How Businesses Get into Trouble with IRS?
Your criminal lawyer will recommend you avoid doing anything that leads you to problems with IRS. But instead of all the recommendations, most business owners make mistakes when it comes to maintaining tax records. Of course, they only make themselves vulnerable and invite trouble for their company.
This is why, Austin criminal lawyer suggests you maintain your tax records and avoid making any errors. The more cautious you are throughout the year, the fewer your chances of being surrounded with the crisis.
The following are some common mistakes that companies make. Make sure to avoid them if you don’t want to get into any trouble with IRS.
You can get into a serious problem if you under-report your income. It also includes the income from cash transactions and barter transactions. The business also under-report their income; they do not report bigger cash transactions and cleverly maintain their deposits under $10,000. Not to mention, you have to report deposits more than this amount to the IRS.
Other companies try to get rid of payroll tax troubles by paying salaries in cash. This means you don’t need to pay withholding for FICA and income taxes. Nevertheless, you need to avoid doing it.
Over Reporting Expenses
You also need to stop over-reporting expenses. Businesses often over-report their expenses through:
- Reporting personal trip or travel expenditures as their company’s expenses, such as taking children on business tours, but showing those expenses as business expenses.
- Claiming different personal expenses as the company’s expenditures.
Criminal lawyers suggest avoiding these errors to keep your business away from the eyes of the IRS.
Avoid Reporting Employee and Sale Tax
The most common problem is that businesses fail to report sales and employees’ taxes. Not to mention, these taxes are known as “trust fund” taxes, as employees have to collect these taxes. After collection, they need to submit the money to the treasury or taxing authority.
However, if a business uses these taxes instead of giving or reporting them to the authority, it will turn into tax fraud.
Forgetting the Self-Employment Tax
Some small businesses also get into problems when they fail to submit self-employment tax. These companies may get worried after seeing their tax returns the first time. At that time, companies find out that they owe more than 15 percent as a self-employment tax, which they have to pay for their net self-employment. This is a separate tax, which they need to pay apart from their income taxes.
The solution to this problem is that you can deduct half of your self-employment tax by canceling some of your income. You also need to remember that the tax gets deducted from the self-employment earnings, i.e., the earnings you get after expenses.
Not Paying Quarterly Taxes Payments
This problem usually happens with small companies. All the startups and small companies don’t have to pay tax withholding from a paycheck. Generally, if you expect to get a tax liability of around $1,000, you need to provide tax payments to the IRS quarterly.
Not knowing or understanding the quarterly payments and estimating them incorrectly can lead to a great due amount. You may also have to face tax penalties.
Failing to File Return
Some company owners fail to file returns as they don’t get the chance to cover the tax balance due, leading to great penalties and tax bills. The authorities may consider it as the general tax bill if it is overdue for five months or more.
The best way to resolve these problems is by keeping track of your business taxes throughout the year. This strategy begins by keeping a proper record year-round. Additionally, you need to continue paying tax bills the entire year to lower your burden at the end of the year. Lastly, you need to provide accurate and precise returns before the due time.
Hence, businesses make some mistakes, consciously or unconsciously, that the Austin criminal lawyer will suggest you avoid. The more you will be honest in your tax record with IRS, the more your business will thrive.