3 Common Tax Problems and How to Fix Them

Getting audited is each taxpayer’s worst nightmare. Fortuitously, 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 below are three widespread tax errors and the right way to remedy them.

Lacking Tax Deadlines

Most customers consider April 15 because the tax submitting deadline. However enterprise homeowners usually have further tax deadlines to remember. Relying on the character of what you are promoting, you will have to remain on prime of quarterly estimated earnings tax cost deadlines, your company earnings tax submitting deadline, state gross sales tax submitting deadlines, employment tax filings, and probably others. Lacking any of the required deadlines — even by as little as a day — may end up in fines.

To remain on prime of all of the deadlines, have your accountant provide you with a listing of the deadlines you’ll have to adjust to. Then, set your calendar or accounting software program to remind you of the due dates far sufficient forward so you possibly can collect the information it is advisable to file the kinds on time.  You probably have staff, a payroll service can deal with the tax filings and remittance of funds for you so that you don’t neglect or miss submitting dates.

Not Setting Apart Cash to Pay Taxes

Whenever you construct a worthwhile enterprise, it’s pure to wish to take pleasure in 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 once you file your private tax return. The truth is, the tax invoice may very well be so large that you just don’t have the money readily 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 when you can’t pay.

Right here’s why: The IRS not solely desires the cash it’s owed, however it additionally desires tax returns filed on time. In case 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 option to keep away from that massive high-quality is to file your tax return on time. Pay as a lot of the cash you owe as you possibly can once you file. The IRS will allow you to arrange a payment 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 possibly can pay once you file the return, the much less the penalty will probably be.

Poor Document Retaining

In case you haven’t been good about maintaining what you are promoting earnings and expense information organized, you could not be capable to collect all of the information (or get them on time to your accountant) to finish your return on time.

If this occurs, you possibly can keep away from that late submitting penalty by requesting an automatic 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, once you file for an extension, you must estimate and pay the quantity of tax you assume you’ll owe to reduce late cost penalties.

To keep away from the issue sooner or later, maintain well timed and correct information of what you are promoting 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 could be very totally different from being audited. It’s straightforward to panic when you obtain a mailed letter from the IRS, however it might be a comparatively minor difficulty. The IRS might have discovered you made an error and that you just owe them more cash. If the quantity is minor, the simplest option to deal with it’s to pay what’s owed. In case you disagree with the IRS, nonetheless, you possibly can 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 sensible 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 normally 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 data, or particular types of cost reminiscent of reward playing cards.

The Backside Line

No person desires issues with the IRS. Nonetheless, issues do come up generally. After they do occur, speak to your accountant and care for the issues as shortly as attainable.

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

By Steve Jones