We know that reporting taxes is particularly complicated and time consuming for small business owners. Here are some quick measures you can take to make sure you file on time and correctly, therefore avoiding any penalties down the line.
If you’re going to claim deductible business expenses, you should make sure to document receipts of all your spending. This will allow you to prove the amounts claimed are deductible if the IRS conducts an audit.
Don’t have a clear out as soon as you file your return! The IRS advises you keep tax records for three years - or until the income or tax breaks on your returns are verified. This will be three years from the date you filed your return, or the due date of the tax return - whichever is later. In the three years after you file, you can amend your tax returns and could be audited by the IRS. Once this time period expires, the IRS can no longer audit you.
However, employee tax records should be kept for at least 4 years after the due date of payroll taxes or the date you paid them. And if your omitted income is more than 25% of the gross income stated on your return, you must keep proof for up to 6 years.
If this sounds like a lot of paperwork, consider keeping digital records. Find out more about how Fincent can help you with this!
This could attract serious scrutiny from the IRS. They may conduct a tax audit to ensure the veracity of these claims, and if the claims are found to be false, you would be penalized. You would be charged the difference between the taxes you should have paid and what you paid as well as a 20% penalty, which could rise to 75% if you are found to have been deliberately misleading. To avoid this, simply be as accurate and honestly as you can.
It's recommended to have a separate business bank account and credit cards to distinguish them from personal expenses and ensure a smoother and error-free record-keeping process.
It sounds simple, but lots of people get caught out this way. A penalty of 0.5 to 1 percent will be applied each month that a tax bill is not paid on time. A delay in making payroll deposits will be more expensive.
Sometimes, due to factors outside your control, you might miss out on the tax deadline by a couple of days. If that’s the case, applying for an extension will give you some room to breathe. But it’s better to file small business taxes on time to avoid paying pocket-burning penalty fees and interest charges.
Check this year’s against it to make sure you covered every tax category.
Looking for help with your tax return? Find out how Fincent is helping small businesses like yours file accurately, efficiently, and on time. Hiring a professional can save your business from overpaying taxes.
Fincent: Your Business's Personal Financial Wizard - From Bookkeeping to Tax Filing