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About one in 100 businesses get hit with an IRS audit each year. While that statistic might seem low, you don’t want to be on the wrong end of it. Audits are time-consuming, costly, and irritating!
The good news is that you can avoid getting audited by steering clear of common tax problems. Increasing your awareness will empower your business to press forward without tax issues.
Keep reading to discover five of the most common tax problems your business needs to watch out for.
1. Undercutting Your Business Income
A lower income puts your business in a lower tax bracket. That means you’ll likely owe less money to the government come tax time. Since this fact is well-known, is it any surprise that businesses often try to undercut their income?
This tax problem is a serious offense. Don’t make the mistake of trying to hide income because it will come back to bite you in a big way!
A minor mistake isn’t seen as a big deal, but several small mistakes are suspicious. Your business could land itself on the audit list. Even worse, you could get hit with criminal investigations, too.
2. Inflating Your Expenses
Your business should keep track of every expense and source of income all year. If you struggle with this crucial task, then you need to invest in bookkeeping services ASAP.
Why? You must report these figures at tax time, and they need to be accurate, too.
One common tax issue businesses face is when they go to report their expenses. Most businesses know that expenses offset income figures. So, reporting more expenses could reduce your tax liability.
That doesn’t mean you should inflate your expenses, though. Misreporting your taxes is not only morally wrong, but it’s a crime, too. Don’t take the risk!
3. Tax Evasion
Have you already failed to file your taxes for a few years? Have you filed incomplete returns more than once? If so, then you could get hit with tax evasion charges.
4. Fraud or Lifestyle Creep
The last thing you want to do is use your taxes to boost your business in an unfair way. Never make the mistake of deducting things that aren’t true expenses. Such actions amount to fraud.
5. Sales Tax or No Sales Tax?
Does your business sell things online? If so, then do you charge a sales tax? You might need to start!
Be sure to speak with a lawyer about your sales tax liability if you’re not sure what you owe.
Avoid These Common Tax Problems
These common tax problems may not seem like a big deal now, but they can haunt you later! The last thing your business needs is to be balancing a checkbook from four years ago.
By avoiding these problems, you and your business will come out ahead year after year.
Is your business in need of an expert tax consultant’s advice? Are you looking for bookkeeping or tax return services? Schedule an appointment with our tax consultants now to get the help you need.
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