Business Tax Problems
Business Taxes In Minneapolis, MN
In most cases, small businesses face a typical loss in their first fiscal year of operation. This only gets worse after the IRS joins the fray and many small business men paying taxes for the first time don’t even stand a chance. It is essential or an operating business body to always be one step ahead when it involves paying taxes. Small businesses need to make sure to avoid small problems they’ll run into with IRS to make sure they get the most out of their venture.
Payroll 941 Penalty
Failing to deposit or willingly not depositing payroll taxes is the fastest way one can get in major trouble with the IRS. There are various penalties and consequences for withholding or not depositing payroll taxes. Mostly the penalty for withholding payroll taxes equals the amount of the taxes owed which is then collected “Trust Fund Recovery.”
It is also called the 100% Payroll Penalty. The aftermath of facing a tax roll penalty can be devastating for any small business that just started regardless of how much they made. Though it may not be easy, troubles with payroll taxes can be resolved by having a professional help you.
Classifying Workers
Though difficult at times, it is still absolutely essential to classify your employees and independent contractors in small businesses. If your employee is classified as an independent contractor, they will not be charged with payroll taxes, but doing so is akin to stealing from the IRS and can result in a major issue which might even escalate to a criminal offence.
The Form 22-8 “Determination of Employee Work Status for Purposes of Federal Income Tax Withholding” will help you decide the vital differences between an “Employee” and an “Independent Contractor.”
Overstating Deductions
If you know how to take advantage of tax credit, then you can manage to run a successful business from the very start that will not just survive, but also thrive. Only the cost of items that are actually used for work can deducted, meaning limo rides and vacations don’t count as “work expense.”
All the deductions you make should be based on solid information, and you should be ready to prove that the items were used for work purposes to the IRS. If you are caught trying to lie or make a false accusation or statement, you can be heavily fined with penalties and interest along with the original debt.
There are some common problems for people running their own business, but there are also a lot of advantages as well. If you know how to take full advantage of tax credits, you can easily make the most of your expenses. This means that everything you buy that is aimed towards work such as notepads, pens, furniture, and computers will be applicable to be deducted from your tax.
If you are in need of business tax relief, call or fill out our form to connect with our IRS and state tax professionals now!