Starting a C Corporation is a big step for your business. You’ve taken the leap, but did you know that simple tax mistakes could be costing you thousands of dollars?
Running a successful C Corp means more than just growing your revenue—it’s about protecting your profits too. And that starts with understanding how to avoid costly tax errors many business owners make.
At Insogna CPA, a trusted Austin, Texas CPA, we specialize in helping businesses like yours avoid tax traps, stay compliant, and maximize every possible deduction. Let’s break down the most common tax mistakes new C Corps make and how you can avoid them.
1. Missing Key Tax Elections – Are You Leaving Money on the Table?
Did you know missing a tax election could cost you tens of thousands in extra taxes?
Key tax elections like the Qualified Small Business Stock (QSBS) and 83(b) offer massive tax benefits—but they must be filed correctly and on time.
Why It Matters:
- QSBS Election: Could exclude up to 100% of capital gains when selling eligible shares held for 5+ years.
- 83(b) Election: Lets founders pay taxes upfront on restricted stock, often reducing long-term tax liability.
How to Fix It:
Don’t let missed deadlines cost you thousands. Work with an Austin accounting service like Insogna CPA to ensure your elections are filed on time and correctly.
2. Lending Money to Yourself Without Proper Paperwork
Have you ever borrowed money from your business—or loaned it to a shareholder?
Unstructured loans to business owners or shareholders can quickly trigger taxable dividend reclassification and IRS scrutiny.
Why It Matters:
- If the IRS suspects a loan is a disguised dividend, it becomes taxable income.
- Missing documentation can lead to penalties and back taxes.
How to Fix It:
Keep it official. If you’re lending from the company or borrowing from it, document it properly with a loan agreement and repayment schedule. A small business CPA in Austin TX can help you get the paperwork right.
3. Filing Taxes Late (or Not at All)
Let’s be honest—staying on top of tax deadlines while managing your business can feel overwhelming. But missing a deadline could be a costly mistake.
Common Missed Forms:
- Form 1120: The C Corporation income tax return.
- State Franchise Tax Returns: Required in Texas and other states where you operate.
- Form 5471: For foreign interests in your business.
Why It Matters:
- Penalties can reach $10,000+ per form for late filings.
- Missed filings increase your audit risk.
How to Fix It:
Partner with a proactive CPA firm in Austin, Texas like Insogna CPA. We track all deadlines for you, so you never have to stress about missing a filing again.
4. Paying Yourself the Wrong Salary
Wondering how much you should pay yourself as a business owner? It’s a tricky balance—and getting it wrong could trigger IRS scrutiny.
Why It Matters:
- Underpaying Yourself: Could result in penalties for avoiding payroll taxes.
- Overpaying Yourself: Might lead to higher payroll taxes unnecessarily.
How to Fix It:
You need a reasonable compensation strategy. We can help you determine the right balance between salary and profit distributions to reduce tax liability while staying compliant.
5. Not Planning for Passive Income Taxes
Does your C Corporation generate passive income—like rental property income or investment gains?
If so, you might face hidden taxes like:
- Personal Holding Company (PHC) Tax: If passive income exceeds 60% of total income.
- Accumulated Earnings Tax (AET): If profits are retained without a valid business purpose.
Why It Matters:
Ignoring these rules could result in extra taxes and penalties.
How to Fix It:
A CPA South Austin expert can help you restructure your income to avoid triggering these taxes while staying within IRS guidelines.
6. Poor Recordkeeping (It’s Riskier Than You Think)
Messy financial records aren’t just inconvenient—they can cost you big time.
Signs of Poor Recordkeeping:
- Missing or incomplete receipts.
- Unreconciled bank statements.
- Disorganized financial reports.
Why It Matters:
- Poor records increase audit risk.
- Missed documentation could lead to disallowed deductions.
How to Fix It:
Let a professional CPA in Round Rock, TX set up a reliable bookkeeping system for you. From digital tools to monthly reconciliations, we’ll help you stay audit-proof.
How Insogna CPA Protects Your C Corporation from Costly Mistakes
At Insogna CPA, we get it—you’re focused on growing your business, not on tax forms and compliance checklists. That’s why we offer proactive tax planning for C Corporations like yours.
When You Work with Us, You’ll Get:
- ✅ Comprehensive Tax Planning: We identify ways to reduce your tax liability through strategic elections and structuring.
- ✅ Deadline Management: We track all tax deadlines so you stay compliant—no stress, no late penalties.
- ✅ Audit-Ready Recordkeeping: Our Austin accounting services ensure your financials are organized and IRS-compliant.
- ✅ Customized Compensation Plans: We’ll guide you on paying yourself properly while minimizing tax exposure.
Avoid Costly Mistakes—Partner with Insogna CPA Today
Running a C Corporation doesn’t have to feel overwhelming—especially when you have expert support. Avoid tax pitfalls, save money, and focus on what you do best: growing your business.
👉 Ready to take control of your business taxes? Schedule a consultation with Insogna CPA today—your trusted Austin, Texas CPA firm for proactive tax strategies that protect your profits.