The average American spends over $200-$600 on tax preparation fees each year.
With so many things happening in business tax and accounting, it’s only normal to feel overwhelmed. It’s essential to know your rights as an employer and as a US citizen.
Let’s look at five big issues that often cause people to make mistakes as we look at five key tax issues to watch out for this year. Keep reading!
1. Unpaid Tax Issues And Penalties
Unpaid taxes and penalties can be a difficult situation to handle. If you owe back taxes, it should be a priority to get them paid as quickly as possible. Otherwise, the penalties and interest can quickly become unmanageable. Generally, penalties will continue to accrue until the debt is satisfied, so even small payments to reduce back taxes can help.
Delays or refusal to pay tax debt can result in liens and possibly wage garnishments or bank account seizures.
2. Incorrect Filing Status
If a taxpayer fails to correctly identify their filing status, it could lead to overpayment of taxes or an incorrect refund amount. It is especially important for couples to accurately determine their marital filing status.
Incorrect filing status can result in fines, interest charges, and the potential risk of owing the IRS additional taxes. It is essential to take the time to understand the filing statuses and the rules that apply to each status.
3. Failure To Report All Income
People are often under the assumption that if their employer does not issue them a W-2 or another income reporting document, then there is no need to report the income. Income should be reported no matter the source. The IRS often catches up to those who are hiding income, so it is best to report everything.
Missing income that have not been submitted could result in taxes due and penalties for under-reporting income or failure to pay taxes on time. Fines for this offense can be quite hefty, so it is best to take control of the situation or consult a tax professional.
4. Failing To Comply With Tax Regulations
Failing to comply with tax regulations can be a costly mistake for small business owners. Small business owners must take active steps to manage their tax obligations and ensure compliance. Additionally, understanding payroll laws and then taking the necessary steps to pay withholding taxes is also important.
Collecting and filing sales taxes accurately is also a must. Owners should understand their filing requirements and file on time. Lastly, they should understand the implications of various deductions and take advantage of all tax planning opportunities.
5. Undetermined Contributions To Retirement Accounts
Undetermined contributions to retirement accounts can be a major tax problem issue that taxpayers do not want to ignore. Not contributing the correct amount to these accounts can result in other issues with the Internal Revenue Service. It is important to track contributions on an ongoing basis in order to ensure they are accurate.
Taxpayers should also create a budget to ensure their contributions are manageable and within their financial limitations. Double-checking the contribution amounts throughout the year can also help ensure everything is reported and documented accurately.
Putting Your Tax Plan into Action
Taxes can be complicated, but taking simple steps can help you save money and avoid IRS penalties. It pays to keep up with the latest tax laws and take control of your tax issues by preparing early and filing accurate returns.
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