The 10 Most Common Tax Issues Faced by Taxpayers

Tax issues can become a complex challenge for businesses, as they arise when laws or regulations governing taxpayers' tax obligations are not properly followed.

Therefore, it is important to understand each process in detail, stay up to date on tax matters, and thereby avoid problems such as fines and even more severe penalties. Below are the 10 most common tax issues faced by taxpayers and the measures that can help prevent them.

1. Errors in Filing Monthly and Annual Tax Returns

One of the main tax issues is related to the obligation companies have to file monthly (VAT, ISR, and Withholdings) and annual tax returns, which consolidate income, deductions, and other relevant information.

Errors in the calculation or reporting of these figures may result in fines and severe penalties.

For example, if a company fails to include income from an international sale in its monthly tax return, creating discrepancies in VAT and ISR reporting, it may be subject to an audit by the SAT.

To avoid this, it is advisable to have tax returns reviewed by an expert before submission to ensure consistency.

2. Deductions Not Authorized by the SAT

Legal entities are entitled to deduct certain expenses related to their economic activity. However, if deductions do not meet tax requirements or lack supporting documentation, they may be rejected, increasing the taxpayer’s tax burden.

This tax issue is one of the most common, as supporting documents are often not retained, causing expenses to be disallowed as deductions.

To prevent a deduction from being rejected by the SAT, it is important that:

• The expense is strictly necessary for the company’s economic activity.
• A valid CFDI issued in accordance with tax regulations is available.
• Payments exceeding MXN $2,000 are made through authorized electronic payment methods.
• The transaction is properly recorded in the company’s accounting records.
• Applicable withholding and reporting obligations are fulfilled.
• Documentation evidencing the nature and necessity of the expense is retained.

In this way, any obstacles can be avoided, and the company will be able to properly deduct the corresponding expenses.

3. Omission or Delay in Provisional Tax Payments

Failure to make tax payments on time is one of the most frequent tax issues among taxpayers.

Whether due to financial constraints, administrative deficiencies, or tracking errors, this noncompliance can generate fines, surcharges, and interest that increase the company’s financial burden. In cases of repeated noncompliance, the tax authority may implement additional measures to recover outstanding tax liabilities.

4. Failure to Comply with Tax Mailbox Updates

The Tax Mailbox (Buzón Tributario) is the official communication channel between the SAT and taxpayers.

For this reason, it is very important to stay informed of any messages or notifications received. Otherwise, taxpayers may fall into noncompliance, face digital seal cancellations, and become subject to penalties.

For example, if a company receives a request to clarify discrepancies in its accounting records but fails to review its mailbox on time and misses the deadline, it may face fines.

To avoid this issue, it is advisable to activate notifications on both email and mobile devices and review the Tax Mailbox at least once a week.

5. Inconsistencies in Electronic Accounting

Electronic accounting is very important because it must match tax returns and financial reports.

If inconsistencies exist in this information, the SAT may receive alerts and initiate audits to determine the cause.

For example, if a company reports income in its accounting records that does not appear in its monthly ISR return, it may receive tax observations.

To avoid this tax issue, it is important to use appropriate software that integrates accounting and tax functions. Likewise, banking and tax information should be compared before filing returns to prevent inconsistencies.

6. Alleged Tax Evasion

Tax evasion, also known as tax fraud, occurs when a company fails to report all of its income, resulting in the payment of less tax than legally required.

This is considered a crime in most countries, including Mexico, and may lead to severe consequences ranging from fines to imprisonment, especially when large sums of money are involved.

To avoid this tax issue, it is essential for taxpayers to declare all income without exception and maintain accurate accounting records detailing income and expenses.

Additionally, all supporting documentation for payments should be retained and readily available if requested by tax authorities. This serves as evidence that all required tax payments have been made.

7. Failure to Comply with Tax Regulations

Companies with operations or offices in different regions of a country or in multiple countries must comply with various local and international tax regulations, as taxes are the primary source of government revenue.

However, lack of knowledge often leads to noncompliance, resulting in severe sanctions, legal issues, and even reputational damage, especially because these regulations cover different types of taxes, both direct and indirect.

For this reason, it is essential to stay informed about national and international tax laws and adapt internal policies accordingly. VAT is an indirect tax levied on goods and services. In other jurisdictions, personal income tax is a direct tax imposed on individual income.

In this regard, specialized tax advisory services are essential, as they provide guidance on regulatory compliance across different jurisdictions. In addition, some low-tax countries are commonly known as tax havens.

8. Errors When Issuing Electronic Invoices

The issuance of electronic invoices is one of the most critical activities for legal entities, as these documents are the foundation of accounting records, tax deductions, and compliance with SAT obligations.

However, due to regulatory requirements and the SAT’s certification of digital tax receipts, the process can be complex, increasing the likelihood of errors that may impact business operations and result in disallowed deductions or tax penalties.

Some common mistakes include entering an incorrect company RFC, selecting the wrong product or service code from the SAT catalog, among others.

A tax receipt can also be verified using its Fiscal Folio.

Verification may also be performed using the XML file.

The mandatory data required for verification are the Fiscal Folio and RFC.

Additionally, suppliers should be reviewed monthly against blacklists to prevent tax issues.

Failing to do so may result in acquiring invoices related to simulated transactions.

9. Failure to File Notices of Suspension or Reactivation of Activities

If a company ceases operations or decides to resume economic activities, it is required to notify the SAT in order to regularize its obligations within the period established by the applicable tax regime. For companies, this period is generally the month following the resumption of activities.

If a business temporarily stops operating and fails to file a suspension notice, it may be required to pay overdue provisional tax payments, as it is considered to remain active and therefore continues to generate tax obligations.

Likewise, when an organization that had suspended operations resumes activities without providing notice, it may encounter difficulties issuing electronic invoices, obtaining financing, or carrying out tax and administrative procedures, because, for the SAT, a suspended company is not authorized to conduct commercial or economic activities.

This tax issue often arises from inadequate administrative follow-up, making it important to file the corresponding notices on time and maintain updated information to avoid inconsistencies.

10. Noncompliance with Tax Withholding Obligations

Failure to report information or comply with tax withholdings, understood as amounts withheld for income tax purposes, may result in negative consequences such as penalties or fines. Errors in payroll tax withholding and payment are common among businesses.

This may occur unintentionally due to oversight, lack of knowledge, or intentionally. Income tax is calculated based on earnings received, such as salaries. Under the applicable law, each withholding must be identified by its specific concept and calculated based on the corresponding compensation. Furthermore, the provisions governing these obligations establish how the amount to be remitted should be determined and, in certain cases, the applicable tax offset. Withholding agents are jointly liable before the SAT. Regardless of the cause, noncompliance can be harmful.

For this reason, it is important to carefully review all information before submission. Key data should not be omitted or altered, as tax authorities can detect inconsistencies. Tax withholdings must be remitted to the SAT no later than the 17th day of the following month. Legal entities must also withhold taxes when making payments to foreign residents.

How to Avoid These Tax Issues with the Help of H&CO

In many cases, these tax issues arise because the complexities of the tax code are not fully understood.

Therefore, it is essential for businesses and taxpayers to seek professional tax advisory services in order to file accurate tax returns and comply with current tax laws.

Keep in mind that everything from unreported income to a lack of tax planning can have significant consequences.

Avoiding tax issues requires a combination of internal organization, professional guidance, and the use of appropriate technology.

The key lies in prevention and ongoing compliance. At H&CO, we can help businesses avoid these issues and fulfill all necessary obligations to minimize risk and focus on business growth. Contact us today!