For many business owners, tax preparation is a time of stress and confusion. Business owners may be unaware of how to prepare for the tax season and what strategies will work best for them. Therefore, to avoid being nailed with penalties and fines by the IRS, it’s important to know the following five myths surrounding tax preparation that could end up costing you.
1. Free tax prep is always the best option
Many business owners think that a free tax return preparation service is the best option for them. However, more often than not, free tax preparation services end up costing them more in time and money in the long run. Free services may only prepare a basic tax return that doesn’t require that you file an amended return. If your tax return ends up needing to be amended, you may be required to hire a tax professional to incur additional fees.
2. I don’t have to file a tax return, I am self-employed
Many self-employed people choose not to file a tax form, as they feel that they are not required to do so. However, this is simply not true. Independent contractors, sole proprietors, and those who are self-employed must file a return. In addition, you must pay estimated taxes, quarterly estimated taxes, or estimated payments. To do so, you will need to file and file on time.
3. I won’t get fined by the IRS for late filing
The IRS imposes both penalties for late filing and late paying. Penalties can be substantial if the tax return is not filed or paid within 30 days. Penalties include late payment fees, failure to pay fees, and even tax fraud charges. Therefore, if you do not plan on filing your taxes on time and paying them in full, you should seek the assistance of a tax professional.
4. I don’t have to pay taxes on lost income from employees
While many small business owners assume that they do not have to pay taxes on the income of an employee if they leave, this simply is not true. You are required to pay taxes on income earned by employees. In addition, you are responsible for paying unemployment taxes on wages earned by employees.
5. I will not be audited, my business is small
When it comes to tax audits, everyone thinks they will be picked apart. However, not everyone who receives an audit notice is a target. Audits are determined by several factors, including personal income, assets, expenses, taxable gifts, and more. Furthermore, it’s unlikely for the IRS to send a notice of audit unless your business has been flagged for unusual or suspicious activity.
Contact us for tax preparation services you can trust!
When it comes to tax preparation strategies, most business owners are unaware of the best path to take. Therefore, it’s important to be aware of these five myths that could end up costing you. When filing your taxes, contact a professional tax preparer. At Abbo Tax CPA, we can provide you with a tax professional who will prepare your tax return within the correct time frame and, if you have outstanding tax debt, we can assist you in negotiating an affordable monthly payment plan.
To speak with a professional at Abbo Tax CPA today, please contact us at (619) 269-8190.
