It is that time of year again. The tax man has come and gone. For those of us that owe the IRS, we have been left a little poorer for the visit. If you are an individual or small business owner and find yourself indebted to the Internal Revenue Service, we have some tax debt tips that may help your situation.
Small business owners (SBOs) have more than enough on their plate – generating new business, keeping current clients happy, and coming up with new ideas to grow their company (to name but a few). Add in accounting, number crunching, and taxes, and it can quickly become too much for even the most ambitious of entrepreneurs. The consequences for taking on too much can be many. One, in particular, has to do with mistakes in tax filings. To help SBOs combat this, our blog today will delve into some of the most common tax mistakes business owners can make.
If you have ever been audited by the Internal Revenue Service, you know well the hassle it can cause. What you may not know, however, is why you were audited. On the other hand, if you have never been scrutinized by the all-seeing eyes of the IRS, you probably want to keep it that way. To help you avoid raising any red flags, inside this post, we are going to look at some common reasons you might get your taxes audited.
It is no secret that the number of individuals that get their taxes audited each year is on a steady decline. In total, less than 1% of filed tax returns caught the eye of the IRS last year, and as the budget for the Internal Revenue Service continues to drop (the organization has seen a steady decline in funds the past few years), that number will only continue to fall, as fewer resources are available to actually perform the auditing.
Tax Audit Red Flags
While your odds are good that you will never be pulled aside for further inspection, there are some things that novice and professional tax prepares alike need to be aware of in order to avoid raising a red flag that could, ultimately, result in a tax audit. This is true for individuals and small business owners alike.
Bringing Home the Bacon
Fair or not, tax filers that make more money than the average Joe are automatically at higher risk of receiving a red flag. If you make $200,000 or more, you stand a higher chance of being inspected. Go beyond the million dollar mark, and your odds go from one in 120 (for individuals less than $200k per year) to less than one in fifteen. That is quite a significant drop!
Because of this, high-income earners need to be extra cautious when having their taxes prepared.
Not Reporting Income
Of all of the mistakes you can make when filing your taxes, not reporting all of your income has to be the easiest to avoid. If you received a 1099 or W-2 from an employer or boss, you can bet your bottom dollar the IRS did too.
When the IRS computers compare the data they receive from employers to the data that you submitted, the mismatch will throw up a red flag and Uncle Sam will have to take a closer look at your tax filing. Skip the hassles, and make sure you report all of your earnings!
Taking Too Many Deductions
As a tax paying citizen, you are well within your rights to take any deductions that you are eligible for. However, creativity by well-meaning tax professionals and tax hobbyists can often blur the lines between what is a legitimate tax deduction or tax write-off and what is not. The IRS has been performing its job for many years now and have gathered data on what the average deduction is for virtually every income level. If your deductions are higher than the average for your income bracket, you could raise a red flag and be audited.
That being said, if you feel your items are legit and claimable, and – this is important – you have proper documentation (ie; receipts), never let fear of a tax audit deter you from claiming what is rightfully yours. Just be aware of what you are allowed to deduct and what you are not, and all should be well in the world!
Tax season is here and with it, the arduous task of preparing to file our taxes. But it doesn’t have to be that way. With a little planning and ingenuity, tax preparation can be a breeze. Don’t believe us? Check out today’s blog post, where we offer 4 tax tips for easy filing.
If you are a small business owner (SBO), odds are you have more to worry about than the impending tax season. With so many things on your mind, it can be easy to overlook simple, yet important, tax saving strategies. Even if you have a tax professional or CPA on your side, it never hurts to arm yourself with as much information as possible. To help, Clayton, Paulk, and Associates would like to share some last minute small business owner tax tips!
For most of us here in the United States, the clock is ticking – April is right around the corner and the taxman is knocking at our doors. If you do not have a relationship with a good tax professional or certified public account (CPA), now is the time to begin your search. This is true for business owners, too, who need help with their small business accounting and financing issues year-round as well.
Whether you are an individual, filing married, or a small business owner (SBO), one thing is for certain – filing taxes can be an arduous and often confusing task that you may find yourself ill-equipped to handle. Even if you have a tax professional help you, you might discover you have some unanswered questions regarding your tax filing. One of those questions that might spring to mind is: who can I claim as a dependent. We answer that question inside!
There is something about the holidays and end of the year celebrations that make people want to give and be more charitable. If you find yourself in the mood for charity this season, you should be aware that there are some ways you can give and get back a little at the same time. Here are some charitable gift tax tips to reward you for your generous spirit!
We recently ran an article on year-end tax tips for individuals. To follow-up on this theme, this go around we are going to share tax tips for small business owners (SBOs).
The end of the year is fast approaching and as December 31st draws ever near, time to implement those smart, last minute tax strategies is running out. To help make sure you get the most out of your efforts this year, here are some tax tips from the professionals at Clayton, Paulk, and Associates!