Invoicing has the potential to be absolutely riddled with errors. By submitting an incorrect or incomplete invoice with your taxes, you might be denied the right to deduct and be stuck with extra costs. These are the most common mistakes that happen while invoicing that you should be sure to avoid:
Required information is missing or incorrectly entered
If you don’t take account of the requirements mentioned above when making your invoice, then you won’t fulfill the minimum requirements and your invoices will not be accepted for taxation. Deductions aren’t issued if the necessary data is not complete and correct on the invoice. Small typing errors generally won’t deny your right to deduct, as long as they aren’t on important information. But incorrectly listing the tax identification number can lead to significant problems.
Tax rate listed too high or too low
If you specify a tax rate that’s either too high or too low, this is a serious billing error. Always make sure that the correct information has been entered here. If, for example, you issue a tax rate that’s too high, you’ll have to pay that rate to the tax office. Your customer, though, can’t put the excessive tax rate toward their deduction.
But a tax rate that is too low also has consequences. It’s true that the company applying the tax will only have to pay that rate on their product, but it also means that the recipient can only deduct at the specified rate.
Unauthorized tax credit
Invoices that contain false data are referred to as unauthorized tax credits. If, for example, you list the expense as office improvements but instead buy a game console for your own use instead of an office computer, the extra tax must be paid.
Invalid invoices
If an invoice has been drawn up without any services actually being performed or deliveries taking place, it’s called a bill. Bills are also available if the invoice issuer isn’t actually a business. In such cases, the IRS reserves the right to refuse the invoice recipient’s request for deductions.