Tax season can cause people to rush around to get their returns filed on time to avoid small business tax disputes. How can you pay the least amount of tax that is legally possible and at the same time avoid a possible IRS audit to your small business?
Don’t make these mistakes listed below as they can increase your chances for an IRS audit.
Failure to report Form 1099 income.
Here’s one thing you can count on. If you fail to get your forms right, you can be sure you will get audited and have to deal with small business tax disputes.
Failure to Report Officer Salary on an S Corporation.
For the next few years, the IRS is going to focus on S Corporation returns as 68% of them are not done correctly. The main issue here is officer salaries. The IRS found over 1 million S Corporations with sole shareholders and profit who did not report officer salary. Ouch! That’s an audit waiting to happen! Yet another small business tax dispute.
Failure to report inventory.
If you are in the retail business, you must report an inventory. If you don’t, the IRS will believe you are not correctly reporting all purchases as current expenses. This can get a little confusing with virtual products. Your best bet is to seek the advice from an accountant or bookkeeper.
Failure to report expense of medical insurance correctly with an S Corporation.
The IRS considered this one to be number one on the target for audits. The rules for S Corporation shareholders, medical expenses and medical insurance can be confusing. The IRS would love for you to get this one wrong, because if you do get it wrong, you will not receive the deduction.
Making incorrect decisions on your first tax return.
The most critical return you will file for your business is your first tax return. You could, without even realizing it, make certain selections that will come back years later to haunt you.
The mistakes mentioned above are very common mistakes made by small businesses. Look, the state and federal government are already in a bind regarding collection of taxes, so the IRS will be coming down hard not only on individuals, but on small businesses as well.
Your better off consulting the advice of a professional tax attorney to avoid small business tax disputes.