Paying taxes is something we cannot go around, right? Not only that we need to pay it, but we also need to be sure that all obligations are fulfilled within a certain period to overcome many headaches in the future. Things like penalties and interests are not something people enjoy paying, especially in the case of corporate tax.
Naturally, you need to inform yourself about corporate tax in your country or state before you can fulfill all the requirements. If you are in Canada, you need to check the highest authority in the country, known as Canada Revenue Agency, CRA. Also, hiring a corporate tax accountant is an absolute must.
Now, we want to show you some common corporate tax mistakes that can end up being quite costly.
1. Underreporting
No matter what sort of business you have, or you are self-employed, you will need to make corporate tax payments within a certain period. Naturally, this can be quite a tricky calculation, and it is quite common that people do not do it right, which leads to underreporting, and as a result, underpaying.
The penalties for this miscalculation can go as far as 20% of the total amount, which is quite severe. To prevent that from happening, you should make these calculations as precise as possible. The best way to achieve that is to do it a couple of times to make sure that you have done the process properly.
2. Personal and Business
One of the most significant things that require your attention is keeping your personal and business income completely separate. When we say that, we are talking about having two different accounts and credit cards. By doing that, you will be able to track the expenses significantly easier, which is always important.
Another problem that can arise if you have one account is that your expenses can be found on the report. Therefore, it would be much harder to focus only on those that relate to the business. For that reason, make sure that you use two of these to prevent any problem of this sort from popping up.
3. Wrong Deductions
Naturally, having the possibility to use certain deductions is a positive thing. These deductions can help your business grow in the future. However, some problems can surface if you start using those that are not proper for you. It can turn into a rather big problem, especially if the local authority institutions spot these issues.
At the same time, you should be aware of the fact that claiming more expenses than usually can be a sign for the institution to check your business. If this happens, there’s a possibility that your deductions will be removed completely, which is not a good thing to experience.
In Conclusion
Corporate tax is quite an important topic, for numerous reasons. That’s why it is crucial to keep all things under control. Here, we’ve provided you with common mistakes that can turn out to be quite costly for your business.
