When you’re a business owner, 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.
There are also things like sales taxes and payroll regulations your business is required to abide by if they apply to you. 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?
There are so many things to file when you’re incorporated that you could end up filing something every month, 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. Get help!
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 and file a tax return that saves you the most money.
IRS Compliance Implement Systems
If you decide to forgo working with an accountant to keep you on track with corporate tax compliance, make sure you know the deadlines that apply to your business. Then make sure you have a system in place so you don’t miss those deadlines.
The most common and time-tested method for tracking deadlines is a calendar, but the best system is one you will use, so it’s important that you figure out what this means for you.
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. Create a system for dealing with all the paper coming into your office so nothing gets missed.
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, you may also receive reminders via email. 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. Depending on your email service provider, you can even add items 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.
What if I’m already behind?
Life happens, and sometimes that means you haven’t filed your company tax returns in a few years. In this situation, it’s best to let your accountant get you caught up so nothing is missed. If you don’t file your taxes, the IRS compliance 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 will ensure you’re claiming everything you’re entitled to as well as filing the returns on your timeline instead of the government’s.
What if something falls through the cracks?
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, IRS compliance 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’ve fallen behind and you need to get caught up or you’re interested in learning how to set up a system to keep you on track going forward, we can help. Our tax compliance services ensure you never worry you’ve paid too much tax or missed an important filing deadline. Fill out this form to schedule a virtual meeting.