure you submit it on time, and avoid any late penalties. 

Lastly, you will need your recipes and dedication  tax codes so you can claim for expenses. The codes will help the IRS identify which category your deductions fall under, and your business receipts will demonstrate that purchases were legmate. 

Making sure you have all of this data on hand will help ensure you tax filling process goes as swiftly and easily as possible. 

Wrongly classifying contractors 

Last of all, you can really do a number on your 2022 tax return if you wrongly classify contractors as employees, or indeed employees as contractors. This is because employers have very different financial responsibilities when it comes to employees including withholding amounts for medical insurance, and matching these contributions. However, for contractors, that is those that manage their own tax, and do not receive any benefits, this is not the case. 

This means if you mark one as the other, not only will you have got all their payments so far wrong, but you could end up owing or trying to reclaim a large amount, not to mention the fines and penalties you can be subject to. 

To that end, it is crucial that you correctly identify and record your employees and contractors  status, otherwise you could risk ruining your tax return.