Most tax problems are avoidable
Every year, businesses experience tax problems that are almost always avoidable. It is important that business owners learn about all of the tax laws that can affect their businesses. Not understanding tax laws can result in penalties and interest being levied against the business. Avoiding this situation is possible if the business opts to hire a knowledgeable tax professional, such as a certified public accountant or tax preparer.
Taking Too Many Deductions
A tax deduction is an expense that is granted by the Internal Revenue Service that permits businesses to subtract from its adjusted gross income when determining taxable income. The credits permit businesses to avoid paying taxes on funds that were used for operating the business, such as client gifts, business travel and capital expenditures. However, businesses should take care not to overstate deductions. The IRS has specific rules about the types of expenses and what percentage of those expenses are deductible. For example, a business owner that does business during a vacation with his family might try to deduct the related expenses for the vacation, such as the airfare and costs of the hotel from his business taxes. However, the IRS will most likely state that the trip is nondeductible because the purpose of or primary activity during the trip was not business. Business owners must prove that every deduction is valid. Failing to prove validity could result in penalties and fines.
Failing to Seek Out the Advice of a Professional
Tax preparation software convinces many business owners that doing their own business tax returns is easy. These programs are often easy to use and offer user-friendly instructions. However, despite the fact that the returns can be completed quickly, companies that use such software may not be actually taking all of the deductions that are available to them. Accountants and other types of professionals understand every aspect of current tax laws. However, in addition to assisting businesses in making sure that their returns have been properly prepared, these experts are experienced in identifying the ways in which tax bills can be lowered, legally. Although the upfront cost of hiring a tax professional might be higher than the cost of tax preparation software, the potential savings over the long term are greater.
Problems With Payroll Taxes
If your business has employees, it is a requirement for you to pay payroll taxes. Depending on the size of your business's payroll, the IRS may require that you make deposits to the IRS immediately after you pay your employees. If you do not pay the payroll taxes that are due on a timely schedule, the IRS may opt to impose interest and penalties. If the issues continue for too long, the penalties and interest could end up being higher than the amount of the payroll taxes.
There are several reasons why payroll tax problems occur. First, a business might not have enough cash. If you don't pay the landlord or your suppliers, your business will fold very quickly. In contrast, the IRS takes very long to take action. It could be several months before the IRS examines your business. Some business owners believe that they can fix the problem by the time the IRS contacts them or that they will have enough money to fix the problems with payroll taxes. However, in most cases that doesn't happen. Instead, the problems with the payroll taxes continue to snowball quarter after quarter. The interest and the penalties grow larger. By the time the IRS has shown up, things are so bad with the business's tax accounts that the IRS may decide that the business needs to be shut down. In some situations, failing to make payments of payroll taxes can be a felony that can result in punishment by imprisonment or a large fine.
Other businesses can experience payroll tax problems when the incompetent or dishonest employees don't pay their payroll taxes and don't tell the business owners about what they have done. Although your business will not be able to avoid paying the payroll taxes even if the problem is the fault of the employees, trained tax professionals can help your business to negotiate a settlement with the IRS in order to lower penalties and interest.
Although the IRS is very powerful, you still have rights as a taxpayer. These rights include the right to consult with a licensed tax professional in order to get tax help. Some solutions that are commonly used to resolve payroll taxes include:
- Submitting an Offers in Compromise to lower the payroll tax debt that is owed
- Requesting a short-term deferral of the payroll tax debt so that your business will have time to recover first
- Working out an Installment Payment Agreement so that you can pay your payroll tax debt over a period of 10 years or longer
- Reviewing the status of your tax accounts in order to determine if the IRS has made a correct assessment of the payroll taxes owed
- Figuring out whether the time for the IRS to collect your payroll tax debt has expired or is soon to expire.
- Getting rid of federal tax liens so that you can get a loan in order to pay-off your taxes
- Having your payroll tax debt declared as uncollectible so that you can obtain a tax holiday from old payroll tax debts
- Obtaining releases of payroll tax levies
- Filing claims for penalty and interest abatement
For every case, the possible solutions are different and an experienced tax professional can advise you on the best course of action for your specific situation.
Now is the time to rely on the experience of NationStar. Give us a call today at 888-842-1366 to find out more about how you can settle your IRS tax debt.