Every small business owner knows that there are a lot of moving parts to run a successful company. There's a lot to keep track of, from acquiring the necessary licenses and permits to hiring the right employees and marketing your products or services. Unfortunately, many small business owners pay attention to core business responsibilities but overlook tax planning.
Proper tax planning is essential for any business, but it can be especially challenging for small businesses. This is because small businesses typically don't have the same resources as larger businesses when it comes to tax compliance. As a result, they can often find themselves in hot water with the IRS. If you're a small business owner, it's important to be aware of the potential tax issues that your business could face. Here are four of the most common ones and how a tax attorney can help resolve them.
1. Over-Deducting Business Expenses
When deducting business expenses, small businesses can sometimes go overboard and deduct expenses that are not actually tax-deductible. This can lead to problems with the IRS down the line. A tax attorney can help to ensure that only legitimate business expenses are deducted and can also provide guidance on what types of expenses are tax-deductible. Furthermore, the attorney will keep you up to date on the latest tax laws and regulations. Thus, you can avoid non-compliance due to ignorance.
2. Failing to Report Cash Payments
If you're like most small businesses, you rely heavily on cash payments. This would be particularly true if you're in retail or the personal services sector. While this can simplify record keeping, it can also create tax problems if the cash is not properly reported. Under-reporting income is a serious tax violation that can result in significant penalties, including fines and jail time. A tax attorney can help you avoid trouble with the IRS by helping you formulate a reliable reporting methodology that accounts for all cash income.
3. Leaving Deductions Unclaimed
Nothing is more infuriating for a small business owner than realizing they've not been claiming deductions they qualify for. To ensure you don't lose money you direly need, allow a seasoned attorney to help you discover deductions your business is entitled to. Your attorney will help you maximize your savings during tax season by properly documenting all deductions.
4. Defaulting Self-Employment Tax
You may be subject to penalties and interest charges if you owe taxes and fail to pay them in full. Thankfully, your tax attorney can negotiate with the IRS on your behalf to try and get these charges reduced or even eliminated altogether. What's more, the attorney will help you pay successive self-employment taxes to ensure you steer clear of tax issues in the future.
For more information, contact a tax attorney near you.
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