IRS Tax Advice for Small Businesses: Part II

IRS Tax Advice for Small Businesses: Part II

We gave several IRS tax tips for small businesses in our last blog, including limiting and double-checking deductions, using the accounting and information services in your software solutions for business and an onsite system to keep track of your accounts throughout the year, and having a CPA look over your return before you submit it. Here are a few more tips before April 15th arrives:

• One common tax mistake made by small businesses is failing to pay payroll taxes. These taxes are made up of contributions, including the employer’s half of social security and Medicare taxes, which are due on a monthly basis. Business owners with cash flow issues often use these funds to carry them over from month to month, and then find themselves facing tax day thousands short with extra penalties for missing their monthly payments. Even if you are short on cash, make sure you resist the temptation to use those funds, and stay on top of your payroll taxes.
• Some small business owners attempt to avoid these pesky payroll taxes by classifying workers as independent contractors, which is above board if they really are independent. More often than not, though, this is a misclassification that can cost thousands of dollars, should the IRS decide to pay a visit and check on this classification.
• If you pay workers or vendors in cash, you also may be in for an audit. Paying in checks or automatic transfers leaves a paper trail that can be verified, but paying in cash leaves an opportunity for tax fraud by underreporting employee wages. Make sure you have a strong paper trail for every money transaction you take part in.

Share: