Getting audited is each taxpayer’s worst nightmare. Luckily, most individuals don’t get audited. Nonetheless, there are a number of different tax issues that the self-employed and different small companies do encounter. Listed here are three widespread tax errors and the right way to resolve them.

Lacking Tax Deadlines

Most customers consider April 15 because the tax submitting deadline. However enterprise homeowners typically have further tax deadlines to bear in mind. Relying on the character of your small business, you might have to remain on prime of quarterly estimated earnings tax fee deadlines, your company earnings tax submitting deadline, state gross sales tax submitting deadlines, employment tax filings, and presumably others. Lacking any of the required deadlines — even by as little as a day — can lead to fines.

To remain on prime of all of the deadlines, have your accountant offer you an inventory of the deadlines you’ll must adjust to. Then, set your calendar or accounting software program to remind you of the due dates far sufficient forward so you may collect the information you could file the types on time.  In case you have workers, a payroll service can deal with the tax filings and remittance of funds for you so that you don’t overlook or miss submitting dates.

Not Setting Apart Cash to Pay Taxes

If you construct a worthwhile enterprise, it’s pure to need to get pleasure from a few of the earnings you’ve labored so laborious to earn. However forgetting to calculate the earnings and any self-employment taxes you’ll owe on these earnings can result in a giant, sudden tax invoice if you file your private tax return. In reality, the tax invoice could possibly be so large that you simply don’t have the money available to pay it.

If this occurs to you, don’t panic. The IRS isn’t going to come back kick in your door and take away your home since you goofed this one time. However do file the tax return on time, even in the event you can’t pay.

Right here’s why: The IRS not solely needs the cash it’s owed, nevertheless it additionally needs tax returns filed on time. Should you don’t file your return on time, the IRS will cost you a penalty of 5% of the unpaid taxes for every month or a part of a month {that a} tax return is late as much as a most of 25% of the taxes due. The penalty begins accruing the day after your return is due.

The straightforward strategy to keep away from that vast high quality is to file your tax return on time. Pay as a lot of the cash you owe as you may if you file. The IRS will allow you to arrange a fee plan to remit the remainder of the cash. The failure-to-pay penalty is 0.5% to 1% of the unpaid taxes, so the extra you may pay if you file the return, the much less the penalty will likely be.

Poor Report Maintaining

Should you haven’t been good about maintaining your small business earnings and expense information organized, chances are you’ll not have the ability to collect all of the information (or get them on time to your accountant) to finish your return on time.

If this occurs, you may keep away from that late submitting penalty by requesting an computerized tax-filing extension from the IRS. The extension solely applies to the submitting date; it’s not an extension of the time to pay. So, if you file for an extension, it’s best to estimate and pay the quantity of tax you suppose you’ll owe to reduce late fee penalties.

To keep away from the issue sooner or later, hold well timed and correct information of your small business earnings and bills. A simple method to do this is to make use of ZenBusiness Cash to deal with invoicing and monitor earnings and bills.

Receiving a Discover from the IRS

To be clear, a discover from the IRS may be very totally different from being audited. It’s simple to panic in the event you obtain a mailed letter from the IRS, however it could be a comparatively minor challenge. The IRS could have discovered you made an error and that you simply owe them more cash. If the quantity is minor, the simplest strategy to deal with it’s to pay what’s owed. Should you disagree with the IRS, nevertheless, you may dispute the cost. One of the simplest ways to do this is to have your accountant deal with the matter for you, since they may know what to say and the way to answer the IRS

Relying in your state of affairs, contacting the IRS could also be a wise first step. A income officer can clarify issues to you, and even present recommendation on the right way to proceed.

A phrase of warning: be careful for scammers posing because the IRS. The IRS often makes preliminary contact about tax issues by sending a letter via the U.S. Postal Workplace. The IRS doesn’t ship emails or make telephone calls asking for bank card info, or particular types of fee corresponding to reward playing cards.

The Backside Line

No person needs issues with the IRS. Nonetheless, issues do come up typically. Once they do occur, discuss to your accountant and handle the issues as rapidly as potential.

Disclaimer: The content material on this web page is for informational functions solely, and doesn’t represent authorized, tax, or accounting recommendation. In case you have particular questions on any of those matters, search the counsel of a licensed skilled.

By Steve Jones