Don’t let penalties for underpaid taxes increase your tax bill next April. Check the total tax you’ve paid in for 2012 through withholding and/or quarterly estimated payments. If you’ve underpaid, consider adjusting your withholding for the final pay periods of 2012.
Withheld taxes are considered paid in equal amounts during the year regardless of when the tax is withheld. Therefore, a year-end adjustment to your withholding could help you avoid a penalty.
The IRS wants to educate new small business owners about their federal tax responsibilities. “Understanding and meeting their tax filing requirements is one of the biggest challenges faced by people starting out in business,” says the head of the IRS Small Business Division.
Among the common tax issues that can trip up new business owners:
* Classification of workers. Determining whether workers are employees or independent contractors is a matter of law, not the choice of the worker or the employer.
* Federal employment tax deposits. Called trust fund taxes, these deposits must be made according to the appropriate schedule, depending on deposit amounts.
* Quarterly estimated tax payments. Business earnings are not subject to tax withholding; therefore, the owner’s income and social security tax obligations are met through quarterly estimated tax payments.
* Recordkeeping. New businesses need a good recordkeeping system to make tax filing easier and accurate.
* Disaster protection. Financial and tax records need to be protected to ensure business continuity in the event of a disaster.
* Tax scams. New business owners should be alert to the prevalence of abusive tax avoidance schemes. Falling victim to one of these schemes could result in serious tax problems.
For guidance in getting a new business off on the right tax foot, give our office a call.
