3 Common Tax Mistakes Entreprenuers Make
- Written by Rogers Sheffield & Campbell
- Published: 28 January 2014
April 15 is coming soon. As an entreprenuer you have some extra work to do. The temptation is to get the returns done as quickly as possible. Speed can lead to mistakes, however, and in the case of filing your tax returns, mistakes can lead to penalties and audits. Here is a quick summary of three of the most common tax mistakes entreprenuers make that may eventually end up on the desk of one of our certified tax law attorneys:
1) Intermixed Personal and Business Transactions:
If business and personal funds and transactions are intermixed, you and/or your shareholders could find yourselves personally paying business tax debts. If you or your shareholders intermixed transactions last fiscal year, take the time during this tax season to document policies, then communicate it to owners and employees at the beginning of this fiscal year, before it happens again.
2) Subcontractor or Employee Confusion:
People are either paid 1099 or W-2. If the IRS determines that the worker is an employee (W2) rather than a contractor (1099), you can count on penalties being assessed and a larger tax bill due to unpaid Social Security and Medicare taxes.
3) Payroll Precision:
W-4s must be completed and filed for federal withholding, and you as the employer must match the Social Security/Medicare payments. Pay the wrong amount or pay late, and you will be assessed a penalty. Unemployment returns must be paid, and remember that we have state and local income taxes too- more deposits and filings. Oh, and don't forget W-2 and W-3 forms, they must be filed with the Social Security Administration every year. If your head aches from this kind of administrative effort and you don't want to take time away from a valued employee to do this in-house, hire a payroll service to do it on your behalf.
If you owe a large sum to the IRS, it gets out of hand pretty quickly. After that first notice, a long span of time may pass before you hear from them again. Don't be fooled by the silence, your debt is accruing; the penalties and the interest expenses are piling up. Once the state or the IRS determines that you owe them, and especially if it is a relatively large sum, a certified tax lawyer will save you time and money... and perhaps your sanity.
- The Tax Law Team
Rogers Sheffield & Campbell, LLP