In this world nothing can be said to be certain, except death and taxes.
For businesses, paying tax obligations is one area where there is almost no room for error. It is critical for you to understand what the IRS and your state requires to avoid problems. Audits can be very expensive. Not just due to potential penalties or additional taxes, but also the for countless hours of record-gathering and preparation that would be necessary. This is why it is critical to work with your trusted advisor to make sure you understand and meet your tax obligations right from the start.
There are four key areas of concern related to taxes:
1. Business Income – You may think you understand and can easily define your business income. However, you need to fully understand what the IRS refers to as “gross income.” Gross income may include goods, services, property, and bartering, as well as income from sales. Failure to report something that the IRS considers gross income can lead to additional taxes, interest, and penalties.
2. Employee Taxes – The issue here is mostly with businesses that have no employees. In this case, it is important to understand that you may be required to meet tax requirements for a self-employed individual and make quarterly estimated tax payments. Even if you are a sole proprietor, you may be considered both an employer and an employee, and the tax implications of this dual role can be complicated.
3. Business Deductions – There are many business deductions available for businesses. It is important that you understand what they are and what is required to use them. You certainly want to deduct everything possible, but you need to be very careful to not make mistakes or you are virtually inviting an audit.
4. Laws and Regulations – As you are probably aware, there is a new tax code every year. Both Federal and State rules change so frequently that it is nearly impossible for the average person to keep up with them. Your business attorney will keep up with them and be able to let you know how they impact your business.
Having a good tax plan in place is critical to building a solid foundation for your business. Make sure that you partner with the right attorney to get this set right from the start.