Taxes is one of the aspects of running a business that can be easily disrupted and a number of mistakes occur leaving the business in a major tax predicament. Understanding and filling taxes properly is essential or you may find yourself facing the IRS and your business could be on the verge of collapsing. To avoid some of the more common tax mistakes, Mecham Dicus & Company would like to share these common mistakes and tell you how to avoid them.
Filing Wrong Status, Forms or Payments
Depending on the business, its legal structure will vary. The type of business or industry you run may have a lot of employees and sometimes none at all. Depending on the nature of the business there are different forms you will need to send to the IRS and state tax department. These forms may need to be filed quarterly such as payroll taxes, estimated income taxes, and sales taxes. Some other forms need to be filled annually such as the W-2 and 1099 forms. The W-2 and 1099 forms are sent to your employees and those you have paid to work for you so they can file their own taxes. As these forms are essential and need to be filed on time, they are sometimes forgotten or the wrong forms are submitted. To help avoid late filing or neglecting your tax forms, you can also use accounting software which comes with a calendar and a calculator system which can help you properly file your tax forms. You can always seek out professional accounting services to help you stay on top of your taxes and avoid trouble with the IRS as well.
Tax Underpayment Penalty
For those who are self-employed or file sole proprietor, as a partner, or as a S corporation, in most cases you are required to file your tax payments quarterly. Small business or business owners that are essentially self-employed may need to estimate how much money they make. The IRS doesn’t expect you to be completely accurate. However, you need to be as close to the mark as possible. You don’t want to get caught under paying or underestimating how much you make each year. Often the small business owner essentially works for themselves. In so doing, they will attempt to handle their own bookkeeping and accounting. However, to avoid problems with the IRS by under paying your taxes, consider seeking out a professional accounting service to help you with your taxes.
Business owners always look to get all of the deductions they deserve. The IRS may consider all of the expenses that are either ordinary and or necessary as part of running the business. However, taking deductions should not potentially lead to audits and penalties. Even with those, there are a number of legitimate deductions. Nonetheless, beware of claims that can cause problems with the IRS. For example avoid showing losses that are not there or may be higher than reality.