There is so much more to tax compliance than simply filing your tax return. Filing your federal tax return will satisfy IRS compliance, but there are also state and local tax laws to consider.
When you’re a business owner, there are also things like sales taxes and payroll regulations you need to follow. The number of things to keep track of and file can be overwhelming. Here are our tips for staying on track with state and IRS compliance.
It’s hard to know you’re missing a deadline when you don’t know what that deadline is. Most U.S. taxpayers know the deadline for filing personal taxes is April 15th, but what about corporate taxes?
It’s possible that you could end up filing something every month when you’re incorporated, especially if you have employees on the payroll. And with language like “the filing deadline is on the 15th day of the fourth month following the end of your tax year,” how can you be sure you’ve calculated the filing deadline correctly?
That’s where working with an accountant comes in. When you work with an accountant, getting help with compliance issues becomes much easier.
Not only are CPAs well versed in the tax code and what all that formal language means, but it’s also their job to make sure you file everything required on time and in the most efficient manner possible. This means they will ask you lots of questions so they can get to know your business in order to file a tax return that saves you the most money.
Finding the Right System
If working with an accountant isn’t right for you at this time, to stay on track with corporate tax compliance, you’ll need to know the deadlines that apply to your business. Then make sure you have a system in place so you don’t miss those deadlines.
How do you know if a system is the right one for you?
It’s the system you’ll use. Tracking your deadlines doesn’t make any sense if you never refer back to where you noted them. When you’re dealing with dates, a calendar makes the most sense, but it’s up to you if this is paper-based or electronic.
For things like payroll, you can build reminders into the process. Every time you calculate your employees’ paychecks, you can make it a habit to calculate the amount you owe to the government for payroll tax and make a note of when you need to pay that by.
Sometimes, receiving a form from the government that you need to fill out will trigger you to fill it out and file it right away. Other times, the form gets added to a pile of things that need to be done. This is one-way deadlines are easily missed. To make sure nothing gets missed, it’s best to create a system for dealing with papers coming into your office.
If you prefer a paper-based method of tracking deadlines, then make sure you have a calendar or planner with you at all times so you can make a note of things that need to be filed by certain dates.
Just like a paper form may trigger you to file something, reminders via email may trigger you to take action. Make sure you have a way to track those reminders, so they don’t get deleted.
There are many great computer programs and apps you can use to set reminders or create digital calendars as a means for tracking your deadlines. Your email service provider may allow you to add reminders to your calendar directly from your email.
Whether you prefer paper or digital calendars for keeping track of everything you need to file, make sure you use them! Missing deadlines is one of the most avoidable compliance issues that can save you money.
Filing Late Returns
Life happens, and sometimes that means you haven’t filed your company tax returns in a few years. If you don’t file your taxes, the IRS may file a return for you. The IRS doesn’t know your corporate tax situation, so this return is an estimate and will not likely give you credit for all the deductions and credits your business is eligible for.
If you receive a Notice of Deficiency from the IRS indicating they have processed a substitute return for you, you only have 90 days to file your past due return or file a petition in Tax Court. By working with an accountant to get caught up rather than waiting for the IRS to assess your tax situation, you’ll ensure you’re claiming everything you’re entitled to as well as filing the returns on your timeline instead of the government’s timeline.
There’s always the chance that something will get missed, even if you have the best system in place. The worst-case scenario is that you’ll have to pay penalties and interest on late-filed returns. In some cases, there are credits and deductions that are only available within a certain time period. That means you’ll miss out on saving tax by taking advantage of those if you file after the deadline.
If you filed late or completely missed filing due to circumstances beyond your control, the IRS offers penalty relief due to reasonable cause. Reasonable cause includes things like natural disasters, death, and serious illnesses.
For individuals and businesses affected by the COVID-19 pandemic, the IRS currently offers a number of options for taxpayers who have been financially affected through the IRS Taxpayer Relief Initiative.
It’s never too late to get back on track with your taxes. If you’re interested in learning how to set up a system to track deadlines, or you’ve fallen behind and need to get caught, we can help. Our tax planning and preparation services ensure you never miss a deadline. Fill out this form to schedule a virtual meeting.