By Roderick H. Polston, P.C.
BlackFin IRS Solutions
Owning a business is rewarding for many people, but being in charge isn’t always fun – especially when you have to think about taxes. There are hundreds of rules and regulations the IRS and state tax commissions impose on business owners. These are some key things to be aware of:
Know your Forms and Deadline Dates
There are several forms you should be familiar with – W-2, W-4, 1120, 4868, 1099, 941, SS-4 – and those are just federal! These forms may look similar, but you need to ensure that you are using the correct documents. If you don’t make the appropriate distinctions, the IRS will probably show up in your mailbox.
Likewise, deadline dates with the IRS are not optional. The IRS has set firm final deadline dates for each form required to be filed. Each day a form or payment are late can cost a business owner hundreds of dollars in penalties and interest. We already pay enough in taxes, don’t needlessly pay more than you are required.
Be sure that the percentage of your employee’s paycheck that you withhold is going to the appropriate account. As the employer, YOU are responsible for that money, not the business. Not turning over payroll tax liabilities is criminal and closing up shop doesn’t make those penalties go away.
If the IRS finds that you have not been paying your business’ payroll taxes, they will come after YOU – the business owner. If that happens, your personally held assets are fair game to the IRS to collect on the back taxes owed.
Estimated Quarterly Tax
It feels like you just paid your quarterly estimated tax and here it is again! So don’t be late, get that 1040 ES form in the mailbox. Even if you pay everything that you owe, you’ll still be hit with penalties and fines if that amount isn’t on time.
For many business owners, making their quarterly estimated tax payments is required by the IRS, but even in cases where it is optional we highly recommend making the quarterly estimated tax payment because it prevents you from finding yourself at the end of the year with a large lump sum check to write!
So what if you’re a one-person office? When you have employees you split the amount owed to Social Security and Medicare, but now you are solely responsible for that total. You’re in luck if you have a corporation, half of that expense can be written off.
Track all of your expenses
One easy way to do this is a planner. Jot down every time you have a business expense. Clip in receipts. Write down mileage. Make note of why it was a business expense. If a planner is too bulky or not your style, find something that works and will keep you accountable. You’ll be thankful you over-documented if the IRS decides to audit you. When an audit happens the IRS doesn’t need to prove they’re right, it’s your responsibility to prove they’re wrong.
Affordable Care Act
The rules for health care depend on the size and structure of your company. Be aware of what applies to you when reporting. We could say more about the Affordable Care Act, but it would take much more than this paragraph.
Plan for the long-term
Think about the next five years. If you’re planning to expand your business that will be more time spent on taxes. You should consider that you may want to hire an outside firm to take care of your payroll and accounting. Good financial planning and accounting can save you money in the long run. An accountant to provide you with your break-even point, so you know how much work each employee can take on, and how much additional revenue you need to generate to cover the cost of an additional employee. These costs to the business per employee go far beyond an employee’s salary. A good accountant and tax preparer will make sure that you are maximizing your opportunity to save on taxes while investing in your business.
Stay up-to-date on your taxes. The IRS may not notice immediately if you fall behind, but that doesn’t mean you’re off the hook. It may take them a few months or several years, but the longer it takes the more you’ll owe. Be sure to get a good accountant and CPA, and do your research. You can also call 405-801-2146 and we would be happy to discuss how we can help you.