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Keeping your Business up to Date with Tax Laws

Tax laws change quickly and often with very little warning. It can seem like an impossibility to keep track of all the changes and utilize them to your business advantage. You have three choices when preparing your taxes – do them yourself, use tax preparation software, or have a professional do them.

No matter which option you choose, changes in tax laws will ultimately affect your business in some way. It’s much better to engage the services of a professional accountant than be surprised at tax time. It’s an accountant’s business to know about changes, inform clients, and help them develop a strategy to minimize tax liability.

Your business will need to remain legally compliant with all state laws – which will depend on where you live – along with federal tax laws. There will be different requirements, depending upon your business structure and you’ll need to ensure all certificates, licenses, and permits are current.

As a small business owner, you’ll be subject to a variety of different taxes unless you’re in a partnership – in which case you’ll be required to file an information return. You’ll be required to pay self-employment taxes and employment taxes on employees. Sole proprietors, S corporation shareholders, and partners will pay estimated taxes and you’ll need to have withheld a sufficient amount to meet tax liabilities.

There are also excise taxes, which can often seem very vague but cut across multiple industries. You’ll be liable for these if you operate certain types of businesses, sell specific products, offer certain types of services, or use specific types of equipment, facilities or products. Some classic examples are alcohol, fuel and tobacco, but the list is extensive.

Of special interest for business owners are changes for net operating losses, first-year depreciation, pass-throughs that include sole proprietorships, S corporations, and LLCs, and those that have significant operations overseas. Many individuals outsource their marketing and other functions when applicable through the gig economy and accounting for that can be a headache for you and the person that provided the services.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

 

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Tax Penalties you Need to Avoid

It doesn’t matter whether it’s time to pay your personal taxes or your business taxes, it’s easy to run afoul of the IRS. There are some common types of tax penalties that you may incur if you don’t stay focused. The following are the most common tax penalties you need to avoid.

Bad Checks

If you write a check to pay your taxes and the funds aren’t available when the IRS tries to withdraw the money, you can be penalized a set amount or the full amount of the check you wrote.

Charitable Contributions

Anyone caught operating for-profit activities while claiming the endeavor as a charitable organization will face considerable penalties. Non-profits that are caught operating for-profit activities can lose their tax exempt status.

Failure to File

There are some taxpayers that aren’t required to file a return, but if you do have to file, you need to do so by a specific date or file for an extension. An extension gives you six more months to file, but won’t absolve you from the need to pay any taxes owed by the usual deadline.

Failure to Pay

When you owe taxes to the IRS, you have 21 days to pay the entire amount. If you don’t, the IRS will charge you ½ of 1 percent per month on the amount you owe.

Fraud

Fraud occurs when you don’t report all your income or inflate the number of deductions you have to lower your taxes. The IRS can penalize you by 75 percent of what you actually owe and/or have you jailed. The IRS receives a copy of your earnings every year, just as you do.

Late Payments

If you fail to pay a balance owed the IRS by the filing deadline, there will be financial penalties that will be added to what you already owe. Those penalties accrue compound interest each month that they go unpaid.

Social Security Number

You have to provide a Social Security number for yourself, spouse, and anyone you claim as a dependent. You must disclose those numbers or face penalties for each instance of non-compliance.

Underpayment

For individuals that estimate their tax burden, you’ll incur a fine if you fail to pay the entire amount. There is also a fine for underestimating what you owe. The fine will be added to the amount you owe the next time you’re required to file.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

 

Contact Us Today

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Preparing for tax audit

Preparing for a Tax Audit…Checklist

There is no reason to be afraid of an audit. However, it is best to be prepared for an audit to make sure that it runs smoothly. Different types of audits require different preparation methods.

If a business is brought up for an audit by the IRS, there are several things you can do to prepare your business for audit. First, review the tax returns that are being audited. Make sure that you are ready to explain how you or your tax preparer came up with the figures in the return when you go into the audit. If you don’t know how your tax preparer came up with the figures, or you have any questions, you should contact your tax preparer prior to the audit for any clarification needed so that you are thoroughly prepared for the audit.

Organizing records used to prepare your tax returns yearly is a great way to maintain proper accounting before an audit. However, if you have not organized your records as you filed year by year, now is the time to organize them for the audit. Make sure that the person performing the audit has access to all records used to prepare the tax returns. For the audit to go smoothly, these records should be organized in a logical fashion. In addition to making an audit quick and painless, this organization will lend you credibility with the auditor, thus making the auditor take things in stride if a small issue does arise during the audit.

Your audit notice should tell you what documentation the auditor wants to see during the audit. Typically, auditors may want to see bank statements, canceled income checks, receipts for expenses, and your financial records. If you have a smaller business, you are not required to maintain a formal set of financial records such as journals and ledgers. However, the auditor may request to see any financial records you do have, and see your bookkeeping system during the audit. If your bookkeeping system in on a computer or otherwise electronic, make sure you take a printout of your financial records with you. If you do keep a ledger and journal for financial records, the auditor is entitled to see them and you should bring them to the audit also. In addition, you should bring with you any prepared financial statements so that the auditor has a clear overview of your bookkeeping.

If you don’t keep a formal set of financial records and you are missing a few receipts, take your appointment books, service logs, and diaries with you to the audit as well. The documentation in your appointment book, service log, and diary will substantiate your expense for deduction without a receipt, provided the expense can be proved to be reasonable based on the information in your personal records.

If you have a home based business, you will also want to bring with you to your audit any usage logs of “listed property.” This is anything that you use for business and home use. Usage logs show that you use these things for business purposes, thereby allowing you to take a partial deduction for that property during the audit if you have not already done so.

If you are in any doubt as to what information you need to prepare for your business tax audit, you should contact a certified public accountant to assist you and represent you to the audit representative.

 

At Peavy and Associates, PC we can assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

 

Contact Us Today

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