How to Avoid Problems with the IRS When it Comes to Your Business
The last thing you or your business needs is a tax problem even you are just now filing for a business. According to the IRS, these are the top five ways to avoid them.
- Keep Good Records
Good recordkeeping is essential for every business. It is the foundation from which you start. The better your business recordkeeping system, the easier it will be for you to:
- monitor the progress of your business;
- prepare your financial statements;
- identify sources of your income;
- keep track of your deductible expenses;
- keep track of your basis in property;
- prepare your tax returns; and
- support items reported on your tax returns.
- Choose the Best Accounting Method
Small business use one of two accounting methods: cash or accrual. Consider consulting with a tax attorney or Certified Public Accountant (CPA) to determine which is best for you. IRS Publication 538, Accounting Periods and Methods, also can give you crucial information.
- Understand IRS Notices
Should your business receive a notice from the IRS, read it very carefully to make sure you understand why they’re contacting you. The IRS sends out notices for many reasons, including when:
- you have a balance due;
- you are due a larger or smaller refund;
- they have a question about your tax return;
- they need to verify your identity;
- they need additional information;
- they changed your return; and
- they need to notify you of delays in processing your return.
Then take the appropriate action.
- File All Tax Returns When Due, Whether or Not You Can Pay in Full
If your business has a past due tax return, file it as quickly as possible. This will let you avoid additional interest and penalties and reduce the risk of losing a refund to which you were entitled.
- Avoid Tax Schemes
Never be tempted to participate in suspicious tax shelters or schemes and put your tax id number in jeopardy. Report any person or organization that contacts you soliciting your participation in such activities to the IRS and give them any such promotional materials you receive in the mail.