Small Business Tax Mistakes to Avoid
Small businesses are hit the hardest by taxes because they need to fulfill the many state and federal taxes, including payroll taxes, local taxes, self-employment taxes, sales taxes, excise taxes and more. Planning, preparing and filing these various taxes takes up much time, effort and resources. Not surprisingly, many small businesses find themselves non-compliant because they missed a tax that they were required to pay.
A small business, irrespective of its type, should consider paying attention to the items discussed below, as these are areas where small businesses commonly make mistakes. If you are a small business owner in need of guidance pertaining to your tax commitments, contact RMS Tax Consulting at (520) 448-3531 and speak with Enrolled Agent Richard Schickel for a free consultation.
You are required to pay self-employment tax if your total business income is more than $400. Self-employment taxes and estimated tax payments typically must be made every quarter. Filing quarterly is more beneficial for a small business so they can keep track of taxes they are paying, and make changes in their financial planning to lower them if possible.
If you have employees working for you, you need to withhold a portion of their income in order to pay taxes to the IRS. As an employer, you are responsible for tax payments for your employees, and the IRS strictly punishes non-compliance with heavy penalties. Even a corporate structure or LLC for personal liability protection is not immune. The IRS can also hold you personally responsible for the non-payment of payroll taxes.
Payroll taxes can often be complicated to handle. You should consider hiring help from a payroll company to reduce your tax paperwork and ensure that you are compliant at all times. If you hired unemployed workers, you might qualify for an exemption.
Organize Your Records
Organizing your tax records, including all the receipts of the deductions you claimed, can save you much time in preparing your taxes. During an audit, the IRS can ask for any tax document, no matter how old, at any point in time. Therefore, it is a good idea to create different folders for each year or quarter to keep all your tax documents. Store the files in a safe place where they cannot get damaged.
Should you currently be a small business owner or contemplating becoming one, contact RMS Tax Consulting at (520) 448-3531 and speak with Enrolled Agent Richard Schickel for a free consultation. Be prepared and knowledgeable of your tax filing obligations for your business to avoid any penalties or interest that may be assessed by the IRS for non-compliance.