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Tax Advice for the Management of a Risky Business

Tax Advice for the Management of a Risky Business

Managing a risky business can be a daunting task. Now add task issues to managing a risky business, then it becomes very tedious to deal with. 

Taxpayers must understand when and what an IRS inspection and investigation could mean for their business. To be able to better prepare for the task season and how best to manage a risky business when it comes to dealing with Uncle Sam, we have prepared some of the things to keep handy.


A better understanding of Employer Taxes and Payroll

Communicating financial information to federal, state, and local tax authorities is one of the processes for paying taxes. Business owners should ensure that they report things properly and correctly to the appropriate authorities. One way to go about this is to use employee scheduling software. You can get a free employee scheduling app to properly track hours and overtime.


Federal and state payroll taxes are divided down into employer-paid taxes and withholding taxes.

Withholding tax amounts include money deducted from a worker's salary to pay income tax, social security, and health insurance (also known as FICA taxes). Deductions are made from each scheduled salary, and employers must regularly consult the relevant tax authorities. The schedule you follow depends on several variables.

Employer-paid taxes are taxes that employers must pay in full, such as federal (FUTA) and state (SUTA) unemployment insurance. Employers are obligated to contribute to social security and health insurance for their employees and must report and remit these amounts quarterly. These expenses are deducted from your business tax.

If an employer makes a mistake with wages and employer's income tax returns, the Internal Revenue Service (IRS) is willing to investigate. But the IRS has tightened its control over business payroll taxes and will impose fines, conduct audits, and in some cases, launch criminal investigations. Risky business owners should be cautious when preparing their financial statements so as not to be penalized.


Do not claim too many expenses. 

The IRS requires proof that the expense you are claiming is legitimate for the business and sets a limit to the amount you can claim for certain items. To substantiate a claim, it is necessary to have the appropriate documentation, and to send the correct amount requires knowledge of the applicable tax codes. Reporting too many expenses can raise the flag to the IRS, and working with the right tax professional can make all the difference.

The three most reviewed items are Car expenses, home office deduction, and travel and entertainment expenses.

Whether it's business travel, food, entertainment, printed supplies, or other generally legitimate deductions, IRS computers can see how businesses in similar industries spend on similar expenses.


Avoid poor record-keeping

A proper recording process is essential for effectively documenting expenses and deductions. Going digital doesn't mean giving up copies, especially if you've ever been audited by the IRS. Please note that IRS recommendations vary depending on the type of receipt filed.

It is recommended that risky businesses regularly reconcile their balance sheets. Failure to reconcile bank statements or reconcile in a timely manner keeps potential errors in your account beyond the time they can be easily resolved. The negative results of not doing bank statements can include:

  • Paying more than expected for goods or services.

  • Paying bank or finance charges that you did not accept.

  • Returning checks due to errors in the company's checking accounts.

If your financial statements are not reconciled regularly, you may have incorrect amounts, or you miss the submission deadline altogether.


Minimizing taxes

In maximum states, the basics of cost basis gadgets can be initiated through the aid of courtroom docket order and legal action if a debt ruling has been filed. Clients are often embarrassed when dealing with the fundamentals of the value base due to their organization's awareness of their financial situation.


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